We’ve seen some important post-mortems of the Biden administration’s Investing in America agenda, a massive industrial policy effort aimed at leveraging public and private-sector investments to expand the nation’s manufacturing sector, shore up national security, and create good jobs (often union jobs) open to workers without college degrees. Some saw the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act as a win-win for business, workers, and national security; others have identified some of these projects as an “everything bagel” policy that got bogged down by too many well-intentioned but competing goals. 

In that spirit, two recent voices on this topic are especially worth considering. Mike Schmidt, a former director of the CHIPS Program Office at the Department of Commerce, published his account of implementing prevailing wages through CHIPS subsidies. Schmidt clearly cares about getting industrial policy right. His frustrations are real, and anyone who has worked inside any federal program navigating across multiple agencies will recognize the feeling immediately.

Soon after Schmidt wrote, Betony Jones, a former director of the Office of Energy Jobs, posted an important counterpoint explaining how the Department of Energy’s centralized compliance system helped both government and contractors successfully navigate prevailing wage requirements. She subsequently released an important, well-documented, and comprehensive report on how the Biden administration’s clean energy strategy used labor standards to ensure that workers and communities share the benefits of industrial policy.

It’s important to underscore that both Schmidt and Jones agree that we shouldn’t make prevailing wages themselves the target of our ire. If we care about building — really building at scale, over time — that’s a short-sighted fight to pick. And if we care about building a robust infrastructure to fuel our economy, it’s important to create good jobs for the construction workers who build that infrastructure

In part, that’s because organized labor is a key ally not only in providing skilled workers but also in building the political coalitions that make large-scale public investment possible. In a world where too few actors are fighting for state capacity and smart development, building trades unions have a long history of going to bat for projects that we need — semiconductor fabs, energy infrastructure, transit, and affordable housing. They do it because those projects have the potential to support the good jobs their members need, the communities their members live in, and the positive economic growth that all Americans rely on. And today, when projects like data centers are taking fire from multiple directions, it’s often the building trades who are vocally defending them. As with the passage of the CHIPS and Science Act, organized labor recognizes that responsible development has the potential (if done right) to not only shore up national security but also to create middle-class jobs, to train apprentices who will be skilled and will build future infrastructure, to produce needed industry, and to generate additional tax revenue for communities. Labor will back fast-track permitting, whether in a high-profile Congressional hearing or before local boards. Simply put, once we strip projects of labor standards, we also threaten to peel off a source of valuable institutional support with bipartisan backers.

But even aside from the politics, prevailing wages are worth defending on their own terms. The point of the Davis-Bacon Act, which established early prevailing wage protections, has been to ensure taxpayer-funded projects don’t drive down local wages and standards. The prevailing wage itself is based on local surveys of actual wages. Yes, wages vary based on the trade, such that electricians are paid differently than iron workers or painters, but contractors are used to making those distinctions on all kinds of projects. The result is that the workers building our nation’s infrastructure earn the wage that prevails in their locality, and local contractors can count on a consistent wage structure and a trained workforce.

And the overwhelming weight of the recent evidence supports that prevailing wages do not have a significant impact on construction costs, according to an analysis of 18 of 20 peer-reviewed studies published from 2000 to 2023. This might sound counterintuitive, but it makes sense in practice. Projects that pay prevailing wages attract union contractors that invest in skilled workers who can deliver with productivity, efficiency, and safety. For example, one recent assessment of a 20,000-project construction dataset found that union contractors have less turnover, fewer delays due to shortages of skilled workers, and even a 4% cost-efficiency advantage. Beyond that, data from the most recent Economic Census of Construction indicate that wages and benefits make up only 23% of total building costs in construction, which represents a relatively small percentage compared to some other industries. The upshot is that a small boost in productivity can offset wages in total construction costs.

Schmidt’s most persuasive concerns involve the edge case of retroactivity in this program. That is, CHIPS investments were structured so that accepting subsidies after a project started would require retroactive payment of prevailing wages for prior work on the project. For a few companies, at least, Schmidt reports that those retroactive payments created significant operational hardships. To be sure, companies have to track down former employees all the time, including to distribute back wages and benefits when problems are identified. But even accepting that a company he described did struggle with retroactive payments, the retroactivity principle is, as Schmidt explains, intended to prevent projects from delaying receipt of a federal incentive to evade requirements altogether. While it’s true that CHIPS subsidies look different than some other federally funded construction projects, it’s hard to argue that CHIPS shouldn’t have the same protections from abuse. Projects supported with billions of dollars in taxpayer funds have a broader responsibility to deliver a good product, critical national security benefits, and fair pay to the workers who build them.  Federally supported construction projects provide real, immediate, and tangible benefits to local economies through good jobs, which is also good politics for folks who support industrial policy. 

Of course, there’s always room to think about how new requirements could be structured differently, and any serious effort to adjust Davis-Bacon implementation for new programs should bring labor to the table as a partner. There are also creative paths toward the very compelling promise of abundance. As I’ve argued elsewhere, community benefits agreements and project labor agreements offer a pathway to negotiate enforceable commitments upfront — on wages, local hiring, training — and in exchange streamline the regulatory process downstream. More engagement at the front end can result in a stronger coalition fighting together for fewer veto points and compliance delays later. Or even in the current system, the centralized compliance program that Jones implemented at the Department of Energy (based on the established models she cites) could make a big difference going forward without requiring any new laws.

The goal of building more and faster is right. The coalition that gets you there includes the workers who build those projects. We should absolutely work together to make implementation work.