As President Biden signed the so-called Inflation Reduction Act of 2022, taxpayers, construction industry small businesses and climate change activists are sounding alarms about controversial labor policies in the legislation that will needlessly increase costs, reduce competition and undermine America’s swift transition to clean energy.
While the IRA has many well-documented problems, less-scrutinized language tucked in the partisan reconciliation bill forces private developers of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects to either hire union-signatory contractors and unionized construction workers or lose critical tax incentives that help grow America’s clean energy marketplace.
Although not an explicit mandate to use unionized firms and labor, in practice this policy is a brazen attempt to leverage federal tax policy to boost union membership while penalizing the 87.4% of U.S. construction workers who have chosen to work for a nonunion contractor and not to join a union.
Problematic language in Subtitle D-Energy Security of the IRA slashes longstanding and current clean energy tax credits from 30% to a baseline credit of 6%. However, the IRA gives developers a bonus tax credit 500% higher than the baseline credit if they require project contractors to use government-registered apprentices and pay workers union-scale, government-determined hourly wages and benefits via the archaic and inflationary Davis-Bacon Act of 1931.
For decades, construction unions have lobbied lawmakers for a host of anti-competitive and costly union-favoring policies, such as government-registered apprenticeship requirements and Davis-Bacon prevailing wage mandates on federal and federally financed construction projects, to steer contracts to unionized firms and labor.
However, rewriting the U.S. tax code to enact pro-labor policies, reward special interests and distort the free market’s workforce development and compensation practices on private construction projects is dangerous precedent.
Even more concerning to climate change activists, these provisions have the potential to slow down America’s transition to clean energy and meet President Biden’s climate goals by exacerbating the construction industry’s skilled labor shortage and needlessly increasing project costs.
The construction industry, already confronting a skilled workforce shortage of 650,000 this year, will need even more workers as the Infrastructure Investment and Jobs Act’s $550 billion in new construction spending begins to flow into communities across the country. Artificially excluding the clean energy sector’s nonunion builders and workforce, who already provide quality construction to clean energy producers and pay their skilled workforce at rates comparable to the overall energy industry construction workforce, will undermine the administration’s plan to reduce emissions and secure a greener future.
For example, if the Biden administration is serious about increasing the number of EV charging stations across America from 48,000 to 500,000 by 2030, it needs all hands on deck, not just the 13% of the U.S. construction workforce that is unionized. However, the IRA forces developers seeking full clean energy tax credits to require their contractors to participate in construction industry government-registered apprenticeship programs. These GRAPs graduate only 40,000 to 45,000 apprentices a year, meaning that at the current graduation rate it would take 14 years for GRAPs to meet the industry’s skilled labor shortage just for this year. In addition, in many markets there are no GRAPs or too few with the capacity to handle new demand.
Associated Builders and Contractors supports GRAPs as one key component of the industry’s all-of-the-above workforce development strategy and offers more than 300 four-to-five-year GRAPs in more than 20 trades across the country. Yet, the majority of contractors engaged in private construction activity upskill their workforce through community workforce development programs and/or proprietary skill-based programs that are not part of the government’s registered apprenticeship system and accompanying red tape.
Likewise, it’s a crushing administrative burden for developers and small businesses installing EV stations to follow the Davis-Bacon Act’s bureaucratic and archaic work and pay rules, which increase compliance costs and kill the efficient use of labor on private projects. And the U.S. Department of Labor’s 2022 proposal making radical changes to Davis-Bacon Act regulations is expected to make things worse for stakeholders.
Besides the negative impacts of the IRA’s labor provisions on the environment, consumers and energy ratepayers, they will be especially devastating to local, small, veteran-, disabled-, women- and minority-owned contractors and their workers, because the majority of them are nonunion and do not participate in GRAPs or perform work subject to the Davis-Bacon Act.
In many markets, increasing costs, exacerbating the skilled workforce shortage and eliminating quality contractors already in the sector or eager to enter it will make tax credits useless for EV charging and other green energy markets. This means less investment in clean energy projects, fewer jobs and more carbon emissions for America.
With the passage of the IRA, the White House and Congress missed an opportunity to maximize private investment and incentives in clean energy projects to combat climate change and create well-paying jobs for all workers and businesses — regardless of labor affiliation — to rebuild America’s clean energy economy. If the United States truly intends to lead in the global fight against climate change and the transition to clean energy, voters should demand repeal of this inflationary policy that is sure to slow down clean energy deployment and stifle job creation.
Ben Brubeck is the vice president of regulatory, labor and state affairs for Associated Builders and Contractors.