Will Biden’s Efforts to Create Good Jobs Succeed?
Recently there have been a spate of efforts to define “Bidenomics” by both the White House and a range of observers.
So far as I can tell, Bidenomics amounts to primarily a version of industrial policy—mostly involving large public investments—to meet important economic goals that private markets cannot. It’s centered around three major pieces of legislation—the Inflation Reduction Act (IRA), the Infrastructure Investment and Jobs Act (IIJA or Bipartisan Infrastructure Law), and the CHIPS and Science Act (CHIPS Act)—which seek to address climate change, reduce health costs, rebuild our national infrastructure, and support the domestic manufacture of advanced computer chips and other cutting-edge information technologies.
But these bills are also designed to serve other major economic goals—especially expanding opportunity in the labor market and helping economically distressed regions redevelop. They require (or at least encourage) that those receiving federal funding use organized labor, meet prevailing wage standards, and domestically source many of their inputs. And there has been an explicit commitment to fund work in areas that have lost millions of manufacturing jobs and whose populations have suffered with high unemployment, declining earnings, and related ills like opioid addiction and exits from the overall labor force.
Frankly, we do not yet know the extent to which Bidenomics will effectively meet these varied goals or its overall cost. Critics and defenders have both made their cases. Place-based economic development policies are particularly controversial among economists and have, at best, a very mixed track record that demands new approaches. Personally, I would have preferred that more of this effort be funded by tax revenue (though the anti-tax pledges by congressional Republicans have made this virtually impossible) and be less averse to foreign sourcing of inputs.
But I strongly support and am hopeful about one important aspect of these bills: the effort to foster good job creation for American workers without college degrees.
As a labor economist, I am convinced that employers in many sectors can choose whether to be competitive through low-wage or high-wage production strategies. In the former, they focus on reducing labor compensation at all costs—even if it means living with high turnover and weak worker performance. In the latter, they compete through better worker quality and performance by investing in worker skills and organizing the workplace to maximize worker autonomy and reward high performance. This latter approach can potentially leave employers just as well—or even better—off than the low-wage strategy, while sharing more of the benefits of their success with workers.
But private labor markets will generate too few employers choosing the high-wage option because they lack information on whether and how to do so—and because worker well-being per se is a public good and often not an employer’s concern. What’s more, our evidence on the success of “high-road” employers and public efforts to encourage more of them remains limited.
In this context, the Bidenomics focus on good job creation offers us an important opportunity to both improve the earnings of non-college workers and reduce inequality while also learning how to do so most effectively.
Biden’s approach centers on three sets of activities:
Direct creation of good jobs;
Training workers for skill demands in such jobs; and
Other initiatives to support good job creation and training workers to fill them.
Direct Creation of Good Jobs
The IRA, the Bipartisan Infrastructure Law, and CHIPS Act are beginning to produce exactly what working Americans most need: good-paying jobs for those without four-year college degrees. Credible estimates suggest that the infrastructure bill alone will create nearly 900,000 new jobs at its peak, while the other bills will generate some additional net job creation. These new jobs will be concentrated in some specific sectors—green energy, construction, manufacturing, and information technology—where good-paying jobs are widely available for non-degree holders. The jobs will also be spread throughout the country, but many are being directed to states like Michigan, Ohio, and Pennsylvania that were badly hurt by declining manufacturing in the early 2000s and after the Great Recession. Good-paying jobs returning to regions that lost so many and where millions of workers were so badly hurt is an important accomplishment for which the Biden team should claim and receive credit—in addition to whatever good they ultimately accomplish on climate change, infrastructure, and healthcare.
Skills for Good-Paying Jobs
It's not enough to create good-paying jobs, however; workers also need a range of general and specific occupational skills to fill them. Recent research has clearly indicated that less-educated workers can be successfully trained for work in high-demand sectors with good paying jobs. And here, too, the Biden team is quietly making progress.
For starters, tens of billions of dollars in IRA, IIJA, and CHIPS Act money will be spent on job training. Workforce development experts in the Biden administration are helping steer the needed cash to regions where jobs will be created, building capacity in local community colleges (among other training providers) to develop workers with the appropriate skills for each of these sectors.
And there are hopeful trends in workforce development for good-paying jobs more broadly. Billions of dollars in American Relief Plan Act funds were allocated towards higher education as well as to state and local governments, and at least some of this money has provided a lifeline to struggling community colleges in general and to workforce programs specifically. Community colleges around the country are experimenting with a range of innovations like new ways of interacting with important regional industries and new ways of funding students, even those in non-credit programs who are not eligible for federal financial aid. Many are also trying to provide a broader range of support services and guidance to help students succeed.
Other Biden administration efforts will help here as well. Liberalizing the terms of federal loans where repayment is based on future income, for instance, should decrease the burden on borrowers in workforce programs and prevent defaults on their loans, especially if they don’t complete their training. The administration’s new Gainful Employment regulations—which limit federal funding to programs where future interest payments are not burdensome and whose graduates clearly enjoy higher earnings compared to local high school graduates—will also help ensure that federal money isn’t siphoned off by weak programs, especially those at expensive for-profit colleges, that result in student defaults and don’t raise participant earnings very much.
Other Good Jobs Efforts
At least two other efforts by the Biden administration to create better jobs and train workers to fill them deserve some acknowledgment: the Good Jobs Challenge and the Good Jobs Initiative. Launched by the Commerce Department as part of the American Relief Plan Act, the Good Jobs Challenge is a competitive grant program that will distribute $500 million to local groups for workforce development tied to good jobs, with a heavy emphasis on distressed regions.
And the Labor Department has launched its own Good Jobs Initiative to provide information and technical support to both workers and employers in efforts to improve job quality. Through partnerships with other federal agencies, it also seeks to embed support for good job creation in a wide range of federal grant programs.
Will It All Work?
Will Biden’s efforts succeed in creating large numbers of good jobs and reducing labor market inequality? Might they even indirectly spur the private sector to follow suit and create better jobs? Only time—and careful policy evaluation—will tell.
At a minimum, though, these particular strands of Bidenomics focus on the right goal: expanding economic opportunity to those without college and to struggling regions on top of its other major economic objectives. And the Biden administration should receive support and political credit for its bold attempts to achieve this goal.
Harry J. Holzer is the John LaFarge SJ Professor of Public Policy at the McCourt School of Public Policy, Georgetown University. He is also a Senior Fellow at Brookings and former Chief Economist of the US Department of Labor.