Impact of Wage Growth on AEC Profit Margins

Introduction

A three, four, or even five percent salary increase sounds manageable on paper. Yet when Zweig Group reports a 5.9 percent average jump across AEC firms and production staff hit a historic high of $37.20 per hour, the impact of wage growth on AEC profit margins stops being abstract and starts showing up in every project review.

We see this pressure every day with our clients. Wage growth is now a permanent feature of the AEC market, not a short spike. At the same time, firms still need to attract high performers in an industry where 89 percent of employers say they struggle to find qualified people. The tension between keeping talent and keeping profits is no longer a side issue; it sits at the center of strategy.

Industry data backs this up. Zweig Group, AGC, NCARB, BLS, and Deltek all point to the same story – steady wage inflation, persistent labor shortages, and growing gaps between disciplines, regions, and firm types, with AE firms with benchmarks consistently outperforming their peers in financial performance. For leadership teams, the real question is no longer whether wages will keep rising. The real question is how to respond without crushing margins or losing the people who drive project success.

In this article, we walk through the numbers, the root causes, and the direct impact of wage growth on AEC profit margins. Then we move to strategy. We share the approaches we see working across our client base, and how we at AEC Talent support firms with data, workforce planning, and high-impact hiring so every talent dollar works harder for the business.

Key Takeaways

• Wage growth in AEC is real and persistent. Average salaries are rising around 5.9 percent and hourly production pay is at record highs. These increases feed straight into labor budgets and compress margins if fees and productivity do not keep pace. Treating this as a temporary spike puts long‑term profitability at risk.
• Compensation is not rising evenly across the industry. Engineering roles saw increases near 8.84 percent while architecture roles rose just over 1 percent, and fast growth firms averaged 8.2 percent in salary increases. These gaps affect internal equity, recruiting strategies, and how firms reward performance across teams.
• Structural market forces drive this inflation. Long‑running labor shortages, a technology-driven skills gap, and booming sectors such as data centers and manufacturing are all pushing wages up. Because these forces will not disappear soon, firms need thoughtful, repeatable responses rather than one‑time cuts or quick fixes.
• Technology, data, and better workforce strategy give leaders a path forward. Productivity gains from BIM and other digital tools can offset some wage pressure, while strong compensation benchmarks, smarter bidding, and focused retention programs help firms protect margins and still compete for top talent.

Understanding The Current AEC Compensation Structure

Compensation now sits among the largest and fastest‑moving cost lines for AEC firms. Zweig Group’s 2025 Salary Report shows an average salary increase of about 5.9 percent across the sector. That figure covers everyone from early‑career designers to senior leaders and hides even bigger jumps in certain roles and firm types.

When we zoom out to the wider construction market, the picture stays consistent. U.S. construction employment holds near 8.3 million workers, and average hourly earnings for production staff reached roughly $37.20, the highest level ever recorded. For firms that run labor‑intensive projects, that one metric alone can add hundreds of thousands of dollars to annual payroll.

These are not short‑term swings tied to a single economic cycle. Multiple data sources, including AGC and BLS, point to steady wage growth over several years, powered by chronic labor shortages and strong demand in nonresidential sectors. That makes wage planning a long‑range financial issue, not just a budgeting headache for the next fiscal year.

At the same time, pay is one of the few tools firms have to attract and keep high‑caliber people. In a market where competitors can and do pay more, underpricing roles to save margin quickly leads to lost bids, schedule slippage, and quality issues. We see compensation strategy acting as both a defensive shield for margins and an offensive lever to bring in talent that grows revenue.

For leaders, understanding these trends is the starting point for any serious conversation about the impact of wage growth on AEC profit margins. Without a clear view of how fast wages move, where they move fastest, and how that compares with fees and productivity, it is nearly impossible to set realistic profit targets or make smart hiring plans.

