Labor Day: Is Biden’s Green Energy IRA the most Pro-Worker Legislation in Decades?

Ann Arbor (Informed Comment) – The Inflation Reduction Act, President Biden’s signature piece of legislation that was passed with no Republican support, contains $369 billion for the green energy transition. Since much of this funding leverages corporate and individual investments, its impact will be in the trillions of dollars. Given the dire climate crisis we face, these monies will leverage a safer future. But since it is Labor Day, it is worth considering the IRA’s impact on American workers, for whom it is a significant gift.

The Inflation Reduction Act’s investments in green energy and combating the effects of climate change has already created an estimated 170,000 jobs since the act was signed into law by President Biden on August 16, 2022. Outside institutions estimate that in toto it will create 1.5 million jobs.

The act has already leveraged $110 billion in investments by the private sector in green energy.

The Treasury Department recently published new rules that clarify that the attractive tax credits for green energy investments in the Act depend on a company’s workers being paid the prevailing wage. The site says,

“The Inflation Reduction Act’s prevailing wage and registered apprenticeship requirements apply to many of the clean energy deployment tax incentives under the law, including for the clean energy investment and production tax credits that help finance utility-scale wind, solar, and battery storage projects as well as for the credits for carbon capture, utilization, and storage and clean hydrogen projects. If the prevailing wage and registered apprenticeship requirements are satisfied, a taxpayer can claim an enhanced credit or deduction equal to up to five times the value of the regular credit or deduction. While prevailing wage and apprenticeship requirements have existed for more than 100 years and have long applied to projects supported by federal contracts, the Inflation Reduction Act applied these requirements to clean energy tax incentives for the first time.”

The White House clarifies that “Many of the IRA’s clean energy deployment tax incentives are increased by five times if taxpayers pay workers prevailing wages and use Registered Apprentices.”

The Department of Labor defines the prevailing wage this way: “The prevailing wage rate is defined as the average wage paid to similarly employed workers in a specific occupation in the area of intended employment.”

Registered apprentice programs are industry-driven career paths that allow for on-the-job and supplemental training and education, and which produce credentials that are recognized industry-wide.

So a company that hires green energy workers for much less than they are usually paid to do that work in that town will be cheating itself out of a nice fat tax break. Likewise those that have no registered apprentice program will be at a disadvantage regarding government grants.

The White House also points out that the Department of Energy has begun accepting applications for $2 billion in grants to help auto manufacturers transition from internal combustion engine cars to electric cars.

The program seeks to protect workers’ jobs by prioritizing grants to facilities that are in danger of shutting down. Likewise, those applicants that have a track record of retaining workers and pay high wages will have an advantage, as well as those that are staying put in their long-established community as opposed to relocating elsewhere. In other words, Biden really is engaged in industrial policy, using the carrot of substantial government funding to shape the work environment to be favorable to workers.

The Department of Energy is also offering $10 billion in loans for the conversion process, which, again, will go first of all to companies with “strong workforce practices and labor standards.”

The Department of Energy is also making available $3.5 billion in grants for the construction of battery factories in the US, and will favor those companies planning to create high-quality jobs.

Finally, note that many workers suffer from the inhalation of the particulate matter created by burning fossil fuels in factories, causing lung cancer, hypertension and heart attacks. Biden’s legislation is estimated to reduce CO2 emissions by a billion tons by 2030, making the air much healthier and avoiding the worst impacts of climate change.

Happy Labor Day, everyone.