US Craft Labor Outlook 2026: Wages, Per Diems, Data Centers

Shaheen Chohan (00:00):
The US energy and industrial construction market is being supported by a raft of policy initiatives, executive orders and tax incentives that is pushing for greater levels of domestic production, regional capacity development and a focus on self-reliance amidst a strategic imperative on resource security. So the big question is, has this impacted the balance between supply and demand for available US craft labor, and what effect has that had on prevailing wage rates?Welcome to Navigating the Currents of Change, where we bring together over four decades of trusted researched data and industry Insights built for the Answer Age. Let's dive in.

Shaheen Chohan (01:02):
My name is Shaheen Chohan and I lead Global Analytics here at Industrial Info Resources. And to help me unpick some of the trends that we're seeing and put some answers to those questions. I am delighted to be joined by Chris Smith, who is IIR’s Vice President of Labor Analytics Solutions.
But before we do that, I would like to say a very big thank you to our podcast sponsor, Kodiak. Kodiak serves large scale commercial and industrial contractors, providing them with tenured professionals experienced in projects such as mission critical refineries, hospitals, semi-conductor plants and others.
So, Chris, with this increasing intensity on construction activity that we're seeing, certainly not just this year, but coming from the backlog of work from 2025. How do large projects today create the competition for skilled labor?

Chris Smith (01:57):
Well, you know, when you have a lot of projects that are happening at the same time, so let's say you have a lot of projects that start or they reach a peak, at the same time, that puts a lot of pressure on the local workforce, right? And so since the workforce is limited, contractors compete for the same people. And what that does that drives up wages, it drives up the per diem. It makes it really hard for contractors to recruit and retain experienced workers.
And I'll give you a good example, data centers. Right now, those data centers are really big, has a lot of projects that are happening. And these projects require, you know, a lot of electricians, a lot of pipefitters, a lot of HVAC technicians and other trades. And so they're all competing for that traditional industrial projects that are out there. So you got data centers and then you've got all these other projects that are out there. And there's an increasing demand of skilled labor putting a lot of pressure on the local workforce, which is going to drive up wages and per diem and other overall labor costs.

Shaheen Chohan (02:58):
So, Chris, what kind of trends are we seeing with wage rates and per diems, and why are contractors increasing compensation right now?

Chris Smith (03:12):
Well, right now what we're seeing is that overall wage rates and per diem, they continue to rise across the US. And there are several reasons behind that. One is that contractors and owners, again, like we just spoke about, they're competing for the same people, right? So they're really having to draw the people in. And one of the ways is through wages.
And what they have to understand when owners and contractors are looking at their projects, they've got to see the potential impact on project schedules. If they don't have enough people to do the job, projects get delayed and then delays are very costly. You can really go over budget if you're delayed. The other thing is we can talk about turnarounds. When units are offline, they're losing money every day that they're offline. And so when you don't have enough people to do the do the project, you lose revenue.
So one of the quickest ways for contractors to get people, is to really recruit and poach, unfortunately, from other contractors. And they do that by offering higher wages, better per diem and other incentives. And that's very common today. The other aspect that you have to look at is that, there's a lot of people retiring every day. And so when you have these people retiring, that's less people in the skilled workforce that are available. And there's just not enough new applicants or new apprentices coming in to fill that void. And so they just haven't caught up. So again, what that means is that contractors not only have to attract, but they must retain the people. And the only way to do that really is through offering good money.

Shaheen Chohan (04:49):
So staying with that, I'm assuming that we are seeing an aging construction workforce, right? Are we seeing the new generation or the next generation of, as you said, the apprentices coming through, and are there attractive incentives to pull young people into that labor pool and skill up?

Chris Smith (05:13):
Yeah, there are there's a lot of companies offering training programs, that are offering paid apprenticeships. So what that does is that offers them incentives to grow within a company, right? So if you start with the company, they can grow with that company. Stay, be a paid apprentice and move on up to a journeyman level.

Shaheen Chohan (05:31):
Now, coming back to per diems, is that more important than the hourly rate?

Chris Smith (05:37):
Yeah, I would say in some cases it is. It really depends on the situation and the worker. So I'll give you an example. If there's a project and it's 60 miles away for a worker, well, that that's pretty close to home, but they may qualify for the per diem. So they would go and prefer to work at that one where on their days off they could go home, visit the family, or they may even commute, you know, back and forth and still get the per diem. In that case, you know, I would say per diem would probably be more important than the wage. Get a good per diem, wouldn't have to have a high wage.
But, you know, if you look on the other side of things, if there's a project that's really far away and it is going to require me to be gone every night, then I would say a high per diem would be important there, to be able to cover the cost of expenses.

Shaheen Chohan (06:25):
And Chris, we track project slippage and typically in a high intensity construction market. We saw it with the big huge wave after wave of ethylene. Then we had the LNG construction activity. Now, what you're saying is the data centers, that is clearly having a big impact on the availability of certainly of some craft labor types. In particular for data centers, where are you seeing the most intensity from a craft and skill set type?

Chris Smith (06:56):
Well, really it's the electricians, it's the pipefitters, the HVAC guys. Those are the ones that are really in need and that we're seeing the deficits in. The location of those, you know, it's really happening where the data centers are. Let's take an example up in Virginia, that's not a high industrial population. There's not a lot of industrial work up there, right? But there is a ton of data center work specifically for the government operations. And so everybody that has to come in is own per diem, and they have to have, you know, good wages and they're paying them. I mean, they're offering good money on these data centers.

Shaheen Chohan (07:37):
Is a $180 per diem better than a $7 per hour wage?