The Discipline Divide In Engineering And Architecture Compensation

One of the clearest shifts in recent years is the widening pay gap between engineering and architecture roles. Zweig Group’s data shows engineering positions enjoying salary increases around 8.84 percent, while architecture roles saw a rise closer to 1.05 percent. That is a striking split for firms that often see these groups as two sides of the same practice.

The story gets sharper at senior levels. Associate and department manager roles in engineering received increases near 8.43 percent. Equivalent roles in architecture did not just lag; they saw pay move backward by roughly 3.85 percent. In other words, leaders on one side of the house are gaining ground while peers on the other side are losing it.

Market conditions explain much of this divide. The AIA Billings Index has shown contraction at many architecture firms over multiple months, while engineering groups tied to data centers, manufacturing, energy, and infrastructure report strong backlogs and aggressive hiring plans. Where demand is hottest, salaries follow.

Inside multi‑discipline firms, this creates real tension. Engineers who see peers at competitors earning more expect raises that match the wider market. Architects in the same organization may face softer demand and smaller adjustments. Managing internal equity, retention, and morale with these different market realities is now a central leadership challenge.

The Root Causes Behind Rising AEC Wages

To respond well, we have to be clear on why wages are rising so fast and why they are likely to keep doing so. These forces are not isolated events. They are interconnected trends that shape how every AEC firm hires, prices work, and manages risk.

Several drivers stand out:

• Chronic supply–demand imbalance. For years, AEC firms have reported more open roles than qualified people to fill them. That imbalance now affects nearly every job family and region. When nine out of ten employers say they cannot find the talent they need, premium pay becomes the standard, not the exception.
• Rising digital and delivery expectations. BIM, data‑rich modeling, automation, and advanced visualization change how teams design and coordinate projects. People who can use these tools at a high level are in short supply, and they know it.
• Uneven demand across sectors. Nonresidential sectors like data centers, manufacturing, transport, and power are seeing strong investment and heavy project pipelines. That drives fierce competition for project managers, engineers, and technical specialists who have direct experience in these sectors.
• Demographic pressure. Large cohorts of senior staff are approaching retirement, while fewer young people choose construction or design careers. Even with higher pay, many firms struggle to convince students and early‑career professionals to enter or stay in the field. Taken together, these factors create a structural wage problem that no single firm can wish away, with the 2026 Engineering and Construction Industry Outlook projecting continued pressure on labor costs across all project types.

Persistent Labor Shortages Across All Skill Levels

Labor scarcity is the single strongest driver of wage inflation we see. According to an AGC workforce survey, about 89 percent of construction firms report trouble finding enough qualified workers. This challenge affects project superintendents, field crews, estimators, engineers, and specialized designers alike.

NCARB data confirms a similar pattern on the licensed side, with about a 1 percent decline in the number of licensed architects over the past year. At the same time, a large share of senior professionals are nearing retirement, which removes years of experience from the field faster than new talent can replace it.

The industry has also struggled to present itself as an attractive career choice for younger generations. Competing fields such as tech and finance often look more flexible or better paid, at least on the surface. That leaves AEC firms fighting over a smaller pool of interested and qualified candidates.

When supply is this tight, firms that really need people do not have many levers to pull. Offering higher salaries, richer benefits, or sign‑on bonuses becomes the practical way to secure talent. OpenAsset research shows about 69 percent of firms expect hiring challenges to continue even with higher pay, which means leaders should treat wage pressure as a lasting feature of their margin planning.

The Widening Technology Driven Skills Gap

Technology adds a second layer of pressure on top of basic labor scarcity. Modern projects rely on tools such as BIM, VR and AR environments, AI‑driven analytics, digital twins, and laser scanning. These tools change how work gets done and what kinds of skills firms need at every stage of design and delivery.

The challenge is that many professionals who came up before these tools were common have not received deep training in them. Colleges and universities are updating programs, but curricula tend to move slower than software and project methods. That lag leaves firms with a small group of candidates who truly excel in these technologies.

