Will ‘Made in America’ really lead to good jobs?

modern industrial factory for the production of electronic components - machinery, interior and equipment of the production hall. Photo: Shutterstock
Editor's note:

This piece was originally published by The American Prospect.

Thanks to the clean energy revolution, batteries are no longer in the public eye just in the form of that unstoppable bunny in TV ads. Batteries—like computer chips, electric vehicles, solar panels, and other hardware—are having a moment.

Last fall, with funding from 2021’s mammoth bipartisan infrastructure law, the U.S. Department of Energy (DOE) awarded nearly $3 billion in grants to 20 manufacturers of electric vehicle (EV) battery components in 20 states. That’s just a portion of the taxpayer money appropriated to dramatically expand battery production and enlarge the EV supply chain in the U.S., which is, in turn, a small part of the trillion-dollar surge in federal investment.

In February, the Commerce Department announced the terms of competition for $39 billion in federal subsidies for manufacturers to expand domestic production of semiconductors. Among other conditions, the CHIPS Incentives Program limits stock buybacks and requires applicants to provide the child care that’s so crucial to enabling more women to work in manufacturing.

The question now is how these big bets to expand advanced manufacturing and boost research and development in America—taken together, what the Biden administration calls our country’s “new industrial strategy”—will create broadly shared economic gains, including good jobs, for workers and communities across the country.

This “how” is not without controversy, to put it mildly. Beyond the conservative critics who have lambasted the child care requirement and other conditions, influential liberal voices have aired serious skepticism as well. In a recent column (and clever pop culture mash-up), Ezra Klein of The New York Times decried “everything-bagel liberalism” that pursues “everything everywhere all at once.” But he, too, lumps everything together—from permitting requirements confronting nonprofit housing developers to these new, conditional industrial-policy incentives meant to embed meaningful economic opportunity for workers and communities into the DNA of some of the world’s most important and massively subsidized growth industries. Klein—whom we agree with on many things—gets it wrong when it comes to CHIPS and other promising government efforts to chart a new course.

Advocates have worked for decades in many parts of the country on how to make the economy work for all, on a foundation of good jobs and racial and gender equity. From that work, one essential lesson emerges: Attaching clear, consistently enforced expectations to public investment is indispensable. And with the enactment of last year’s landmark legislation, public officials now have a once-in-a-generation set of tools and resources to do this. The “how,” however, remains an open question, especially for jobs outside of construction.

For much of the past half-century, America’s dominant economic paradigm held that free markets and freewheeling capital alone have created the nation’s critical industries and enabled them to flourish. That paradigm denied the important role that government plays in shaping the nation’s economy. Indeed, innovation has long required and received government-backed R&D, contracts, and other investments in discovery and commercialization. Today, that investment is also focused on the making of a lot of stuff: batteries, electric vehicles, charging stations, computer chips that put the brains in all that hardware, and more. So how did we approach that challenge for the past few decades, given that influential economists and political leaders across the political spectrum often questioned whether America needed manufacturing at all?

Consider the evolution of the DOE and how it impacts our economy and communities. Created with a wartime sense of urgency—to address the energy crisis of the 1970s—the DOE quickly found itself in the crosshairs of American politics, especially as high gas prices receded and renewable energy seemed a pipe dream. For years, the DOE was a favorite target for those keen to attack public investment and many of the other tools of entrepreneurial government. By that we mean, as economist Mariana Mazzucato argues in her book “Mission Economy: A Moonshot Guide to Changing Capitalism,” a government that is both equipped and directed to help solve national challenges—not just address market failures and economic calamities.

Despite the lack of broader political support, the DOE quietly became a vital source of the R&D dollars that helped develop new technologies. Thanks to the Advanced Technology Vehicles Manufacturing Loan Program, signed into law by President George W. Bush in 2008, the agency also became an important supplier of the financing that, in principle, could have helped turn great ideas into great companies that committed to good jobs in addition to great products.

Famously, the DOE bet $465 million in taxpayer dollars, in the form of a direct loan, on the ambitious domestic production plans of Tesla, now the world’s most valuable car company. That was well before the private capital markets were ready to make that bet on a largely unproven company and its first major factory in Fremont, Calif.

