A User Guide to the Inflation Reduction Act
Maximizing Benefits for Workers, Communities, and Equity
Implementation of the Inflation Reduction Act is a critical opportunity to ensure its investments create a more just, equitable society that works for all. As a nation, we are confronting three ongoing, interconnected crises: economic injustice, racial injustice, and climate change. The true impact of this legislation on addressing those crises will be determined through implementation.
Our nation has been struggling with economic inequality for decades. The U.S. Census Bureau reported that income inequality in 2018—the gap between the wealthiest Americans and the average worker—had reached the highest level recorded since the bureau started tracking the gap. Subsequent reports of 2019 and 2020 data show no movement toward income equality. According to the Economic Policy Institute, CEOs in 2020 were paid more than 350 times more than the typical worker.
There is a direct correlation between the increase in income inequality and the decrease of worker power as the share of workers in a union fell from 24% in 1979 to under 11% now.
Systemic racism and oppression are knotted into all of the challenges to building a clean, healthy, and thriving economy for all.
At the same time, we are struggling against racial injustice. From its outset, our nation’s economy has been built on the exploitation of people of color. Systemic racism and oppression are knotted into all of the challenges to building a clean, healthy, and thriving economy for all. For example, historically and persistently, Black Americans fare worse in our existing economy, having lower wages, less savings to fall back on, and significantly higher poverty rates. Black workers have been the hardest hit by the outsourcing of U.S. manufacturing, enduring a 30% drop in manufacturing employment since the 1990s. Regardless of education level, Black workers are far more likely to be unemployed than white workers. In fact, unemployment rates are twice as high for Black workers historically. That disparity carries into the workplace as well, with Black workers paid on average 73 cents to the dollar compared to white workers. The wage gap persists regardless of education, and even with advanced degrees, Black workers make far less than white workers at the same level. The poverty rate for white Americans sits at about 8.1%, compared to 20.7% for Black households.
The COVID-19 pandemic has cast a harsh spotlight on, and exacerbated, these crises. The burden of COVID-19 cases and deaths in the U.S. falls disproportionately on people of color. Black workers are more likely to have front-line jobs—like grocery clerks, public transit workers, warehouse and postal service workers, cleaners, healthcare workers, and childcare workers. Black workers are also less likely to have health insurance, paid sick time, or the ability to work from home. They are also more likely to live in neighborhoods with more air pollution, increasing the risk of COVID-19 infection.
Lower-income communities and communities of color are also hit the hardest and are less able to deal with the impacts of climate change and the increasing natural disasters we are witnessing, from wildfires and hurricanes to heatwaves, droughts, and sea-level rise. As wages have fallen, access to stable housing and economic mobility and power in the workplace has declined, and working people are disproportionately vulnerable to these impacts.
These crises are well documented and the solutions to them are as intrinsically linked as their causes. To begin the work of addressing economic inequality and dismantling systemic racism in our society, equity and justice must be at the core of our efforts to rebuild the economy.
As we work to implement the Inflation Reduction Act, we have the opportunity to ensure we do so in a way that protects and creates good union jobs, delivers public health and environmental benefits, addresses economic and racial injustice head-on, and creates a cleaner, stronger, and more equitable economy for all.
Several policy levers exist to help ensure these investments create good union jobs and community benefits—particularly for targeted constituencies. They also help reduce the income inequality that has harmed the American middle class and build a competitive, clean economy. The Inflation Reduction Act includes some codified policy tools explicitly in the legislation. There are additional policy tools available that we have the opportunity to insert or attach as much as possible in the implementation of these funds at the federal and state level. We explore these tools in detail below.
Beyond these policies, it will take not only a deep understanding and acceptance of how we got here but also humility and a willingness and desire to change our present and future. This can start with policy changes at every level of government that seek to address the injustices that lead to disproportionate lack of access to and acquisition of resources and opportunities for people of color.
Key Labor and Equity Standards
There are a number of policy tools that can and should be used to help ensure the creation of good, union jobs that build pathways into the middle class and move us closer to creating a cleaner, more prosperous, and equitable future.
With the right tools in place, the investments included in the Inflation Reduction Act will not only help address the climate crisis and revitalize our manufacturing sector, but can also fight the interconnected crises of income inequality and racial inequity by:
- Incentivizing the use of union labor;
- Mandating that workers are paid a fair wage;
- Utilizing union apprentice, pre-apprenticeship, and other union-affiliated training programs;
- Ensuring equitable access to the jobs that this law will create;
- Prioritizing workers and communities most in need; and
- Building pathways into good-paying careers for workers across the nation.
A few such provisions are defined below and are included in the grids of key policy provisions included on this site where they are already required by the legislation.
