The following commentary was written by Jason George, business banager and financial secretary for the International Union of Operating Engineers, Local 49. See our commentary guidelines for more information.
It is not exactly news to say clean energy could transform our region’s economy.
In 2019, nearly half of Minnesota’s power came from sources like wind and solar. The state’s wind generation capacity is nationally ranked in the top 10 and North and South Dakota are not far behind. And recent research has shown that investments in this emerging sector would create more jobs — and more economic growth — than comparable investments in fossil fuel power generation.
Indeed, some analysts have noted that the cost of building solar and wind facilities has plunged 72% to 90% over the past decade. Wind and solar are cheaper than existing coal plants and competitive with natural gas and nuclear alternatives.
However, there are very real challenges that could threaten this progress.
Before COVID, the industry was facing a shortage of skilled workers needed to make, build, or install these facilities. Research has revealed that clean energy sector workers face a pay penalty of as much as 22% compared to workers in the fossil fuel sector, and of at least 7% relative to skilled trade workers on other types of infrastructure.
As a result, many projects have relied on lower skilled travelers from out of state for their workforce needs. One study found that 86% of workers on wind projects in North Dakota were from out of state, costing the state’s economy nearly $62 million.
That’s clearly a problem. So how do we fix it?
From high schools and community colleges to union hiring halls, we already have many of the workers we need to lead America’s energy transformation. But we need a policy framework that encourages more of our next-generation energy firms to compete for them and invest in the institutions that can help this budding industry attract the labor force it needs for generations to come.
A key reason why we aren’t facing similar shortages on fossil fuel or most infrastructure projects can be traced — at least partially — to the role that labor unions have played in ensuring these comparatively older sectors invest in their workers. Such efforts have not only resulted in market competitive wage and benefit rates, but an entirely privately financed apprenticeship system that trains new workers and attaches them to in-demand careers.
This latter point cannot be emphasized enough. Skilled trade unions and their signatory employers negotiate cents per hour contributions into their apprenticeship programs, which train the next generation of workers (who earn a paycheck while in school and graduate debt-free). Over 90% of Minnesota’s skilled trade apprentices come from these privately financed, union-affiliated programs.
Importantly, a growing body of research has concluded that these investments do not result in higher costs on school construction, and would be unlikely to affect the cost competitiveness of clean energy projects.
There are two main reasons why. First, labor represents less than 20% of overall project expenditures. Second, union labor has been linked to improvements in productivity, efficiency, safety and workforce retention that offset higher wage and benefit levels. In Minnesota, researchers have also found that higher wages and benefits negotiated by skilled trade unions support more than 15,000 additional jobs through increased consumer spending, while reducing reliance on social assistance programs like food stamps and Medicaid by as much as 13%.
Without institutional or policy mechanisms that promote workforce investment, there is too often an incentive to depress wages or forego spending on training in an effort to lower project bids or maximize short-term profits. Such dynamics, which are not uncommon in the non-unionized side of the construction and energy sectors, can lead to erosion of job quality and labor market competitiveness. And it can invite the skilled worker shortages we are seeing in clean energy and so many other industries today.
Late last year, the U.S. House passed new tax credits and incentives to accelerate America’s clean energy transition by encouraging greater utilization of union labor and American-made materials. These provisions — which may soon be considered in the U.S. Senate — would ensure the industry is not only creating more good jobs in the bargain of constructing and maintaining its facilities, but investing in the joint-labor management apprenticeship programs that function as skilled workforce supply pipelines. With unions enjoying their largest public approval in more than 50 years, such provisions are clearly popular with the public. When considered alongside the imperatives of protecting our environment, growing our economy, and attaching more workers to good jobs and in-demand careers — it’s clear they are also sound policy.