The Inflation Reduction Act (IRA) does a lot of valuable things: it lowers the prices of prescription drugs, fights climate change and ensures that companies pay minimal taxes. However, one of the more consistent and lasting effects of the new law could be that it highlights how Congress can move forward with pro-labor laws. Until the Senate filibuster is reformed, the most likely avenue for Congress is to support workers and their unions in fiscal reconciliation — the process used to make the IRA succeed by a simple majority in the Senate.
Creating good jobs – jobs that pay well and offer decent benefits – is central to the IRA’s goal. As President Biden noted earlier this month, the new law will “create thousands of high-paying jobs, apprenticeships and manufacturing jobs for clean energy construction projects, solar projects, wind projects, clean hydrogen projects, carbon capture projects, and more. ”
The bill does this through policies such as the prevailing wage, buy-American, and apprenticeship use requirements associated with various tax credits. The prevailing wage laws ensure that government spending does not lower the market standards that workers – especially union workers – have been able to maintain. Buy American preferences will support and create jobs for domestically produced clean technology and materials. The requirements for the use of apprenticeships ensure highly skilled, well-educated workers who receive on-the-job training and decent wages, often through union contracts.
With the filibuster increasingly being used to block popular legislation, budget alignment has become a standard way for Congress to consider important policies, from the Inflation Reduction Act to former President Donald Trump’s 2017 Tax Cuts and Jobs Act (TCJA) to repeated failed attempts to pass the Affordable Care Act.
While a number of previous budget reconciliation laws contained provisions helpful to workers, such as a 1990 wage requirement for dialysis treatment under Medicare and a paid family and tax credit for medical leave in the TCJA, these pro-employee elements were relatively minor and ancillary to the goals of the broader legislation. The American Rescue Plan Act (ARPA), a major COVID-19 recovery package that went through the budget reconciliation process in March 2021, began to change these dynamics by incorporating many pro-employee policies.
The IRA goes even further to completely invert traditional script — making it clear that pro-labor policies can be central to reconciliation.
Unfortunately, some of the most important and popular employee bills don’t fit the arcane rules of the budget reconciliation process. For example, an increase in the federal minimum wage was removed from the ARPA because of the so-called “Byrd” rule.
Yet there are many policies that can walk the reconciliation cord. Some, such as increased funding for the National Labor Relations Board, increased fines for labor law violations and a tax deduction for union dues, were included in versions of budget reconciliation bills in 2021 and 2022.
Much more policy could probably suffice. Activities that destroy unions should no longer be tax-deductible business expenses. When the government subsidizes companies with tax credits or other incentives, quality standards must always be included. Companies that mistakenly classify employees as independent contractors should stop receiving favorable tax treatment. The possibilities can go on endlessly.
Not only is the IRA a victory for workers today, but, most importantly, it highlights the potential for more pro-labor policies under existing Congressional rules. Workers are clamoring for action – from their extremely strong support for unions to the growing number of strikes and campaigning. Policymakers should seize the opportunity in future reconciliation laws to help workers.
David Madland is the author of “Re-Union: How Bold Labor Reforms Can Restore, Revitalize, and Reunite the United Statesand is a senior fellow at the Center for American Progress.