Davis-Bacon Prevailing Wage
Prevailing wage establishes a wage floor for each occupation that all contractors on a project must pay at or above—typically set to reflect the average or market wage for a given type of work in a given area. Similar to Project Labor Agreements (PLAs), in practice, prevailing wage policies are generally limited to workers employed in the construction industry. Many state and local governments establish a prevailing wage for public works projects, and at the federal level, the Davis-Bacon Act establishes prevailing wage rates for federal construction projects. Requirements or incentives for contractors to pay the prevailing wage are extended by the Inflation Reduction Act for the first time to a set of privately developed projects, such as new power generation facilities.
Registered Apprenticeship, Pre-Apprenticeship Programs, and Other Union-Affiliated Training Programs
One of the main mechanisms for building career pathways is through registered apprenticeship, pre-apprenticeship, and other union-affiliated training programs. Apprenticeships are registered through a state apprenticeship agency or through the U.S. Department of Labor (DOL). Registered apprenticeships are paid positions that combine on-the-job training with classroom instruction in a trade. Construction unions collaborate with their employer partners to jointly operate robust registered apprenticeship programs. Industrial unions also work with their employers on labor-management training programs that provide a combination of classroom and on-the-job skills training.
Strong, democratic unions can also play a key role in promoting diversity, equity, justice, and inclusion within these programs. An internal BlueGreen Alliance analysis of the DOL Registered Apprenticeship Partners Information Database System (RAPIDS) found that in the construction industry, 43% of apprentices were people of color in union programs, compared to 33% in non-union programs. However, enrollment in these programs only shows one small metric by which to judge if these programs effectively advance the careers of people of color. For true equity and justice to be sustained, officials must focus not solely on enrollment rates, but also on completion data and, crucially, on retention and promotion within the workplace—that means, in part, working to ensure that apprentices have not only the technical skills but also the professional tools they need to succeed.
Pre-apprenticeship programs, in particular, have become a key tool to improving diversity in the building trades. Such programs aim to ensure that workers can qualify for entry into an apprenticeship program and have the skills they need to succeed. These programs are generally designed to target certain populations or demographics such as low-income workers, workers of color, women, and other marginalized communities. The most successful pre-apprenticeship programs are those affiliated with registered apprenticeships or other contractually agreed on-the-job training programs.
Additionally, many unions offer training throughout a member’s career to enable them to stay up to date with changes in technology.
Project Labor Agreements, Community Workforce Agreements, and Community Benefits Agreements
PLAs are collective bargaining agreements that are negotiated in advance of a project. These agreements generally specify wages, fringe benefits, worksite conditions, dispute resolution protocols that restrict lockouts and strikes, and ensure health and safety protections. The encouragement of the use of PLAs on federally funded projects is not a new policy. President Biden signed an executive order in February 2022 ordering that, “it is the policy of the Federal Government for agencies to use project labor agreements in connection with large-scale construction projects to promote economy and efficiency in Federal procurement.”
Community Workforce Agreements (CWAs) and Community Benefit Agreements (CBAs) are beneficial tools for communities when included with PLAs. They can be more broad in scope and are sometimes negotiated with both union and community partners. CWAs go beyond PLAs and focus on creating opportunities to maximize benefits to and in local communities. However, in the absence of a CWA many PLAs include community workforce provisions. In addition to the collective bargaining aspects of a PLA, CWAs frequently include local hire provisions, targeted hire of low-income or disadvantaged workers, and the creation of pre-apprenticeship pathways for careers on the project.
Through the collective bargaining process, workers represented by a union negotiate with their employer the terms of their employment. This includes wages, benefits, hours, health and safety requirements, and more. Research has shown that through the collective bargaining power of unions, workers are able to get more and better benefits—such as health insurance and pensions—and are able to fight for more enforcement of the labor protections they have a right to under the law, like enforcement of safety and health regulations and overtime. Additionally, collective bargaining is one of the most powerful tools in comprehensively raising standards for any particular industry regularly, as each renegotiated collective bargaining agreement—which typically has a three to five year lifetime—typically includes gains for the workers.
Moreover, research has shown that across the board, union members earn higher wages than non-union workers and this difference is most pronounced for workers of color and women:
- White male union members earn 17% more in wages on average compared to white male non-union workers;
- Female union members earn 28% more in wages on average compared to non-union female workers;
- Black union members earn 28% more in wages on average compared to non-union Black workers; and
- Latine union members earn 40% more in wages on average compared to non-union Latine workers.
Justice40 and Other Targeted Community Investments
To ensure that new government policies help dismantle structural racism and target federal resources to the workers and communities that need them most, President Biden established a Justice40 Initiative to ensure that 40% of the benefits from federal investments for climate and clean energy benefit disadvantaged communities. This could include funding set-asides, funding prioritization, or more general guidance that instructs agencies to maximize benefits for communities or workers in ways that can and should—if properly implemented—complement the Justice40 objectives. This includes prioritization or targeting of resources to environmental justice communities and/or communities impacted by energy transition, such as those where coal-fired power plants or coal mines have closed.