It has only been a few months since The Inflation Reduction Act of 2022 was signed into law by President Joe Biden on August 16, 2022. But ever since, the landmark legislation has been overshadowed by a cliffhanger congressional election, a barely-averted federal railroad strike, a controversial World Cup, sinking stock markets, and crashing cryptocurrencies — among other things.
That’s unfortunate, according to Jason Lamonica, chief operations officer of Spec on the Job, a Durham, North Carolina-based blue collar outsourcing company founded in 1998. He says the president’s signature legislative achievement still matters, particularly for blue-collar workers, who have been losing ground against their higher-paid cohort since the late 1970s.
Indeed, most of the discussion last August was focused on the Inflation Reduction Act’s impact to the Biden presidency rather than the economy or workers. As its provisions kick in, and the government begins offering all-important guidance to employers, here’s a rundown of some of the law’s most consequential features:
Tax credits for jobs within energy sector
Because the law was largely inspired by making the United States a leader in clean energy, much of its impact will be felt in the energy sector. “The law authorizes $391 billion in spending on energy security and climate change, which it estimates will create over 1 million new jobs in both energy and manufacturing,” Lamonica notes. “Much of this spending is in the form of tax credits for creating blue-collar jobs, but there are some conditions.”
In October, The Treasury Department released a fact sheet to clarify just what those conditions are, as well as how the new law will, in its words, “drive investment and dynamic economic growth, create new opportunities for workers by supporting good-paying jobs, and lower costs for American families.” In order to receive the largest tax credit — 30% for clean energy generation and storage — companies must pay their workers the local prevailing wage and hire “a sufficient proportion” of workers from registered apprenticeship programs. Smaller credits have similar conditions targeting tribal communities and non-profits.
“The good news,” Lamonica says, “is that the Treasury Department will soon issue guidance on these provisions, and companies will then be able to make their plans. But employers will have to submit certified payrolls in order to receive the credits, so there will be additional administrative costs for companies that hope to benefit from the new law.”
Another major goal of the Act is to bring blue-collar jobs back to the United States, a process known as “onshoring.” Even with the demise of union participation over the past several decades, relatively high wages, and healthcare costs have pushed companies to outsource their production to countries like Mexico, China and Vietnam.
The recent groundbreaking of a $40 billion Taiwanese semiconductor plant, attended by the President himself, was a rare victory for American manufacturing. “The administration would like to see many more such events,” Lamonica says. “To that end, the Inflation Reduction Act provides bonus credits for meeting domestic content requirements, particularly for electric vehicles.”
The Treasury says that this will support good-paying jobs in the energy supply chain, though governments in Europe and Japan have objected to some provisions, and the details are still being worked out at a high level.
Employer-provided health plans
Finally, the Inflation Reduction Act makes good on its name with several provisions to lower the cost of healthcare plans, which are predicted to rise 7.4% next year as prescription drug hikes soar into the double digits. The White House has emphasized that the Inflation Reduction Act will reduce the cost of prescription drugs by establishing price caps and allowing Medicare to negotiate prices for high-cost drugs for the first time ever.
Lamonica says that blue-collar workers stand to gain the most, not only from lower drug prices but with health insurance premium subsidies extended for union members. “All in all,” he explains, “the Inflation Reduction Act should be a win/win for blue-collar workers by creating well-paying jobs on one hand and lowering important household expenses on the other.”