The DOE’s investment in Tesla paid off in terms of demonstrating the viability of mass-produced electric vehicles. But in terms of generating good jobs and racial and gender equity in this critically important new industry, the investment proved to be a bust. The company leads all carmakers in the U.S. in workplace safety violations—as Forbes put it, “racking up more infractions and fines in the last three years than all other automakers in the U.S. combined.” CEO Elon Musk has fought workers’ attempts to unionize by spying on them, firing organizers, and refusing to stop anti-union social media attacks. The company is also being sued by the state of California for alleged widespread anti-Black racism, and by several women for alleged sexual harassment.

There’s a moral to this story: Tesla may be the world’s biggest example of how much harder it is for government to push for high-road labor standards after a company has grown with the help of taxpayer financing. If something important is not part of the deal up front, it tends not to happen.

Tesla is not alone. Particularly in the South and many rural areas around the country, even in ostensibly pro-labor states such as California, innovative manufacturers are mass-producing low-quality jobs. The good manufacturing job is mostly gone, outside of the less than 10% that are unionized. There is, therefore, no guarantee that a significant chunk of the publicly supported clean and high-tech production jobs will pay much more than minimum wage or that they will provide opportunity for training and advancement.

That is, unless certain choices are made to incentivize and embed good jobs and equity into the deals.

In the conventional, low-road “attraction game” to lure major employers or encourage them to stay and expand in a given state or region, the larger public purpose of taxpayer investment gets lost in the push to land the deal. As in the widely publicized 2018 contest to land Amazon’s second U.S. headquarters, companies get state and local governments to compete with one another in a race to the bottom. Often, those companies win tax breaks that starve public benefits of many kinds.

However, thanks to last summer’s twin legislative landmarks—the CHIPS and Science Act and Inflation Reduction Act (IRA), together with 2021’s bipartisan infrastructure law—elected officials and public agencies in the nation’s capital and across the country now have the tools to make the creation of good jobs, racial equity, and community benefits part of the deals as companies seek public funding from this legislation. To do that, however, these officials will have to clear some significant hurdles. While good jobs are often a stated goal of major public investment programs (including each of the major federal investment bills of the past two years), the commitment to and production of good jobs—especially for people and communities who most need them—has been harder to pin down.

While the legislation strongly incentivizes the domestic production of manufactured goods created with the new funding, there is little specification on the quality of the jobs that will be created, outside of construction. Part of the problem has been the failure of government at all levels to clearly articulate the meaning of the term “good job” and then create specific policies and contractual language to ensure the results. It’s a key reason that the attraction game of economic development has long centered on the total number of jobs to be created—sometimes with dubious claims and disappointing results—rather than creating demonstrably good jobs.

There’s evidence, though, that broad-based public opinion and key sectors of business now hold that a good job does more, and better, than simply paying the federal minimum wage—still $7.25 an hour—and providing such legally required benefits as workers’ compensation and unemployment insurance. A large body of public opinion surveys used by corporate leaders and investors makes clear the public’s belief that a good job pays enough to meet such basic needs as decent housing, food, and transportation, and offers conditions for motivation, advancement, and a voice on the job. Last October, after summarizing the evidence on the benefits of job quality for business and society, over 100 companies, philanthropies, and advocacy organizations proposed a simple and compelling “good jobs” definition and called for its wide adoption.

Broadly speaking, the Biden-Harris administration has aligned with the major elements of that definition, most recently by creating a Good Jobs Initiative at the Department of Labor, which worked jointly with the Department of Commerce to issue what we believe to be the federal government’s first-ever official statement of Good Jobs Principles. Moreover, in public statements, the administration has highlighted the importance of creating jobs “with the free and fair choice to join a union.”

For now, however, there remains a gap between these principles and the specific policies and business commitments needed to fulfill and enforce them. That gap is clear when we compare expectations for construction jobs with those for manufacturing and other “permanent” jobs—in both pro-labor and labor-hostile states.

The bipartisan infrastructure law, IRA, and CHIPS and Science Act include money for workforce investment and encourage public agencies receiving federal funds to obtain private sector commitments for good construction jobs. The funding requires compliance with federal Davis-Bacon prevailing-wage rules and, for some federal programs, also creates incentives for private contractors to support and utilize construction apprenticeship programs.