When someone brings both strong domain expertise and advanced digital skills, they sit in a very rare spot in the market. Those individuals can command a clear salary premium, and competitors are often ready to pay it because they know how much time and rework the right person can save on complex projects.

This premium has a direct impact on margins. Firms that want to win high‑complexity work almost have to pay more for digitally fluent teams. At the same time, they still need to fill traditional roles in design, coordination, and field management. That mix of general labor demand and specialized digital demand compounds the wage problem.

Sector Specific Demand Intensifying Competition

Not every part of AEC is growing at the same speed. Right now, nonresidential sectors are driving much of the heat in the labor market. U.S. construction spending has reached around $2.14 trillion on a seasonally adjusted annual rate, with nonresidential work up roughly 6 percent.

Data centers are a clear example. One in seven members of Associated Builders and Contractors is currently busy on data center projects, fueled by rapid growth in AI workloads and hyperscale cloud operators. These projects lift demand for electrical, mechanical, structural, and civil engineers who understand high‑density, high‑reliability facilities.

Manufacturing, transport, and power projects also carry strong pipelines, especially in regions benefiting from federal and state‑level investment. Firms chasing these projects often look for professionals who have already delivered similar work, which narrows the candidate pool even further.

By contrast, residential activity has softened, with starts down around 5 percent in some measures. That shift pushes some professionals toward hotter sectors, yet it does not fully ease the pressure there. High‑growth segments still use salaries and bonuses as weapons in intense bidding wars for experienced project managers and engineers, and those higher rates ripple across the wider market.

Geographic And Growth Based Compensation Disparities

National averages only tell part of the story. When we dig deeper into compensation patterns, location and firm growth rate play major roles in how wages move. For leadership teams, these differences matter when setting pay bands, choosing where to hire, and deciding where to grow.

Zweig Group’s regional data shows that firms in the Eastern United States recorded the highest average increases at about 5.87 percent. Central region firms followed closely at roughly 5.49 percent. In the West, salary increases were lower, around 4.35 percent, and they were not spread evenly across roles.

Firm performance adds another layer. Fast growth firms, defined as those with revenue growth above 20 percent per year, tended to raise pay more aggressively than stable or slow‑growth firms. That lines up with what we see across our client base. Organizations that are adding revenue and backlog faster can justify larger pay moves to secure and keep the teams that feed that growth.

For executives, the takeaway is clear. A single national pay scale rarely works across offices, disciplines, and firm types. Firms need regional and growth‑based benchmarks to keep compensation competitive where it matters most while still guarding profit margins.

Regional Wage Variations Across The United States

Regional variation shows up clearly in recent salary reports. Firms in the Eastern region saw average salary increases near 5.87 percent, which slightly outpaced the Central region at about 5.49 percent. These two regions also showed more consistent increases across departments, from technical staff to administrative roles.

The West told a different story. Average salary growth sat closer to 4.35 percent, and some job categories saw little or no movement. Designers in the broad “other technical” category are a good example. In the Central and East regions, these professionals often received increases above 10 percent. In the West, designers in similar roles, on average, saw no increase at all.

State‑level data adds even more nuance. California stands out with some of the highest pay in the country, where architects average around $112,000 and engineering managers can reach about $194,000 per year. Those figures reflect both strong demand and high cost of living.

Meanwhile, Georgia has emerged as a growth hot spot, with architect‑related search volume jumping more than 100 percent in the last year and average architect pay near $90,000. Atlanta shows high search interest for both architects and engineers, matching its strong project pipeline. For multi‑office firms, these differences make it clear that regional benchmarking, not national averages, should guide compensation decisions.

How Firm Growth Rates Drive Compensation Strategy

Revenue growth shapes how firms think about compensation strategy far more than many people expect. Fast growth firms, those adding 20 percent or more in annual revenue, reported average salary increases around 8.2 percent. Slow growth firms, with revenue growth in the low single digits up to about 19 percent, managed closer to 3.17 percent. Firms with flat revenue for several years sat in the middle with increases near 4.9 percent.