Chris Smith (07:44):
Wage increase? Yeah, absolutely. I think so, because if you take a look, if you do just on a 40 hour week, if you take a look at $7 increase, that's basically $280 a week on 40 hours. But that's before taxes. They got to take taxes out. So it really reduces that down. But if I take $180 a day over a five day period, that's 900 bucks. So if I play my cards right and I get a cheap hotel or bunk up with somebody or bring my travel trailer in, you know, I'm really making good money and that's all tax deferred money.

Shaheen Chohan (08:23):
And that, I guess, is really incentivizing the mobility. Or what do you call the travelers, right? People moving from state to state. They're seeking out those higher paying projects, right?

Chris Smith (08:35):
Absolutely.

Shaheen Chohan (08:35):
And now the structure of that payment is becoming increasingly important for a project owner to factor in to their costings, right?

Chris Smith (08:40):
Yeah, absolutely. Because that can really increase the cost, specifically if you're even trying to draw them with travel incentives or safety incentives and things. So the price on projects go up.

Shaheen Chohan (08:52):
I guess that really is a big influencer and kind of incentivizes or makes workers leave one project for another. You talked about poaching as being a very active component of the market right now. So what kind of what kind of incentivizes people to leave one project for another?

Chris Smith (09:18):
In most cases, it's the totality of the the situation or what's being offered. So what is the hourly wage? How long is the project? Is there a good per diem? Is there overtime? Are there incentives? Where is the project? You know, is it bad weather there all the time, is it really hot or is it really cold? What is the job site like? Do they have good facilities for me to eat lunch in, right? All of those things. You know, you really have to take a look at.
And so when they really consider changing the jobs, most workers won't leave for small pay increases, right? They're going to really want the money. But when the overall package again is good, they'll look for that project.

Shaheen Chohan (10:01):
So Chris, we track project slippage. Our project data is very, very dynamic. And just through the normal cycle of a project pipeline that our researchers are tracking, there is always a degree of slippage, and slippage meaning those projects are not starting as per schedule or indeed, the life cycle or the lifespan of the project gets pushed out, the completion date gets pushed out. What does it take to retain the labor on that project?

Chris Smith (10:33):
That's a good question. I mean, it's really case by case. But what I've heard, and talking to our customers, because we're calling out to contractors on a daily basis, and we're asking them about their projects, and you know, what they're paying, how much per diem and what they're seeing.
And what happens is, if you call somebody and say, hey, project is going to start on this date and then it gets delayed, you risk losing that person. And what some contractors are doing is they're even moving them from job to job. But when there's a gap, they're even paying them to like hang around, hey, come to our shop, come sweep the shop floor, I'll pay you full, your full wage. But it's really if they can't do that it is, you know, the incentives that are going to go along with it to pull them to those projects.

Shaheen Chohan (11:26):
So right now with a very, very frothy, active project market, I can imagine considering a career in the skilled trades is actually an attractive one. Would that be correct?

Chris Smith (11:45):
Yeah, absolutely. I mean, a young person coming out of high school can really start making good money right out of high school. There's a lot of apprenticeship programs that are out there that's offering them high wages to come in and work and learn a trade. It's a good chance for them to start working and not have to accumulate a lot of debt. And, you know, the parents need to think about that, too. That if my child starts working in the trades, I'm not forking out a lot of debt. And so, you know, with the employers offering these programs, it's a good opportunity to make some good money fast.

Shaheen Chohan (12:29):
So, Chris, what should parents know about trade careers?

Chris Smith (12:29):
Well, they should know that, number one, it defers any type of expense for them, sending their kids to a university or to college. And it's a respectable job, right? Not that people look down on the trade workers, but, you know, the old dirty blue collar guy comes in, he stinks all the time. You know, that's not a bad thing. This country was born and raised off of hard workers. And so it's a very respectable job, and they can make a lot of money. They can have a good, long career. And so that's the fastest way for them to get into finding a career is to go to these trade schools, go to apprenticeship programs and start making money. It's about money.

Shaheen Chohan (13:17):
What does the next 3 to 5 years look like for the industrial construction market? You're clearly seeing a very tight pool of labor supply at the moment. And it doesn't really look like we're going to see any letup in the, I guess, the big mega projects. We're going to see more reshoring, there's a lot of incentives to build new capacity here in the US across multiple industries and sectors. I can imagine it's going to be tight?

Chris Smith (13:49):
Yeah, absolutely. I mean, again, demand for skilled labor is expected to remain strong and resilient. I mean, it's just going to be there, right? And again, like you were saying with manufacturing and data centers and and power generation, they got to build the power plants to get these data centers, keep them running. As of our second quarter of 2026, in our forecast, we're seeing about $680 billion average each year over the next five years, and that's about 1300 million hours. So there's plenty of work out there. And so, for young folks to get into the trades and come up is a perfect opportunity. That's why it's important for them to to do that. And it's also important for the companies to realize that we need to reach out, train folks. We need to get them, have them a steady job to go to every day so they can plan ahead for their projects so they could be in the best position to deliver on their project.

Shaheen Chohan (14:49):
That brings us to the end of our discussion. I guess it is fair to say that the outlook right now looks like a very healthy pipeline of capital project activity, which I think will continue to challenge project owners and developers in how they plan and execute their projects. A situation which will largely be influenced by some of these big mega data center and semiconductor build out and how they play out over the next 24 months, and certainly one that we think could extend for a good number of years to come.
So that leaves me just to say a few thank yous. Firstly, to the folks over at Kodiak. Thank you for your support today. If you'd like to find out a little more about the products and the services that they offer, then please do visit their website. And of course, a very big thank you to you, Chris, for sharing your insights and perspectives today. If any of you who've joined us have any further questions about any of the points that we've discussed, then please do reach out to myself or Chris via the contact details you can see here. And finally, a big thanks to all of you who've joined us. I hope we have helped you all better navigate some of the currents of change that we are seeing. Welcome to the Answer Age.