President Biden and Commerce Secretary Gina Raimondo took a victory lap through Phoenix in December, when they announced that federal subsidies in the CHIPS Act had lured one of the largest foreign direct investments in U.S. history. Taiwan Semiconductor Manufacturing Company (TSMC) plans to spend $40 billion in Arizona as it builds a new state-of-the-art "fab," where it will produce leading-edge computer chips.
The Inflation Reduction Act has brought even more business to the desert city. Soon after the law passed, a startup raised $75 million to build a new lithium-ion battery factory outside Phoenix. And a bevy of chips- and greentech-linked industries are breaking ground, creating a cluster of advanced technology jobs in the metro area. All this has come on top of a massive influx of residents to Phoenix, the fastest-growing big city in America, that shows no sign of letting up.
Biden’s sales pitch at the fab emphasized the importance of "hiring union folks." Yet local contractors continue to rely heavily on non-union workers. So far, TSMC has declined to sign a deal with labor, which union leaders stress would ensure a supply of skilled workers for the Phoenix plant.
"The parking lot is just full of Louisiana and Texas license plates. They’d rather import non-union workers who would be paid a subpar wage than even have a conversation with the unions," said Aaron Butler, president of Arizona’s Building and Construction Trades Council. Butler managed to secure one meeting, over Zoom, with TSMC Senior Vice President Peter Cleveland. "It was the iciest meeting I’ve ever been in," he said. "There is zero interest in doing business with us."
Arizona has long been a right-to-work state, meaning that even in unionized shops, workers can choose not to pay dues. That has devastated union density and drained the coffers of local chapters. The unions that are able to survive in this arid climate are typically the most technical crafts, like electricians and sheet metal workers, which require longer apprenticeships.
Now that the labor market is heating up, some less technical crafts lack the manpower to immediately staff jobs. Even where they have had available workers, several labor representatives said they have been met with hostility from TSMC in particular. LiUNA Local 1184, the Laborers’ Union, does not have a single worker at the site, according to business manager Mike Dea. Carpenters, cement layers, and brickmasons have also struggled.
Butler’s own Local 469, which represents plumbers, pipe fitters, and HVAC technicians, has been able to place workers at the TSMC project, where he estimates that his local provides around 60 percent of the mechanical work. The sheet metal workers’ local has also seen recent growth, increasing membership from around 500 in 2018 to 850 today, according to Jeff Holly, Local 359 business manager.
But with less-skilled crafts currently lacking manpower, the building trades have sought guarantees that work will be available once they have rebuilt their ranks. That will require investment in training. "It’s a chicken-and-egg game," Butler said, since many of the unions are "holding out on training investments because they’re broke."
UNIONS ARE SEEKING CERTAINTY in the form of a project labor agreement, which would set wages and work rules while still giving TSMC the right to hire non-union workers if organized labor is unable to meet staffing needs. Crucially, a PLA would increase investment in training, both by giving unions reason to invest and by setting a level for employer contributions.
But the Commerce Department’s guidance for companies seeking CHIPS subsidies, released last month, only lists project labor agreements as a nice-to-have. PLAs were cut from the bipartisan CHIPS legislation during negotiations. That has given union leaders far less leverage in talks.
The chilly standoff between labor and employers in Phoenix might come as a surprise to national pundits who have criticized CHIPS guidance as gummed up with costly labor and environmental standards.
Writing in The New York Times this week, Ezra Klein echoed TSMC’s complaint that the company’s expenditures in Arizona could be as much as four times those in Taiwan. There is little serious effort to lower costs of construction and reshoring, he wrote, with the government instead "layering on requirements."
Klein pointed to language in the guidance urging companies to use female construction workers, including by ensuring access to child care. (The guidance doesn’t ask companies to provide child care—just to check that affordable options are available near the job site.) Likewise, PLAs are not required, just "strongly encouraged."
In the highly concentrated semiconductor industry, where a few key players are the overwhelmingly likely recipients of funding, these nonbinding wish list items in guidance amount to little more than polite suggestions.
Despite the uncertainty about future demand from TSMC, however, some unions are forging ahead with big workforce investments. LiUNA is building a $6.5 million training center outside Phoenix, looking to bulk up so they can ultimately win jobs.
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UNION CONSTRUCTION WORKERS JUST WON a foothold in Phoenix that has nothing to do with federal funding, when the city council narrowly voted last month to raise the pay for workers on city construction jobs. That could increase pay scales in the private sector, which is competing for construction workers.
Prevailing wage requires contractors on government projects to pay their workers no less than the typical salary for the trade in that region. It’s basically a sector-specific minimum wage, intended to prevent a race to the bottom for the cheapest workers.
Phoenix’s ordinance takes the prevailing-wage system that the Department of Labor already uses on federal projects and applies it to city development. It includes a carve-out for residential construction, so that it does not directly impact affordable housing.
The most right-wing member of the council joined progressives in supporting the ordinance, which they passed in a 5-4 vote over the objections of business-friendly Mayor Kate Gallego. Gallego’s former senior policy adviser is now director of state government relations at TSMC, and industry groups for contractors bitterly opposed the measure.
A similar ordinance failed in 2021. Vice Mayor Yassamin Ansari, who voted for the measure, said it had gained bipartisan support this time because "there’s a war on the working class. I think Democrats and Republicans can often agree on this."
Workers spoke in favor of the ordinance at a heated city council meeting in March. "Downtown was pretty much built by people from out of town," said Jason Sangster, business manager of Phoenix’s Ironworkers Local 75. "It was built by Texans, it still is being built by Texans."
Sangster noted that his local completed its last project for the city in 2012, more than a decade ago. The prevailing-wage ordinance would allow his contractors to bid downtown, he said.
A representative of the Arizona Builders Alliance, an affiliate of the national industry group Associated Builders and Contractors, warned councilors that the ordinance would be met with legal challenges.
Dea, of the Laborers, said the new prevailing wage for city construction workers could lift standards for Phoenix—and made the case for investing in training union workers for the long haul.
"If the rest of the country’s economics went down, the city of Phoenix wouldn’t for years," Dea said. He predicts "five or six years of boom time, in the public sector alone. They’ve got to do it because of all the infill, infrastructure, schools, water treatment, streets, just to handle the people that have moved here."
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