But there is a big missing piece: None of these laws require that the mining, manufacturing, or related logistics, operations, and service jobs created with the help of massive public investment be good, provide skill-building apprenticeships, or be realistically accessible for workers of all backgrounds.

That’s why implementation choices by the Biden-Harris administration are so important and, in several specific cases so far, promising. The DOE included an innovative community benefits incentive incorporated into the competition for $3 billion in subsidies to bolster domestic battery manufacturing, recycling, and supply chains. In the scoring of the proposals, the program weighted “an applicant’s commitments to deliver benefits for communities and workers.” Crucially, credit was given for commitments to good construction, manufacturing, and operations jobs, and for agreements with community groups and unions to help the companies create those jobs and provide training and support for more inclusive hiring practices.

To fully realize the promised good jobs and benefits, however, the DOE—and other federal and state agencies implementing hundreds of billions of dollars in public investment—now must ensure that the companies are held to their promises through enforceable contractual requirements. And these requirements—and evidence of compliance with them—must be made publicly available, so workers and the public at large can see clearly what these employers have promised to do.

Then there’s the massive CHIPS Incentives Program, led by the Department of Commerce, to expand and upgrade domestic manufacturing of semiconductors. For workers, the recently announced conditions on this money matter, and they reflect the hard work of committed worker champions inside the administration as well as expert advice from the field and strong advocacy by unions.

In CHIPS, the federal government is directly addressing job access and quality through well-defined expectations that include the construction jobs building or modernizing chipmaking facilities (aka “fabs”) as well as the technical and assembly jobs creating the chips once the factory is up and running. Because there is otherwise no guarantee that these jobs will be good.

The CHIPS requirements, intended to build a “skilled and diverse workforce,” include workforce partnerships and wraparound services and ask whether the applicant plans to use registered apprenticeships and other programs that successfully train diverse populations. Commerce also encourages more skills-based hiring—eliminating degree requirements for certain jobs, given that an estimated 60% of semiconductor manufacturing jobs, according to recent Brookings Institution research, do not require a college degree. This is encouraging, since employers and training providers in Ohio, Michigan, and other industrial states are recognizing that with their historical base in manufacturing, they can upskill and cross-train workers to meet growing demand from the fabs as well as EV and battery factories and other potential sources of well-defined “inclusive innovation.”

As for job quality, while Commerce does not impose specific employment terms, such as wage floors or union neutrality, the agency states that it will evaluate “commitment to good jobs as defined by the Departments of Labor and Commerce’s Good Jobs Principles” and “quality of participation” commitments by community colleges, labor unions, and other entities. Crucially, the notice makes clear that the federal government views these commitments as an essential part of creating competitive manufacturing facilities for the long run—not just industry growth with inclusion expected, but inclusion as a key to successful and sustainable growth.

Commerce is also requiring that manufacturers bidding for the subsidies secure state or local government incentives, too, which gives elected officials at multiple levels of government a stake in these deals. Time and constructive pressure will tell whether and where that translates into real public leverage. Nonetheless, these new policy conditions are not only important for directly shaping the incentives for corporations to commit to good jobs up front; they could also be crucial for mobilizing the community and labor power required to enforce high-road commitments over long years, business cycles, and terms of office.

It’s not only the federal government that’s showing what’s possible. In fact, as exceptions to the low-road, attraction-game norm, some state and local governments have led the way, modeling how to get enforceable good-job commitments from manufacturers—especially those keen to sell their goods to public agencies—and others who get public subsidies.

For example, the Los Angeles County Metropolitan Transportation Authority (L.A. Metro), the third-largest public transportation agency in the country, recently adopted a Manufacturing Careers Policy that requires all companies wishing to sell $50 million or more in commercial vehicles (“rolling stock”) to the agency to respond to requests for proposals with specific commitments. These must cover the number, type, and location of jobs that will be created in the production of the vehicles as well as the minimum wages, benefits, and investment in training that the companies will provide if they win the contract. Companies that are awarded contracts are to be held to their commitments through robust monitoring, education, and enforcement to ensure that the good jobs—and equitable access to those jobs for historically disadvantaged workers—are actually created.

