Skilled Labor Shortage and Inflation Fuel Record 9% Wage Growth for Residential Building Workers in 2024
The housing industry’s ongoing skilled labor shortage and the nation’s lingering inflation continue to spur accelerated wage growth. Residential building workers’ wage growth increased in June at its fastest year-over-year rate since December 2018, a reflection of the unique pressures the construction sector faces.
According to the U.S. Bureau of Labor Statistics (BLS), average hourly earnings for residential building workers reached $32.28 per hour in June 2024, a substantial increase from $29.62 per hour in June 2023. This marks a significant 9.0% year-over-year growth in wages, the highest recorded rate in recent years. This trend has been largely driven by a persistent shortage of skilled labor, coupled with inflationary pressures that continue to affect wages across industries.
In comparison to other sectors, residential building workers are earning competitive wages:
- 16.2% higher than the manufacturing industry, where the average hourly wage was $27.79.
- 10.6% higher than the transportation and warehousing industry, which saw an average of $29.18.
- 11.1% lower than the mining and logging industry, which reported average hourly earnings of $36.33.
While wages are rising, the demand for construction labor has shown signs of softening as elevated interest rates dampen housing demand. The number of unfilled construction jobs dropped to 295,000 in June 2024, indicating a notable shift in hiring trends. However, the industry still faces significant challenges related to the shortage of skilled labor, which remains a critical factor in the continued wage growth.
As the chart illustrates, wage growth has experienced substantial volatility over the years. The construction sector saw the lowest wage growth during the pandemic period, bottoming out at 0.3% in 2021. Since then, wages have surged, peaking again at 9.0% in 2024, reflecting the ongoing tight labor market and inflationary forces that are shaping compensation trends in the residential construction industry.
This rapid wage increase poses both challenges and opportunities for the industry. Higher wages can help attract talent, but they also contribute to rising project costs, which may be passed on to homebuyers, compounding affordability issues already heightened by higher mortgage rates. Despite these complexities, wage growth in residential construction is expected to remain robust as long as the skilled labor shortage persists.