We see these numbers play out in leadership conversations. In firms where revenue and backlog are rising quickly, leaders feel more confident about raising salaries to keep key people and bring in talent that supports expansion. Those same firms often use pay increases as part of a broader plan to build capacity and win bigger, more complex projects.

How these firms allocate increases is also telling. Fast growth firms tended to push the largest percentage increases toward administrative and non‑technical roles, at around 12 percent. That suggests a deliberate focus on project coordinators, marketing teams, and support staff who keep the engine running as volume rises.

At the same time, pay for top management in those fast growth firms actually dipped by a small amount, roughly 3.19 percent on average. That pattern lines up with a strategy where leaders hold their own compensation steady or slightly lower while they invest in the wider organization. In practice, this approach helps protect margins, because higher productivity and better support often offset wage growth in specific teams.

Direct Impact On Project Costs And Firm Profitability

All of these trends flow straight into project economics. Labor is usually the largest controllable expense after materials for AEC firms, and even modest wage increases can shift a healthy project into a marginal one if they are not matched by pricing or productivity improvements.

A 5.9 percent average salary rise might not look huge on a single role. Across a project team or entire firm, though, it quickly becomes a significant cost increase. When fees were set months earlier based on lower labor assumptions, that extra cost eats into the profit planned for each job.

Fixed‑price contracts face particular risk. If a firm locked in fees based on assumptions from two years ago and wage growth continues through the life of the project, there is often no simple way to recoup those extra labor dollars. Without careful planning, the firm ends up absorbing the difference.

Beyond direct margin compression, rising labor and input costs are causing some owners to hesitate. AGC’s chief economist, Ken Simonson, has warned that higher costs are prompting certain owners to delay, scale back, or cancel projects. That creates a second hit for firms, where they feel both lower margins on active work and a thinner future pipeline.

Margin Compression And Project Budget Challenges

When wages move up and fees stay flat, the math is straightforward. The share of revenue spent on labor grows, and the leftover slice for profit shrinks. On labor‑heavy projects, a 5.9 percent increase in salaries can wipe out a big portion of the margin that leadership expected when the contract was signed.

Fixed‑price agreements cause the most pain because they leave little room to adjust. If a firm did not include wage escalation language or sufficient contingency when it bid the work, every pay raise granted to keep staff from leaving narrows the project’s profit. Over multi‑year projects, this compounding effect can turn a solid bid into a near break‑even job.

At the same time, owners are watching their own budgets. As Ken Simonson has highlighted, higher input and labor costs push some owners to pause or reduce scope. That means fewer projects moving from planning into execution and more competition for the ones that do go ahead.

The result is a double squeeze. Current projects cost more to staff, and future work may be scarcer or more contested. To stay healthy, firms must:

• Improve cost forecasting.
• Build realistic contingencies into bids.
• Adjust expectations for how much wage growth can erode margins if left unaddressed.

Strategic Shifts In Business Development And Proposal Strategy

Rising labor costs are also changing how firms pursue work. With every proposal pulling time from senior staff, subject matter experts, and marketing teams, the cost of each pursuit grows as wages rise. We see more firms stepping back from a high‑volume proposal model because it spreads expensive people too thin.

The Deltek Clarity A&E Study illustrates this trend. Between 2024 and 2025, firms submitted about 38 percent fewer proposals, yet the total dollar value of awarded work increased by around 52 percent. That signals a move toward fewer, better‑aligned opportunities rather than chasing every possible project.

This shift makes sense when talent is costly. Firms can no longer afford to spend scarce engineering and proposal capacity on low‑margin pursuits that pull margins down even if they win. Instead, they are focusing on opportunities where they can:

• Bring clear, differentiated strengths.
• Command higher fees.
• Build long‑term client relationships.

