How Biden’s American-Style Industrial Policy Will Create Quality Jobs
How Biden’s American-Style Industrial Policy Will Create Quality Jobs
The Inflation Reduction Act, the CHIPS and Science Act, and Infrastructure Investment and Jobs Act are key pillars of a transformative industrial policy platform.
With the passage of the Inflation Reduction Act, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act (IIJA), President Joe Biden has signed into law three key pillars of a transformative economic policy platform that will not only accelerate economic growth and rebuild broken supply chains in the United States, but also uphold high standards for workers. The Biden-Harris administration’s signature investments in infrastructure, advanced domestic manufacturing, and clean energy and energy efficiency will support millions of jobs that pay good wages, empower workers, and are accessible to local workers from all walks of life.
The new laws support the creation of good jobs by including job quality measures such as prevailing wages, registered apprenticeships, and domestic manufacturing and content requirements. They will also incentivize government spending recipients to go even further to create good jobs and build a more equitable and diverse workforce.
Together, these laws represent American-style industrial policy: They make needed investments in growing industries that will drive future economic growth in a way that promotes quality American jobs, including by building electric vehicle (EV) charging stations and energy-efficient homes, manufacturing semiconductors, repairing crumbling roads and bridges, and closing the digital divide, among many other investments.
This industrial policy framework provides policymakers with tools to support multiple labor and workforce issues simultaneously.
The three laws pave a promising path forward for American workers and represent a dramatic break from the failed trickle-down economic policies of the past. Trickle-down economics recklessly assumed that tax cuts for corporations and the wealthy would create good jobs but ultimately led to the decline of the American middle class and shrinking opportunities for working families. The economic transformation promised in these bills seeks to reverse that decline.
Taken together, this industrial policy framework provides policymakers with tools to support multiple labor and workforce issues simultaneously. For example, investments that expand domestic manufacturing in key sectors should also, to the extent possible, encourage the use of workforce agreements that support job quality and job access for local community members. Moreover, policymakers at all levels of government must commit to robust implementation of these mechanisms; monitor recipient compliance over time; and support public accountability and enforcement in order to ensure that investments in the domestic workforce live up to this promise.
While much more needs to be done to improve job quality throughout the economy and ensure effective implementation of these laws’ job quality provisions, the Inflation Reduction Act, the CHIPS and Science Act, and the IIJA make a major down payment on good jobs and lay the groundwork for future policies that include worker empowerment and protection at their core.
How these critical investments use job quality measures to create good jobs
A closer look at the job quality measures in the Inflation Reduction Act, the CHIPS and Science Act, and the IIJA shows how these programs can benefit workers by supporting high-quality jobs.
Prevailing wage standards ensure government spending upholds local wage and benefits standards. For nearly a century, federal policymakers have required recipients of government spending to pay prevailing wages through the Davis-Bacon and Related Acts, which guarantee that construction workers on publicly supported projects are not paid less than the amount commonly earned by local workers. These laws have a proven track record of raising wages, closing racial pay gaps, and leveling the playing field for high-road employers.
[Prevailing wage laws] have a proven track record of raising wages, closing racial pay gaps, and leveling the playing field for high-road employers.
Extending these standards represents a big step toward ensuring that all forms of government spending promote good jobs; they cover the overwhelming majority of IIJA funds, CHIPS and Science Act facility construction funds, and billions of dollars of the Inflation Reduction Act’s clean energy and energy-efficient construction tax credits. Under the Inflation Reduction Act, recipients of tax credits for clean energy, energy-efficient construction, and EV infrastructure projects access the full credit amount only by meeting job quality standards, including prevailing wages. Companies that falsify their compliance with the standards suffer penalties—an especially crucial measure since improving job quality will have a lasting impact on jobs in the rapidly expanding clean economy. The “overwhelming majority” of IIJA investments are also covered by the existing prevailing wage and benefit standards of the Davis-Bacon Act. These investments include billions of dollars for advanced energy technologies and for steps to combat climate change through programs to build new charging infrastructure for EVs, support clean water infrastructure, and reduce truck emissions at port facilities. CHIPS and Science Act funding for construction of manufacturing facilities requires that employers meet Davis-Bacon standards as well.
Apprenticeships and workforce training programs
Apprenticeships provide classroom instruction and paid on-the-job training to equip workers with the skills they need to work on crucial projects, largely in skilled trades occupations but increasingly in clean energy and advanced manufacturing as well. Such programs build a pipeline of well-qualified workers for publicly supported projects. Increasingly, governments, unions, and employers are using registered apprenticeships and high-quality pre-apprenticeship opportunities to train a skilled workforce in order to boost long-term earnings and further career advancement opportunities. These programs may also be used to increase workforce equity and lower barriers to entry to high-paying jobs for traditionally underrepresented workers, including women, people of color, low-income residents, LGBTQI+ individuals, disabled workers, and residents who have past involvement with the criminal justice system. These benefits extend to employers as well by addressing labor shortages through pathways to good jobs.
The Inflation Reduction Act supports registered apprenticeships; in order to be eligible for the full tax credit offered to certain clean energy projects and energy-efficient construction, employers must ensure that a set percentage of total hours worked on a construction project are performed by registered apprentices.
