President Biden plans to run for reelection on “Bidenomics,” his economic plan that aims to build the economy from the middle out and the bottom up. In essence, Biden is betting that he can create jobs through his signature investments in infrastructure, semiconductor manufacturing, and clean energy, and that voters will reward this progress and return him for a second term in the White House. Yet whether the Administration can deliver high-quality, union jobs that pay good wages and provide benefits, and receive a political boost for doing so, remains an open question.
Optimism may be warranted: Biden’s industrial policies—the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA)—include several strong job-quality requirements and are likely to create millions of jobs and boost GDP. Research strongly suggests that Biden is likely to reap electoral rewards if industrial policy creates enough jobs with sufficiently high incomes to overcome the negative effects of inflation.
Still, caution is necessary. Delivering high-quality jobs will not be easy. The Biden Administration needs to overcome several challenges, including the low standards that exist in many manufacturing and construction jobs and the limits of the job-quality provisions in the bills. Further, his Administration is facing misguided pushback that emphasis on job quality could delay or undermine the underlying goals of new roads, supply chain resilience, and sustainable energy production.
Warning signs are flashing that industrial policy needs to deliver better jobs than those in the rest of the economy: The nation’s unemployment rate is near record lows, yet Americans are down on Biden’s economic performance largely because pay is barely keeping up with rising prices. To understand why so much depends on job quality requires a closer look at the implementation of these programs, the economics, and the ways voters hold lawmakers responsible for economic outcomes.
The Likelihood of Quality Jobs: It Won’t Be Easy
Despite the collective nostalgia for mid-century America, manufacturing and construction—the primary sectors in which Biden’s industrial policy will create jobs—do not automatically produce jobs that offer good wages and benefits. Manufacturing may conjure images of a solid middle-class career, and some manufacturing jobs, generally unionized ones, are quite good, but the reality today is often different. The typical manufacturing job is little better than those in the rest of the economy, and many offer low pay and are increasingly staffed by temp workers. Pay is still above fast food, but the gap is closing. Similarly, nonunion construction jobs frequently offer poor pay and are too often inaccessible for women and workers of color.
Policy details and implementation practices will determine whether the Biden Administration can improve upon the status quo.
The three signature Biden laws include a number of requirements that can help ensure job quality—such as prevailing wage and apprenticeship utilization requirements—as well as some provisions that aim to help a more diverse pool of workers have access to the jobs created. Prevailing wage laws set a basic hourly rate of wages and benefits paid to a number of similarly employed workers in a given geography (which can be union wages in areas where membership is high). They ensure that government dollars do not undercut local wage and benefit standards. Registered apprentices earn a paycheck while they are being trained for high-paying jobs.
These standards are quite good, but they have their limits. The standards apply to only some of the funds in the three bills, primarily those producing construction jobs. There are few to no required standards for most subsidized manufacturing jobs or related logistics, operations, and service jobs—though the bills do encourage firms to locate manufacturing jobs in the United States. In addition, many existing job-quality requirements aren’t guarantees: A prevailing wage merely prevents government spending from undercutting market wages, but in areas with low wages and low union membership, market wages can be quite low the minimum wage.
The strengths and weaknesses of the job-quality requirements highlight a core economic truth about industrial policy: Political considerations often determine its effectiveness. As one heavily cited article notes, “We cannot understand why some governments pursue and implement industrial policy better than others without understanding its politics.” That is, President Biden may have preferred a different industrial policy—with, for example, more robust job-quality measures and major investments in child care and home care—but ultimately the version contained in the IIJA, CHIPS Act, and IRA became law.
Conservative critics as well as centrist and progressive skeptics sometimes maintain that various government requirements, including job-quality standards, can get in the way of actually delivering promised roads, factories, and electric vehicles. Not only Republicans criticize Biden—voices from the center-left claim that Biden’s whole-of-government, “everything bagel” approach to spending significantly delays projects.
But while there is a valid, growing concern that the combined weight of various government requirements can hinder performance, there isn’t much evidence that job-quality standards in particular are the problem.