Win rates have responded, climbing to a median of about 50 percent in 2025. Part of this comes from sharper pursuit discipline, and part comes from better tools. More than half of A&E firms now use AI in business development to improve proposal quality and target fit. In a high‑wage environment, concentrating effort on the right pursuits and using technology to support teams is a practical way to protect margins.

Technology's Dual Role As Cost Driver And Solution

Technology sits in a strange position in this story. On one hand, it raises costs in the short term. Firms pay for software licenses, hardware, data platforms, and the specialists who know how to use them. On the other hand, the right tools can help teams work faster and smarter, offsetting some effects of wage growth over time.

Most of the clients we work with no longer ask whether to invest in digital tools. Instead, they ask how fast to move and where to focus, as AEC Print Technology: A time of innovation shows how technology adoption is reshaping industry standards and expectations. Owners and partners understand that without BIM, model‑based coordination, better data use, and smart automation, their firms fall behind on both quality and efficiency.

The challenge is that the benefits of technology rarely show up on the first day. There is a learning curve for staff, changes to workflows, and a period where the firm is carrying both old and new ways of working. During that window, labor and technology costs rise together, putting extra stress on margins.

Over the longer term, though, well‑executed digital strategies often pay for themselves. Teams reduce rework, cut coordination errors, and handle more work with the same or slightly larger headcount. For firms facing steady wage inflation, technology becomes a key part of any plan to keep profit margins stable.

How Digital Transformation Fuels The Skills Gap And Wage Demands

Every major technology shift changes the skill profile that firms need. The rapid growth of BIM, digital twins, AI‑driven design support, VR and AR for stakeholder reviews, and laser scanning for as‑built capture has raised the bar on what many roles require. A senior designer or project engineer today often needs deeper digital fluency than in the past.

Because these tools evolved quickly, the talent pool that truly excels with them is still relatively small. Many mid‑career professionals have had to learn on the job with mixed levels of formal training. New graduates may have exposure to the tools but less project experience, which limits how much responsibility they can take on early.

This scarcity leads to a clear salary premium for people who combine strong project experience with advanced digital skills. Competing firms know the value of those profiles and are willing to pay more, particularly in high‑pressure sectors like data centers and complex industrial work.

Firms that adopt new technologies therefore face a double cost. They must fund the tools themselves and pay more for the people who can use them well. That cost is the price of staying competitive in modern AEC markets, yet it does increase short‑term pressure on margins until productivity gains catch up.

Productivity Gains As A Long Term Offset To Labor Costs

The case for technology gets stronger when we look at productivity over time. Tools like BIM allow architects and engineers to manage more complex projects with smaller, more coordinated teams. Digital models cut down clashes, reduce change orders, and speed up design iterations, which all save time and money.

The U.S. Bureau of Labor Statistics projects only about 3 percent employment growth for architects from 2021 to 2031, and one reason is improved productivity from digital tools. If each professional can handle more work without quality loss, firms do not need to hire at past rates to deliver the same volume.

For firms, this means that some wage growth can be absorbed through efficiency rather than endless staff increases. A highly skilled, well‑tooled team may cost more per person but can deliver more fee volume and higher quality with less rework. Over a portfolio of projects, that translates into healthier margins.

Of course, the return on these investments depends on implementation. Training, change management, and process redesign are just as important as software selection. When firms commit to making technology part of how they work every day, not just a shiny add‑on, they position themselves to manage wage growth more confidently and stay ahead of competitors who struggle to adapt.

Strategic Responses For Protecting Margins In A High Wage Environment

The trends we have covered are real, but they are not a sentence to thinner margins forever. We see AEC firms succeed when they treat wage growth as a strategic constraint instead of a surprise cost. That means combining better data, smarter contracts, targeted development, and sharper retention plans into a coherent approach.

