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**FEBRUARY 28, 2023**

Harris on TAP

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**** Unions for On-Time Construction

Commerce Department urges chip-makers facing a construction labor crunch
to offer child care, use union workers.

Commerce Secretary Gina Raimondo today published the first funding
application for the CHIPS and Science Act, offering guidance to
commercial semiconductor manufacturers on how the department will
evaluate applications for federal subsidies.

The guidance includes new pro-labor requirements, and the administration
is selling it by using a novel argument: Well-paid union construction
workers will help keep these vital national-security projects on
schedule.

CHIPS appropriated $39 billion for manufacturing incentives, with some
of that money available to be levered up with loans and loan guarantees.
All told, program outlays could exceed $100 billion.

There is no fixed amount for how much any single project can receive, a
Department of Commerce official said on a Monday press call with
Raimondo. Instead, the official said, the department will take a
"dynamic, commercial approach."

Raimondo has emphasized three key considerations in the guidance:
training a new labor force, using taxpayer money judiciously,
and-above all-delivering on the administration's national-security
goals.

"This is fundamentally a national-security initiative," she said. To
that end, the department will require chip-makers to agree not to expand
semiconductor manufacturing capacity in China for a decade after taking
the money.

Commerce did not add any similar guardrails to prevent recipients from
using subsidies on stock buybacks. Lawmakers including Sens. Ed Markey
(D-MA) and Tammy Baldwin (D-WI) had urged
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that awardees be restricted from engaging in buybacks for at least ten
years.

While Raimondo has vocally discouraged buybacks, nothing in the law
prevents awardees from engaging in them. The application will require
chip-makers to "detail their intentions with respect to stock buybacks
over five years, including whether they intend to refrain from or limit
them."

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The department will also give preference to companies that "credibly
commit to investing in the domestic semiconductor industry." But, facing
a sudden semiconductor glut, leading chip-makers have recently suggested
that they may slow down manufacturing, or time it with the infusion of
federal cash.

In a recent earnings call
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CEO Pat Gelsinger said that Intel will first build "shells," or factory
buildings, and wait for consumer demand to increase before investing in
the expensive equipment that will fill them.

The CHIPS Act, Gelsinger said, "give[s] us a lot of flexibility ... to
make sure we're spending the capital, the more expensive equipment
capital, more timed with the market demand clarity."

Rival semiconductor maker Advanced Micro Devices has criticized Intel
for that strategy, questioning whether it should receive funds to build
shells that sit empty.

The administration's workforce goals are the third major plank of the
funding design. The secretary argued that the current labor crunch
represents both a bottleneck and an opportunity.

"We are in an incredibly tight labor market. Labor is hard to find," she
said. The U.S. needs to triple the number of Ph.D.s and students in
semiconductor-related fields, and train 100,000 technicians in the next
decade, she said, in addition to training a skilled construction
workforce.

Currently, according to the Associated Builders and Contractors, an
industry group, the construction sector is short as many as half a
million workers
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Areas like Phoenix, where multiple semiconductor fabs are under
construction, are already experiencing commercial construction labor
shortages
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The single most important factor keeping people out of the workforce,
Raimondo said, is a lack of affordable child care. With the new
guidance, she announced a new child care initiative. Applicants seeking
more than $150 million in direct funding will be asked to submit plans
to provide facility and construction workers with access to affordable
child care. To her knowledge, Raimondo said, no other federal program
has made a similar requirement.

Trade unions won language they had sought, encouraging chip-makers to
use project labor agreements, a prehire collective-bargaining agreement
between building trade unions and contractors. While non-union firms can
compete for those jobs, they raise the floor for standards and wages,
preventing open shops from undercutting union work.

PLAs are also useful to employers, covering employment dispute
procedures and banning strikes and work stoppages for the duration of
the agreement.

Unions are often criticized for being a drag on project completion. But
the Commerce Department framed its reliance on organized labor as
consistent with its overriding national-security aims.

"Applicants who don't commit to using PLAs will have to submit a
construction workforce continuity plan, to demonstrate exactly how
they'll be on schedule," the official said, adding that PLAs are
"effective in keeping things on schedule and avoiding things like work
stoppages."

~ LEE HARRIS

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