The CHIPS and Science Act and the IIJA also support apprenticeship and workforce training programs in critical industries. The CHIPS and Science Act directly funds such programs for workers in advanced manufacturing through a $13.2 billion investment in research and development and workforce development, building a skilled domestic workforce in the critical semiconductor sector. Supporting these programs also expands access to work traditionally gated behind higher education and encourages collaboration between businesses and academic institutions, workforce development programs, and labor unions. Meanwhile, the IIJA builds on the innovations adopted by cities and states in partnership with labor and community organizations that have established targeted hire, apprenticeship, and pre-apprenticeship programs. The law supports the creation of training centers for the installation and maintenance of energy-efficient building technologies run in partnership with employers and labor unions; allows the use of surface transportation funds for the establishment of registered apprenticeship or pre-apprenticeship programs; and permits cities and states receiving federal transit, road, and bridge funds to establish local hiring programs with economic or geographic preferences.
The Inflation Reduction Act’s clean electricity production tax credit
The clean electricity production tax credit, which offers a technology-neutral tax credit for energy production beginning in 2025, serves as an example of how the Inflation Reduction Act’s tax credits are structured to create quality jobs and workforce training programs. The tax credit offers a base amount calculated from the amount of electricity produced by an eligible facility creating at least 1 megawatt of power, plus additional credits for facilities that:
- Use only domestically produced steel, iron, and manufactured products
- Pay workers on the project the Davis-Bacon Act prevailing wage, with recipients falsifying compliance liable for back pay, interest, and government penalties
- Make a good faith effort to ensure that 10 percent, increasing to 12.5 percent by 2023 and 15 percent by 2024, of the total labor hours on the project are performed by apprentices, with penalties for failing to make a good faith effort or for intentionally disregarding the requirement
By meeting both the prevailing wage and apprenticeship standards, the credit amount increases to five times its base level, and recipients earn an additional 10 percent credit for meeting the domestic content standard.
Domestic content and manufacturing
American manufacturing jobs have long offered a route to the middle class for working families, as direct investments in U.S. manufacturing have the potential to create good jobs in new and growing industries. Domestic content standards are protections that help ensure federal spending supports domestic production and manufacturing by requiring the federal government to purchase American-made products and recipients of federal funding on construction projects to use inputs made in the United States. As a result, strong domestic content and sourcing requirements further incentivize investment in American manufacturing and infrastructure, helping to prevent good jobs from being sent abroad. The Inflation Reduction Act’s, the CHIPS and Science Act’s, and the IIJA’s domestic content standards are an important step toward upholding these standards.
By upholding domestic content standards and onshoring critical advanced manufacturing jobs, provisions of these three bills will create thousands of domestic jobs. The Inflation Reduction Act ties tax credits for consumers purchasing new EVs to domestic content standards that require final assembly to take place in North America and, starting in 2023, offers up to $7,500 in credits per vehicle for meeting standards regarding battery mineral extraction or recycling, manufacturing, and assembly. The law also offers bonus credits for a range of projects, including clean energy, tied to compliance with domestic content standards, and it invests tens of billions of dollars in grants and tax credits to help companies build out, reequip, or expand facilities to make new products for the clean economy or bolster existing manufacturing. It also invests billions of dollars to help manufacturers decarbonize and supports the purchasing of low-carbon materials.
The CHIPS and Science Act makes historic investments in American manufacturing capacity by building up the nation’s semiconductor supply chain, creating upward of 280,000 jobs in the United States.* Finally, not only does the IIJA directly support the domestic manufacturing of thousands of new rail cars, battery electric buses, and ferries, but the law also strengthens a number of existing domestic content requirements and origin standards while closing loopholes used to sidestep these standards.
By upholding domestic content standards and onshoring critical advanced manufacturing jobs, provisions of these three bills will create thousands of domestic jobs.
Innovative grants that create good jobs and boost workplace equity
Government agencies are prioritizing applications for IIJA competitive grants that demonstrably commit to creating good jobs and boosting workplace equity. The administration has released notices of funding opportunities for IIJA discretionary grants covering transit, ports, highway improvement, EV battery manufacturing, and abandoned mine projects that judge applicants on their ability to create jobs that offer workers a chance to join a union, are covered under project labor agreements, and are available to groups traditionally excluded from these jobs.
For example, in its notice of funding opportunity for the Reconnecting Communities Pilot (RCP) grant, the U.S. Department of Transportation states that Capital Construction Grant applicants must explain how their grant will support:
Good-paying jobs with the free and fair choice to join a union, the incorporation of strong labor standards, pro-active anti-discrimination and anti-harassment plans, project labor agreements, workplace rights notices, training and placement programs, and local hiring and procurement preferences, particularly for underrepresented workers and individuals with convictions … [and implement] High-quality workforce development programs with supportive services to train, place, and retain workers, especially joint-labor management training partnerships and registered apprenticeships.
In its strategy for the CHIPS for America Fund, the U.S. Department of Commerce similarly expects to encourage “programs that enable employers, training providers, workforce development organizations, labor unions, and other key stakeholders to work in partnership to create more paid training and experiential apprenticeship programs.”
Together, the Inflation Reduction Act, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act place high-quality jobs for American workers at the center of major investments in critical sectors of the U.S. economy. This American-style industrial policy adopts time-tested job quality measures, such as prevailing wages, registered apprenticeships, domestic manufacturing and content requirements, and it prioritizes projects that create good jobs and boost workplace equity—principles that can be replicated in future investments.
* This is based on an estimated $50 billion federal investment program to “to incentivize domestic semiconductor manufacturing“; the CHIPS and Science Act created $52 billion in investments into domestic semiconductor manufacturing. For more, see this Center for American Progress fact sheet.
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Senior Director, Employment Policy