Good Paying Jobs And Revitalized U.S. Manufacturing

The Inflation Reduction Act is not just historic climate policy, its historic jobs policy, capable of creating an estimated 9 million jobs over the next ten years according to the Blue Green Alliance. But what kind of jobs will they be?

For the very first time, Congress is using clean energy tax incentives to not only make more jobs, but ensure these jobs meet high labor standards and provide a just transition for fossil fuel workers. This legislation also marks the country’s most significant investment in clean manufacturing—leveraging tax dollars to grow 21^st clean energy jobs in the U.S.

The U.S. is finally acting to solve the climate crisis by passing the IRA. But the law is not just about slashing harmful emissions, it’s also designed to create communities where working families can thrive.

The decline of American manufacturing jobs

The past four decades have been tough for America’s workforce. Since 1979, the U.S. has lost nearly 7 million manufacturing jobs, mostly in the Midwest, in some cases decimating once-thriving towns. Losing good-paying manufacturing jobs meant the pandemic-induced recession and rising prices hit working Americans the hardest.

Wages have stagnated with economic growth disproportionately benefitting the highest earners, while the federal minimum wage has lost 21% of its purchasing power since 2009. And stagnating wages have corresponded to a steady decline in union membership. In 1955 roughly 35% of the U.S. workforce belonged to a union, down to just about 10% today.

Many of these working families bear a disproportionate burden from harmful fossil fuel pollution. The country’s remaining coal plants are concentrated in former manufacturing regions like the Midwest, while polluting highways have been built in low-income communities of color. These towns and neighborhoods experience higher rates of asthma and other negative effects including more lost workdays and premature deaths.

A renewable energy boom – and boon for workers

The transition to a clean energy economy is an enormous once-in-a-generation opportunity to reinvest in America’s workers and foster thriving communities. Building a clean manufacturing sector that doesn’t pollute our air or water can also provide good-paying jobs that serve as onramps to the middle class.

The IRA was intentionally designed to do just that: “The importance of this legislative win can’t be understated for working families,” said Pat Devaney of the Illinois AFL-CIO. “This new stimulus will tip the scales and help us tackle the climate crisis while beginning to reverse decades of wage stagnation and widening racial inequality.”

Energy Innovation estimates the IRA’s clean energy tax credits alone could add 1,053 gigawatts of new solar and wind capacity by 2030, or about 2.5 times our current wind and solar resources. It turns out installing millions of new panels and turbines will create millions of new jobs—but in contrast to previous tax credit structure, these credits are intentionally designed to create new careers and in regions that need them most.

The IRA’s tax credit provisions create enormous financial incentive for developers to meet high labor standards. Renewables project developers will receive a base tax credit for installing or producing renewable energy, 6% for the investment tax credit (ITC) and 0.5 cents per kilowatt hour for the production tax credit (PTC). However, the credit increases five-fold if prevailing wage and apprenticeship standards are met, all the way to 30% for the ITC and 2.5 cents per kilowatt hours for the PTC.

High roads labor standards

Prevailing wage laws ensure workers earn fair wages for their labor, and are set by surveying established local wages for skilled labor which are often the result of collective bargaining. Requiring prevailing wages for projects prevents unfair bidding advantages to employers who underpay their workers, avoiding a race to the bottom.

These requirements have been tied to direct federal spending since 1931, but this is the first time they’ve been linked to clean energy tax credits. Research shows prevailing wage standards have ensured blue collar workers earn middle-incomes.

To earn the bonus credit, developers must also ensure 10% of a project’s workforce is enrolled in an apprenticeship program, rising to 15% by 2024. The prevailing wage and apprenticeship provisions are complementary—as employers pay skilled wages, they hire for the skills they’re paying for, stimulating a virtuous cycle that fosters a well-paid, trained workforce.

Apprenticeships train the workforce required to build the clean economy and open up a pathway to the middle class for people who either can’t afford to take years away from work or can’t afford tuition. Apprenticeships allow workers to “earn as you learn,” providing on-the-job training for careers that offer higher earnings over their working life—the U.S. Department of Labor reports 93% of apprenticeship participants retain their employment after completing their training and earn an average starting salary of $77,000 (compared to the U.S. median wage of about $52,000).

Justice for fossil dependent workers and communities

There are also bonus credits for creating jobs in those parts of the country that most need this influx of new, family-sustaining careers. An additional 10% credit is available for developing clean energy projects in coal or other fossil-fuel dependent communities, offering the opportunity to either revitalize areas that have already felt job losses, or ensure a smoother transition to clean energy jobs in others.

Another 10% bonus credit is available for building projects below 5 megawatts in communities with a significant share of the population below the poverty line, or 20% for projects installed on low-income housing. These bonus credits will stimulate job growth in historically marginalized communities, immediately help clear the air, and alleviate higher energy costs.

The PTC and ITC includes yet another 10% bonus credit for projects utilizing domestic materials, intended to meet growing market demand for new clean technologies like offshore wind turbines while boosting traditional American manufacturing for components like iron and steel. These bonuses all add up to a whopping 50% credit for clean energy development that supports high-quality work in the neighborhoods, communities, and towns that need them most.

Revitalizing and retooling American manufacturing

The IRA invests a record $50 billion into building a 21^st century U.S. clean energy manufacturing sector and supply chain, creating high-quality jobs for a whole new generation of Americans and ensuring competitiveness in the exploding clean tech global market.

The law includes $10 billion for clean manufacturing investment (48C) tax credits to build or expand manufacturing facilities that produce solar, wind, battery, electric vehicle, energy efficiency, and other clean technologies. Four billion of these tax credits are carved-out for facilities in existing energy communities, helping prioritize a just transition for fossil fuel workers and their families.

For the first time, this tax credit can be used to install equipment that achieves an at least 20% reduction in greenhouse gas emissions. And a separate, first-of-its-kind grant program devotes another $6 billion to help energy-intensive industrial facilities reduce their emissions.

The new electric vehicle tax credits are also intentionally designed to spur domestic EV manufacturing and an entirely new supply chain. Only passenger vehicles made in America qualify for the $7,500 credit, while 50% of the battery’s components must be made or assembled in North America by 2028. The auto industry is already responding to these signals—Honda and LG have announced plans to build a new $4.4 billion battery plant in the U.S., most likely Ohio and a Chinese company is planning a new $3.6 billion plant that will create 2,000 jobs in Michigan.

In addition, the IRA includes loans and grants to build or retool American factories to manufacture EVs and batteries, including $3 billion in loans to build or re-equip factories to make EVs and their components, as well as an additional $2 billion in grants specifically to retool at-risk or recently closed auto factories, sustaining good manufacturing jobs that would otherwise be lost.

The brighter future for workers and the climate starts now

From the Sunrise Movement’s Green New Deal to President Biden’s American Jobs Plan, the climate conversation has shifted from a focus on environmental protection to economic transformation. Passing the IRA proves that climate solutions can provide good paying jobs and justice for pollution-burdened communities.

Declining costs for clean technologies and booming clean energy demand equal a chance to restructure our economy and eliminate polluting-infrastructure, fostering healthy neighborhoods where all kids have a shot at a rewarding career. “What laws like the Inflation Reduction Act prove,” Devaney said, “is that we don’t have to choose between creating good jobs and fighting climate change. We can do both.”