Evan Vucci/AP Photo
President Joe Biden speaks about electric vehicles during a visit to the Detroit Auto Show, September 14, 2022, in Detroit.
The Biden administration is in a tough spot with the United Auto Workers, which could initiate a strike of the Big Three U.S. auto companies in less than two weeks. Through its industrial policies, the White House is giving away billions to automakers through production tax credits and loans, while supporting the transition to electric vehicles through consumer rebates and funds for charging infrastructure. Biden has promised that those incentives will lead not only to carbon emissions reductions but also good-paying union jobs. Union leadership has said that it wants to see the president get more personally involved in reversing a “race to the bottom” in the EV transition.
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But the best tool for encouraging a just transition, a proposal in the Inflation Reduction Act (IRA) that would have given a $4,500 consumer rebate for EVs made with union labor, was stripped out of the bill before it became law. When the Big Three were struggling after the financial crisis and government loans saved them, presidents had the wherewithal to dictate terms, and used that power to create two-tiered wage scales. Biden has a fire hose of money, but there isn’t anything concrete in the law that directly conditions that money on unionization or better pay.
So instead, the administration has looked to indirect options. It released a new one late last week, part of a strategy that has yielded benefits in the past, and if nothing else represents a commitment to both the environmental and labor sides of the industrial transition. Whether that’s enough for the UAW, however, is another matter entirely.
The IRA included $2 billion in Domestic Manufacturing Conversion Grants for both electric vehicles and component parts. The Department of Energy (DOE) grants would go to retrofitting factories that already assemble vehicles or components, so they can produce hybrid, plug-in electric, or hydrogen fuel cell vehicles. There’s a cost-sharing requirement, but all told the government grant could knock off as much as half the cost of converting a factory. Separately, DOE is offering $10 billion from the Advanced Technology Vehicles Manufacturing Loan Program (part of the bipartisan infrastructure law) for the same purpose.
Both the grant and loan programs are competitive, meaning that interested companies must apply to earn the funding. Decisions on the winners will be made on the basis of a “scorecard,” with a lot of consideration going to job quality.
Specifically, according to a DOE fact sheet, in the grant program, “higher scores will be given to projects that are likely to retain collective bargaining agreements and/or those that have an existing high-quality, high-wage hourly production workforce, such as applicants that currently pay top quartile wages in their industry.” Commitments to maintain higher wages and ties to communities experienced in vehicle manufacturing will also be scored, along with contributions to the “Justice40” initiative, which seeks to deliver 40 percent of the benefits of federal investments to marginalized and underserved communities.
The loan program also grades applicants on whether they “retain high-quality jobs in communities that currently host manufacturing facilities,” the fact sheet says. Promising higher employment levels or better wages and benefits, contributing positively to the local economy, and keeping existing facilities open until new facilities are retrofitted would be examples of actions that would get high marks.
Companies that don’t want to use union labor or commit to high-paying jobs will simply forgo the grants or loans.
Separately, DOE announced a second round of grant funding under the bipartisan infrastructure law for its advanced batteries and battery minerals program, adding another $3.5 billion for companies making batteries for EVs and energy storage. Like the first round, companies will have a better chance to secure these grants if they promise high-quality job creation, union neutrality, investment in communities with historic contributions to U.S. manufacturing, and a skilled, diverse workforce.
“Today’s announcements show that President Biden understands that building the cars of the future also necessitates helping the communities challenged by the transition away from the internal combustion engine,” said Energy Secretary Jennifer Granholm in a public statement that also seemed to be aimed directly at a specific audience: UAW members and their leadership.
These indirect conditions through the relatively small number of grants and loans in the Biden industrial policies have paid some dividends. I wrote in May about Talon Metals, a Minnesota-based mining company that won a $114 million grant in the first round of DOE’s battery minerals program. The company signed a union neutrality agreement for mining and processing, partnered with the United Steelworkers on a joint workforce training center, committed to recruiting among tribes and refugee communities, initiated a project labor agreement for all facilities, and moved its processing facility to North Dakota to mitigate environmental harms.
Workers at Blue Bird, an electric bus manufacturer, won a union election that they partially attributed to the company being less aggressive in its anti-union campaign. Blue Bird had just won a grant for electric bus manufacturing from the Environmental Protection Agency that committed them to not use the funding for anti-union activities.
These are obviously not bulletproof ways to ensure a just transition. Companies that don’t want to use union labor or commit to high-paying jobs will simply forgo the grants or loans. But it attaches at least some power to encourage some social goals that benefit decarbonization, industrial capacity, and labor benefits simultaneously. Since the government is picking up a substantial amount of costs for the electric-vehicle transition, it’s both reasonable to nudge that transition in a pro-labor direction, and more affordable for the companies to carry it out.
This is a significant break with the last 40 years of economic development policy, when there were no such workforce carrots, and companies getting the funding could do whatever they pleased with it. To pick one example of many, the Foxconn debacle in Wisconsin, in which $3.5 billion in subsidies produced barely 1,000 jobs, shows the myriad problems with such an approach. What elevates the Biden industrial strategy from yet another corporate welfare program is the effort to win tangible benefits for workers and communities with the money invested. That’s intended to help maintain its tenuous public support.
Of course, the downside is that this is an indirect strategy, because more direct ones were stricken from the various laws. The DOE grants and loans aren’t necessarily going to get UAW a better contract with the Big Three, or win unionization at other workplaces. The union will still have to organize and bargain effectively to gain those victories.
But the administration is trying to deal organized labor into the transitions happening in its industries. It’s easier to enforce guardrails on public spending with an organization like a union at the table. Instead of the usual spectacle of companies sticking up politicians for subsidies, this time the policymakers are retaining their power, and distributing it to those with a stake in the outcome. That’s a smart way to get the most value for this historic investment.