Prevailing wage requirements have been around for a century and have been extensively studied, with academics finding they promote quality work and produce good value for taxpayers. They do this by increasing worker productivity, reducing injury rates, and supporting high-quality training, all without raising construction costs. They also increase the amount of work performed by local contractors and make workers less reliant on government programs such as the Supplemental Nutrition Assistance Program (food stamps). Apprenticeships often pay for themselves, both in the short term and by securing a long-term pipeline of skilled labor.
Research on other job-quality standards, such as project labor agreements and community workforce agreements, similarly finds that they do not hinder the government’s ability to deliver on projects—in fact, they can be a crucial tool for improving it. For instance, project labor agreements can ensure a pipeline of skilled workers and include provisions to prevent costly work stoppages, reasons the federal government has cited to support their usage in the past.
More generally, the ability to place conditions on government subsidies is the essence of successful industrial policy. Governments make industrial policy succeed by forcing private firms that receive public funds to deliver not just for their shareholders but also for the public. Conditions may add complexity, but they can also help ensure projects actually produce what policymakers have judged to be in the public interest.
The Biden Administration is doing its utmost to make this version of industrial policy work. Indeed, it has been taking a whole-of-government approach to promoting good jobs, using all levers available, including executive actions. The Administration is also promoting collaboration across government agencies to improve job quality through efforts like the Department of Labor’s Good Jobs Initiative and the White House Task Force on Worker Organizing and Empowerment.
Still, implementation of job-quality standards—much like the entire industrial policy program—is complicated. Many of the job-quality standards will pose novel challenges because they are attached to tax subsidies, not just requirements on government contracts as is more traditional. This is a major advance toward ensuring all types of government spending include robust job-quality standards, but it necessitates creating new implementation strategies. Adding additional complexity, a significant portion of the federal funds will flow through state and local governments, some of them not particularly interested in constraining the behavior of corporations, and much of the money flows in ways that severely limit the Biden Administration’s ability to encourage higher standards.
Because the three bills became law only recently, many projects have yet to begin. Yet the potential for major economic benefits can already be seen. The Port of Oakland, for instance, received a $36.6 million grant to help it implement an existing plan for achieving zero emissions. The port has in place a project labor agreement that ensures quality jobs and apprenticeships and access to these jobs for disadvantaged workers. Planned repairs of the Brett Spence Bridge, near Cincinnati, Ohio, prompted a local construction union leader to write that he has “never seen a more promising time for our field and our workers than today” because of the opportunities for good jobs.
And yet, the potential pitfalls of industrial policy are also already apparent. Some firms are rejecting the Biden Administration’s encouragements to go above the legal minimum job-quality requirements. Subsidies are likely to flow to companies that engage in union busting. Many projects are on track to produce relatively low-wage jobs.
Indeed, some projects represent both potential and peril. For example, an Ultium battery plant in Ohio, jointly owned by General Motors and LG Energy Solution, is expected to receive several billion dollars in loans and tax subsidies, yet plant workers are currently paid around $16 per hour, roughly half what comparable jobs assembling internal combustion cars pay. In December, workers voted 710-16 to unionize and thus could significantly improve pay, though contract negotiations are still pending. Many workers are also paid around $16 per hour at Blue Bird electric bus manufacturing factories in Georgia, factories that receive federal subsidies. Yet in May, workers were able to successfully form a union in part due to nudges by Biden Administration policies and progressive policymakers, leading to the possibility of a collective bargaining agreement with significantly higher pay. And Ford has committed to a card-check process for workers to form a union at a forthcoming battery plant in Michigan, creating a straightforward path to bringing the vast majority of the 2,500 new workers under the high standards of the United Auto Workers union. Without unionization, these jobs are predicted to pay less than the median household income in the area.
The Biden Administration’s significant efforts appear to be pushing standards higher than they would otherwise be, but it will likely have to do more to achieve the President’s goals.
Whether industrial policy creates lots of high-quality jobs is particularly important, because economic research indicates that in the short run, the impact of the IIJA, CHIPS Act, and IRA will be most forcefully felt by individuals and particular locations rather than the country as a whole. Thus, the quality of the jobs will be noticed.
