TRG | The Bottom Line – 10/29

It’s hard to break a bad habit. And while job shortages remain the topic du jour for many industries, the construction industry difficulty in filling positions may be, in part, driven by not raising wages and salaries as much as other industries. According to the Bureau of Labor Statistics (BLS), wages and salaries in construction increased by 3.3% YOY in Q3’21 versus a 4.6% increase in private sector over the same time period. That gap, -1.3%, was the largest in the history of the series, which began in Q1’01. Since the inception of the seasonally adjusted average hourly earnings (AHE) for construction and the nonfarm private sector in 2006, the construction industry paid an average hourly "premium" of 9-12%. In other words, AHE in construction exceeded AHE for all private workers by that amount. Since April 2020, however, the premium has slipped to 8.1% or less, and the most recent reading for September 2021 was 7.8%. Construction has fallen behind its historical position relative to other sectors because pay increases in construction have just not kept up with the acceleration in pay that has occurred in other industries.