What the Labor Shortage Means for Construction Bidding in 2026

In short:

• Labor shortages will make bidding riskier by 2026, with 6–8% annual wage hikes, longer timelines (10–15% labor float), and more costly overtime.
• Retirements, lack of young workers, and strict immigration laws contribute to the shortage.
• To stay profitable, contractors must plan for higher costs, add labor clauses, and increase scheduling time in bids.
• Contractors who adapt their bidding strategies now are best positioned to succeed in the coming years.

Finding good workers is hard these days. And by 2026, it’s going to be tougher still. This isn’t just a small problem. It’s a huge labor shortage that’s going to change how you bid on jobs.

If you’re pricing out work for 2026, you need to be extra careful. If you guess wrong on your labor costs, don’t account for prices going up, or mess up the project timeline, you could lose all your profit before your crew even shows up.

Let’s break down what the labor shortage means for you and go over three steps to help you stay ahead. 

The Labor Gap: How Big is It?

It’s big. The construction industry needs more people than it can find.  

You’ve probably noticed that it’s gotten harder in recent years to fill open roles. In fact, nine in ten contractors have openings for trade workers that they can’t fill. That’s a big problem, especially since the industry needs to hire approximately 723,000 workers per year to keep up with the demands.

But it isn’t because there’s less work. Public and private projects are constantly added to project databases like ConstructConnect® Project Intelligence every day. The real problem is that the number of qualified people just doesn’t exist. This issue is getting bigger every year, which means the gap just keeps growing. 

Why the Shortage?

A big reason for the labor gap is that many skilled workers are heading toward retirement. Right now, one in five construction workers is 55 or older. The average age for a skilled tradesperson is almost 43, and it’s only going up.

As the experienced workers are getting ready to retire, there aren't enough young people entering the construction workforce. If construction companies don’t start getting creative to attract young workers, like recruiting via social media or apprenticeship programs, they will face challenges in 2026 and beyond.

And that’s not all. Stricter immigration rules have put additional strain on the construction labor market. One-third of construction businesses say federal immigration actions have caused project delays. 

How to Change Your Bids in 2026

Given these challenges, you’ll need to change how you bid on jobs. Here are three steps you can take to account for the new realities of the labor market.

1. Assume Your Labor Costs Will Go Up

Wages are going to keep climbing. For your 2026 construction bids, you need to plan for labor costs to go up by 6-8% each year. If you bid any lower, it’s likely you’ll end up losing money.  

To protect your business, include labor escalation clauses in your contracts. This is just a way of saying if labor costs go up, your price goes up too. Tie it to official government numbers so the owner knows you’re not just making it up. Some owners might even give you extra time on the schedule if they know workers are hard to find. 

2. Add Extra Time to Your Schedule

A labor shortage means jobs will take longer to complete. Even a basic task can take more time if your crew is stretched thin or less experienced because of the skills gap. Your project schedules should now include a 10-15% labor float to account for potential delays.

Also, don’t forget to order your materials earlier. The last thing you want is to pay your crew to sit around waiting for a delivery.  

3. Don't Forget About Overtime

Overtime is becoming more common, especially to help meet project schedules. Paying for overtime can easily double your labor costs. If you don’t plan for it, this can turn into a huge hit on your bottom line. Figure out how much overtime you’ll need and include it in your bid.  

The Takeaway

The next few years will be challenging. But if you plan for it, your business can still be healthy and deliver great work. The contractors who do well in the next few years will be the ones who really understand the labor shortage and proactively make changes now to get ahead of it.  

Start today by learning more about the current market. Download our free comprehensive Labor Guide to overcome labor challenges and stay competitive in the industry.