The Biden administration finalized new rules on Tuesday that have major implications for labor unions under its key climate legislation, the Inflation Reduction Act (IRA). The finalized rules, established by the Internal Revenue Service (IRS) and the Treasury Department, include prevailing wage and apprenticeship requirements for certain incentives in the IRA, signed into law by President Joe Biden in August 2022.
The administration touts these regulations as a win for blue-collar workers, but critics argue they primarily benefit labor unions, which are strong supporters of the Democratic Party. They warn that these rules could increase the costs of clean energy projects funded by the IRA.
Ben Brubeck, vice president of regulatory, labor, and state affairs for the Associated Builders and Contractors (ABC), voiced strong opposition to the new rules. “If the Biden administration’s goal is to undermine taxpayer investments in the construction of critical clean energy infrastructure funded by the Inflation Reduction Act, this final rule is a wild success,” Brubeck stated. He accused the administration of using the IRS to push an agenda that favors unionized labor and contractors, key supporters in election years, by encouraging private developers to enter into project labor agreements (PLAs).
The new rules mandate that developers of certain IRA-funded projects must adhere to PLAs, pay prevailing wages, and offer apprenticeships to access the tax credits. These requirements could exclude non-unionized labor and increase project costs. PLAs are collective bargaining agreements specific to the construction industry, and prevailing wages are defined as the average wages paid to workers in similar jobs within the same area.
John Podesta, a top climate advisor in the Biden administration, praised the new rules, saying, “Meeting strong labor standards and building partnerships with unions will now be the norm for clean energy projects. Today’s final rules give clarity and certainty to developers and the workers they employ that clean energy jobs will be good jobs.”
Additionally, the administration requires that green energy projects employing at least four laborers must also hire at least one registered apprentice. These apprentices must perform at least 15% of the total work hours on projects starting this year to qualify for the maximum subsidy.
Diana Furchtgott-Roth, director of the Heritage Foundation’s Center for Energy, Climate, and Environment, criticized the rules, stating, “These rules definitely subsidize unionized workers, who are a tiny fraction of the American workforce, which is made up of about 164 million jobs.” She argued that while a subset of workers will benefit from these subsidies, many others will face increased difficulties.
Critics also highlight that most American construction workers are not unionized. ABC estimates that only about 10% of construction workers were union members in 2023. The new rules could delay construction projects and reduce competitive bidding, especially amid a shortage of about 500,000 construction laborers in the U.S.
Despite the backlash, pro-labor groups and unions, some of which are key supporters of Biden’s reelection campaign, have praised the new rules. Jason Walsh, president of the BlueGreen Alliance, stated, “One of the greatest promises of the Inflation Reduction Act is that it will create and maintain good-paying, union jobs in the clean economy, while building inclusive pathways into the highest quality training for lifelong careers in construction.”
As the rules take effect, the Biden administration remains focused on promoting strong labor standards and union partnerships in implementing its climate policy agenda. Neither the IRS nor the Treasury Department provided immediate comments on the finalized rules.