On the compensation side, guesswork is dangerous. Paying far above market drains profit with no guarantee of better performance, while paying below market drives turnover and kills project continuity. Data‑driven benchmarking gives leaders a more accurate target to aim for by role, region, and discipline.

Inside the firm, developing and keeping people becomes just as important as hiring them. Training programs, clear career paths, and a healthy culture help employees feel invested and reduce their interest in outside offers. When experienced staff stay longer, firms avoid the high cost of constant recruiting and onboarding in a high‑wage market.

Contracts and bidding strategies round out the picture. Including wage escalation mechanisms where possible, using realistic contingency levels, and focusing on well‑aligned pursuits all help spread wage risk between firm and client instead of leaving the firm fully exposed. Together, these moves support both competitive hiring and sustainable margins.

Data Driven Compensation Benchmarking And Market Intelligence

Accurate compensation data is the foundation for any effective response to wage pressure. When firms rely only on outdated surveys or informal feedback from candidates, they tend to either overpay out of fear or underpay and lose key talent. Neither outcome supports strong profitability.

Peter Drucker famously said, “What gets measured gets managed.”

That line applies directly to pay. Leaders need to look at compensation by role, discipline, region, and firm growth profile rather than one broad average. Zweig Group’s reports and other specialized platforms are helpful here, as they show how pay behaves in the markets that match a firm’s footprint and services.

Good benchmarking also looks at total compensation, not just base salary. Bonuses, profit sharing, benefits, flexible work, and career development all influence how attractive an offer feels to candidates and current staff. In some cases, smart design of these elements can relieve pressure on base pay while still improving the overall package.

At AEC Talent, we provide clients with current AEC Salary Benchmarking and Compensation Trends Analysis that goes beyond headline numbers. We combine national research with real‑time data from our managed talent pool so decision makers can design compensation structures that are both competitive and sustainable, which protects bottom‑line profit while still attracting the people they need.

Investing In Workforce Development And Upskilling

In a high‑wage market, building needed skills inside the firm often beats buying them at a premium from outside. When we help clients map their workforce, we usually find strong, motivated professionals who can grow into high‑demand roles with the right guidance and support.

Training existing staff has several advantages:

• It often costs less over time than repeated recruiting for scarce specialized talent.
• It keeps institutional knowledge in place, since experienced employees stay and expand their capabilities instead of leaving and taking their insight with them.
• It helps teams keep up with new tools and delivery methods.

As Henry Ford is often quoted, “The only thing worse than training your employees and having them leave is not training them and having them stay.”

Internal development also closes the technology skills gap we discussed earlier. When teams receive focused training in BIM, data tools, and modern project methods, the firm gets more value from its technology investments and reduces the need to overpay for a handful of outside experts.

Our Retention And Employee Engagement Consulting at AEC Talent helps firms design development paths that make sense for their people and projects. We work with leaders to define critical capabilities, set up training and mentoring, and connect those efforts to career progression so employees see a future inside the organization.

Retention Focused Culture And Employee Engagement

Turnover has always been expensive in AEC, but rising wages push those costs even higher. Every departure triggers recruiting spend, onboarding time, lower productivity as new hires ramp up, and often some level of project disruption. When staff are in high demand, replacing them usually means paying more than before.

Focusing on retention reduces this constant drain. Employees who feel respected, see clear career paths, and enjoy some flexibility in how and where they work are far less likely to accept the next outside offer. That is especially true for mid‑career professionals who value stability alongside pay.

There are direct performance benefits as well. Long‑tenured staff know a firm’s systems, clients, and standards. They make fewer mistakes, coordinate better, and often deliver work faster. That efficiency supports margins in a way that simple headcount numbers do not show.

AEC Talent’s Retention And Employee Engagement services help firms build environments where high performers want to stay. We partner with leaders to understand what drives engagement in their teams, what barriers push people out, and what practical changes can reduce costly turnover and the constant need to chase new hires in a tight labor market.