Thanks to L.A. Metro’s policies, three of the largest electric bus manufacturers selling to public agencies in the U.S. have built or expanded domestic bus manufacturing facilities employing thousands of workers, with plants in Alabama, Minnesota, Kentucky, New York, and California. All of these manufacturers have negotiated community benefits agreements (CBAs) with coalitions of community, civil rights, environmental, and labor organizations. These agreements guarantee the right of workers in those plants to choose to unionize without company interference, as well as guaranteeing good wages and benefits and the creation of apprenticeship, worker safety, and workforce development programs. (Disclosure: One of us helped advocate for the policy and negotiate the agreements.) The companies have set high goals for recruiting, retaining, and promoting historically underrepresented people in their workforce—so far with significant success in the clean-tech manufacturing industry. For example, in one recent CBA, an EV bus manufacturer committed to getting 45% of all new hires from historically marginalized groups such as Black and female workers. (Currently, 87% of metal product fabrication workers in the U.S. identify as white and 82.8% identify as male.) Crucially, those good-job and equity commitments apply to the workforce before and after the workers choose to unionize, if they do.

While L.A. Metro’s policies did not guarantee these achievements, the agency’s bidding process deeply incentivized companies to make the kind of long-term commitments—in new factories, good jobs, and equitable hiring and training—that we have described. And the CBA was a critical mechanism to help companies, workers, and communities get to the good-jobs finish line.

The White House Office of Management and Budget (OMB) recently invited comments on how its antiquated grant rules governing the use of federal funds by state, local, and tribal agencies can be updated to encourage innovations like L.A. Metro’s. OMB’s Request for Information has reportedly generated hundreds of comments from across the country. Federal as well as state agencies—such as the powerful state departments of transportation that call most of the shots in that huge and changing sector of our economy—can and should encourage more agreements like the ones struck by the companies receiving contracts with L.A. Metro.

This is the kind of industrial policy—with enforceable specifics about plans for job quality, training, and follow-through—that can ensure that workers and low-income communities benefit directly from the massive taxpayer support for infrastructure and industrial competitiveness.

It’s also the kind that has the most chance of succeeding. Policy requirements around unionization are either toothless—since the National Labor Relations Act already theoretically guarantees workers a “free and fair choice to join a union”—or face a thicket of legal obstacles and powerful company opposition, like that at Tesla. And in lieu of transparent, broadly applied expectations and agreements, even companies motivated to commit to good jobs and worker empowerment fear being undercut by low-road competitors that are focused overwhelmingly on short-term earnings.

In practice, good-job commitments and performance do not guarantee unionization, and likewise, unionization does not in and of itself guarantee strong and enforceable commitments to the specifics we have outlined. But unions are undeniably important mechanisms, especially for enforcement and worker voice over the long run.

As economist Richard McGahey recently underscored in Forbes, our nation’s last big runs at industrial policy—to win the Second World War and then the Cold War space race—invested huge sums in unionized manufacturing. In many cases, those public investment programs created not only union jobs, but also broader economic benefits for industrial regions and across sectors and occupations: in construction, engineering, manufacturing, and operations, which grew the number of workers who gained economic security, mobility, and a voice thanks to durable collective bargaining agreements.

In recent decades, America has slipped far below that high-water mark of shared-gains industrial policy. As recent research shows, the postwar “manufacturing wage premium” resulting from past unionization has all but disappeared.

The efforts of the Biden-Harris administration and its congressional allies, and by local agencies like L.A. Metro and its manufacturing partners, are beginning to show us how we can recreate an “industrial policy for all.” But the window for action will only last so long. If we don’t want this next industrial revolution to continue down the path of terrible job quality and worker exploitation—including at the extreme, prison labor and child labor, as recent media coverage and Justice Department research have documented—we need to be crystal clear on the difference between, say, overly rigid permitting requirements that thwart the rapid scaling-up of clean energy (as Ezra Klein and others have rightly called out) and principled good-job commitments for which there is a business case and economic case to go with the urgent moral one.