The general direction of the three bills fits best practices, because they address market failures: reversing underinvestment in public goods like infrastructure, reducing harmful externalities like pollution and climate change, and fostering new investment in long-term goals that businesses might be reluctant to make on their own. Not surprisingly, projections of the three laws’ macroeconomic impacts, such as on GDP and employment—and even inflation—are generally positive.
Analysis of the infrastructure bill, the climate investments, and the semiconductor funds indicates that the bills will create around 2 million new jobs per year in total. These are big numbers, but there are more than 160 million jobs in the U.S. economy and unemployment is already quite low, suggesting that the national employment impacts may not be obvious to see. GDP effects may be even harder for most people to discern.
These economic effects could be reduced or overwhelmed by any number of factors.
Inflation, though falling, still makes people feel poorer and think the economy is going in the wrong direction. Inflation has also caused the Federal Reserve to clamp down on economic activity with interest rate increases, limiting the boost from industrial policy. Over the long run, the small annual GDP gains from addressing climate change and building more efficient infrastructure and factories will lead to very significant and noticeable macroeconomic benefits, but these will not be fully felt for decades.
There’s a strange inversion of the logic of neoliberal globalization. The benefits of outsourcing and free trade were felt by the economy as a broad whole, but particular regions were devastated by business and factory closings, harm that likely shifted many voters toward Donald Trump. Now the opposite is possible: diffuse overall benefits combined with immense localized ones. Thousands of new jobs in a town are economically noticeable, as is a new job to any single individual—particularly when the jobs are good ones paying better than other available ones.
Judging how industrial policy’s economic effects will be interpreted politically leads to another set of complicated evaluations, but academic research strongly suggests that creating good jobs—ideally unionized jobs—is critical for political success. Indeed, this may be the most important factor Biden has some control over.
Indicators such as GDP, inflation, and unemployment, as well as subjective measures of the economy, have all been found to influence votes. So too has the amount of government spending on factors like infrastructure—so Biden could possibly get some localized boosts from industrial policy even if the jobs aren’t particularly good. Still, income adjusted for inflation is one of the most important variables, and in some studies is far more important than other factors.
The state of the economy in the period immediately prior to an election has a “large impact” on voting behavior, with conditions in earlier years having relatively little effect—meaning Biden needs to deliver soon. Though vote choice is based more on national economic indicators than personal pocketbook or regional economic conditions, personal and regional economics do have some direct influence on vote choice, and can also shape judgements about the national economy and thus influence votes indirectly. Voters are much more likely to reelect Biden if he can create good jobs in enough localities.
Research also indicates that creating jobs where employers respect workers’ right to unionize is important. Most obviously, unions improve job quality, but they also help educate their members, encourage them to emphasize economics over social issues, and turn them out to vote—especially for candidates they perceive as advocates for workers. Together, these factors make a big difference in how union members vote.
Polls find voters care far more about the potential economic benefits of the industrial policy bills than they do about the bills’ other goals, with surveys indicating, for example, that economic issues outrank climate change and national security as priorities. Just 1 percent of non-college voters identified climate change as the biggest concern facing their family in an April 2023 poll.
If we had 10 percent unemployment, things might be different, but most Americans do not seem to value job creation as highly as being able to afford rising prices, and nearly two-thirds of workers are frustrated by their low pay and lack of opportunities for advancement—fertile soil for Biden to reap the rewards of offering workers better options. Thus, if industrial policy creates jobs that are merely equivalent to those of the business down the street, the President may receive little political benefit. A better bet—and the one Biden is making—is that people will be more appreciative of jobs that provide high enough incomes to overwhelm the effects of inflation.
To improve the odds of this bet, President Biden will have to do more. Biden is already doing as much as any President in decades to promote good, union jobs, so there is little low-hanging fruit. Still, Biden and his Administration can more frequently and forcefully use the bully pulpit and direct conversations to remind corporations to comply with the law and respect workers’ rights. The Administration can also deepen coordination across agencies to achieve these goals. To succeed, Bidenomics needs to mean middle-class jobs.