Strategic Bidding, Contract Negotiation, And Risk Management

Contract terms can either protect or expose a firm when wages rise. Where clients are open to it, we recommend including wage escalation or cost‑adjustment language in multi‑year agreements so both sides share the risk of unexpected increases. This creates more honest pricing and fewer painful conversations later.

For fixed‑price bids, firms need realistic contingencies that account for likely wage growth over the project life. That means using current data rather than old assumptions when modeling future costs. It also means walking away from work that requires unrealistic pricing just to win.

Clear thinking at the bidding stage can reduce project cancellations down the road. When owners see realistic budgets with thoughtful risk sharing, they are less likely to pause work due to surprise cost growth. In this sense, smart contracting is not only about protecting one firm; it helps stabilize the project pipeline for everyone involved.

How AEC Talent Helps Firms Navigate Wage Growth Challenges

All of this raises a hard question for leaders. How can a firm pay what it needs to win and keep top talent without seeing the impact of wage growth on AEC profit margins turn every project into a struggle? This is exactly the space where we at AEC Talent focus our work.

Because we are dedicated solely to the built environment, with more than eight years in this space, we understand the nuances of compensation by discipline, region, and project type. We bring that insight to every engagement, whether we are advising on executive hiring, benchmarking pay, or helping map out workforce plans for a new market.

Our AEC Salary Benchmarking and Compensation Trends Analysis give clients real‑time, role‑specific data that anchor compensation decisions in facts rather than guesswork. We pair that with Workforce Strategy And Planning, aligning talent investments with revenue goals, backlog profiles, and margin targets so firms know where higher pay will truly pay off.

On the recruiting side, our managed talent pool of more than 15,000 AEC professionals, including many passive candidates identified through confidential market mapping, lets us connect firms with high‑impact leaders and specialists quickly. Our Executive Leadership And Technical Talent Acquisition services focus on people who bring enough value to justify competitive compensation and improve project performance.

We also know that hiring is only half the game. Our Retention And Employee Engagement Consulting helps clients create environments where these high performers stay, grow, and contribute over time. With our twelve‑month replacement guarantees, we share in the risk of each hire, which matters in a market where recruitment costs are rising. In short, we act as a strategic partner to C‑suite teams and HR leaders, helping them make every talent dollar count and turning wage growth from a pure threat into a managed part of a broader growth strategy.

Conclusion

Wage growth in AEC is no passing phase. With average salaries climbing, hourly production pay at record levels, and persistent labor shortages across roles and regions, leaders have to assume continued pressure on compensation for the foreseeable future. The impact of wage growth on AEC profit margins touches every project, office, and discipline.

At the same time, the story is not purely negative. The same forces that push wages up are also driving firms to become more disciplined, data aware, and strategic in how they plan their workforce, as demonstrated in recent Press Release statements from major AEC firms highlighting strategic workforce investments. Differences between engineering and architecture, between high growth firms and stable ones, and between regions all show where sharper strategy can make the most difference.

The firms we see doing well combine several moves. They use accurate compensation benchmarks instead of guesswork. They invest in technology and training to raise productivity, not just headcount. They build development and retention programs that keep experienced staff in place. They negotiate smarter contracts and target higher value opportunities where their expertise earns a premium.

No single firm can change the market forces behind wage growth. What leaders can control is how they respond. With the right data, clear strategy, and support from specialized partners like AEC Talent, AEC firms can protect their margins, keep their best people, and continue to grow even as wages rise.

FAQs

Question: How Much Have AEC Salaries Increased In The Past Year, And Which Roles Saw The Biggest Jumps?

Recent data from Zweig Group shows average AEC salaries rising about 5.9 percent over the past year. Engineering roles saw the largest jumps, with average increases near 8.84 percent, while architecture roles rose only about 1.05 percent. At the associate or department manager level, engineers received increases around 8.43 percent while comparable architecture leaders saw pay fall roughly 3.85 percent. In fast growth firms, administrative and non‑technical roles recorded even higher increases, often near 12 percent, reflecting heavy investment in support teams. Much of this shift ties back to strong demand in data centers, infrastructure, and industrial markets and softer demand in some architecture segments.

Question: What Are The Primary Factors Driving Wage Inflation In The AEC Industry?

Several long‑term forces sit behind current wage inflation:

• Persistent labor shortages, with about 89 percent of firms reporting trouble finding qualified workers at many levels.
• A widening skills gap driven by digital tools such as BIM, AI‑based analytics, and VR or AR, which makes specialists in these areas scarce.
• Sector‑specific demand in data centers, manufacturing, and power infrastructure that concentrates hiring in certain fields and regions.
• Demographic trends, including an aging workforce and difficulty attracting younger professionals.

NCARB has also noted a small decline in licensed architects, underscoring that these are structural issues rather than short‑term market swings.

Question: How Can AEC Firms Protect Profit Margins While Still Offering Competitive Salaries?

Protecting margins in a high‑wage market starts with data‑driven pay decisions so firms stay competitive without drifting far above market. Strategic bidding and contract terms help as well, especially through realistic contingencies and wage escalation language in longer projects. Investing in technology to improve productivity allows teams to do more work with the same or slightly larger headcount, which offsets higher individual pay. Building internal skills through focused workforce development reduces the need to pay premium rates for every specialized role. Strong retention programs cut down turnover, which is especially costly when replacement salaries are higher. Many firms also concentrate their pursuit efforts on higher‑margin opportunities where their strengths justify better fees, often with guidance from specialized talent partners such as AEC Talent who bring market intelligence and efficient recruiting support.

Question: Should We Expect AEC Wage Growth To Continue, Or Is This Trend Temporary?

Our view is that current wage pressure represents a long‑running trend rather than a short spike. Surveys show that around 69 percent of firms expect hiring challenges to continue even as they raise pay, which suggests the talent shortage will not vanish soon. Demographic factors, such as retirements among senior staff and fewer young people entering the field, will remain in play for years. Technology adoption will keep creating demand for advanced skills faster than the education system can supply them. Ongoing investment in infrastructure, data centers, and manufacturing projects also supports strong demand for certain roles. That is why we advise clients to plan for continued wage growth in their long‑term financial models and to put strategic responses in place now.

Question: How Does Wage Growth Vary By Region, And Should We Adjust Our Compensation Strategy Accordingly?

Wage growth varies noticeably across regions and must shape compensation strategy. Recent data shows Eastern U.S. firms with increases around 5.87 percent, Central region firms near 5.49 percent, and Western firms closer to 4.35 percent. Within those regions, some roles move much faster than others. Designers in the Central and East often saw increases above 10 percent, while similar roles in the West sometimes saw no raise at all. State and city‑level patterns matter too, such as California architects averaging about $112,000 compared with $90,000 in Georgia. Cost of living differences and local demand both play roles, so multi‑office firms should lean on regional benchmarks rather than national averages when setting pay.

Question: How Can We Compete For Engineering Talent When Wages Are Rising So Much Faster Than For Architects?

Competing for engineering talent starts with recognizing the scale of the gap, with engineering salaries up about 8.84 percent compared with roughly 1.05 percent for architecture roles. Much of this growth comes from heavy demand in data centers, infrastructure, and manufacturing projects that need specific engineering skills. Multi‑discipline firms should use discipline‑specific benchmarks and separate pay structures so they can respond to each market fairly. At the same time, they can stress non‑monetary advantages such as strong project portfolios, professional development, flexible work, and a healthy culture to stand out without relying only on pay. Retention remains vital for both engineers and architects, because keeping experienced staff often costs less than constantly trying to outbid competitors for new hires. Strategic partnerships with AEC‑focused recruiters like AEC Talent also help by surfacing well‑matched candidates more efficiently and advising on realistic compensation levels.

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