Unions and Electric Vehicles: Can Democrats Really Have Both?
Imagine two electric cars made in the US for $ 40,000, one made by union workers in Michigan and the other by non-union workers in Tennessee. After a proposed federal tax break, the Tennessee vehicle would cost $ 32,500 and the Michigan vehicle would cost $ 28,000. Is it right?
Now imagine the workers who made these cars. The median hourly wage for a unionized Michigan assembly worker is around $ 21, while the unorganized Tennessee worker is $ 18. Is it right?
These two questions converge in the form of a controversial provision in the gigantic budget reconciliation package under consideration in Congress. For the first time, Congress is set to tie billions of dollars in vehicle subsidies to the employment status of the people who make the vehicle.
The effort is unique because it links the adoption of electric vehicles – and therefore the trajectory of climate change – with labor policy, and in particular an attempt to force automakers to abandon decades of resistance to organized labor.
“It’s an interesting tool to use in trying to create leverage,” said Dan Gilmore, an employment attorney who has represented automakers and teaches labor issues at the University of Tennessee, Chattanooga. “It would be the first, I can’t think of another example.”
This is one of President Biden’s most daring union-building experiments to date, who rarely misses an opportunity to tie his economic and climate agenda to unions (Energy wire, The 17th of March).
Biden and his Democratic allies in Congress say greater union representation in the workplace is crucial to increasing wages and benefits and recreating middle-class prosperity. But unable to pass legislation that would tilt the labor law more in favor of workers, they find other ways to do so – in this case, in the form of a federal tax subsidy worth up to $ 4. $ 500 per vehicle.
“It is the employers who largely determine whether workers will organize according to the strength of their resistance,” said Thomas Kochan, professor of industrial relations at the Massachusetts Institute of Technology. “And this is a big social problem that needs to be solved.”
But critics say this social experiment might not work as Democrats intended.
If these non-union automakers don’t bow to the pressure and union organizers fail to convince workers, Americans would be less able to afford the new models of electric vehicles that these automakers have to come. That, in turn, could slow the electric vehicle adoption curve and prolong the United States’ dependence on climate-warming fossil fuels.
One of the opponents is Joe Britton, executive director of the Zero Emission Transportation Association (ZETA), which represents many players in the new ecosystem of electric vehicles. The provision, he said, “undermines the public policy objective, which reduces emissions and supports the industry.”
Winners and losers
The provision has produced cries of protest from automakers whose workers are not unionized. Reuters reported that on Tuesday Elon Musk, CEO of Tesla Inc., America’s leading electric automaker, told a conference that the Biden administration was “not the friendliest” and “appeared to be controlled by the unions “.
At least in the short term, the bill creates clear sets of winners and losers.
The US House and Senate have written union-friendly EV language in the massive reconciliation bill, which has a grim future as congressional negotiations intensify in Washington this week.
The two approaches are similar in that they are both written by Democratic Michigan lawmakers who count unions as their grassroots and sit on powerful tax drafting boards. The House version was written by Rep. Dan Kildee, who sits on the House Ways and Means Committee, and the Senate version by Senator Debbie Stabenow, who is on the Senate Finance Committee.
Both versions continue today’s $ 7,500 incentive to purchase brand new electric vehicles and add $ 5,000 in incentives beyond. How to spend that extra $ 5,000 is where the two diverge.
The House version does it all for the unions, offering an incentive of $ 4,500 if the vehicle is assembled in a factory organized “under a collective agreement” – in other words, where workers are represented by a union. Another incentive of $ 500 is given if the vehicle and its battery are primarily manufactured in the country.
The Senate version offers $ 2,500 for electric vehicles made by unions and an additional $ 2,500 if the vehicle is assembled in the United States.
The impacts would differ from region to region and from automaker to automaker, due to marked divisions in how the US auto workforce is unionized.
The Midwest, home to General Motors Co., Ford Motor Co., and Stellantis NV brands like Dodge and Jeep, is the birthplace of the American auto industry. Their workers have been represented by the United Auto Workers since the 1950s, and electric vehicles made in their factories would get the full subsidy.
An entirely different story unfolded in the Southeastern United States.
There, a host of factories have been established by overseas-based automakers, from BMW AG and Volkswagen Group of America in Germany, to Toyota Motor Corp. and Nissan Motor Co. in Japan, via Hyundai Motor Group and Kia Corp in South Korea.
These automakers manufactured 46% of all U.S. vehicles last year, according to Autos Drive America, a trade group of foreign automakers. They are also investing billions of dollars in building electric vehicles, including $ 118 million by the Volvo Group in South Carolina and $ 7.4 billion by Hyundai, which has a plant in Alabama.
None of these factories are unionized. That includes Nissan, which has built the electric Nissan Leaf since 2010, and Volkswagen, which is spending $ 800 million to build an electric vehicle plant in Chattanooga, Tenn.
The automakers have chosen their locations in part because of the strong anti-union tendency in the Southeast. Organizing efforts among workers in their factories have failed and workers tend to have lower wages.
The Economic Policy Institute, a liberal Washington-based think tank, has studied the wages of auto assembly workers without a college degree. He found that the median hourly wage of unionized workers over the past four years was $ 20.95, while non-union wages were $ 17.95.
Overseas-based automakers benefit more from these lower wages. But they present their objections to electric vehicle subsidies as unfair to their workers.
“Their workers did not choose to unionize,” said Jennifer Safavian, CEO of the Autos Drive America business group, “and that discriminates against the vehicles they produce.”
Another story emerges in California, where Tesla manufactures its electric cars and has hampered the efforts of its workers to form a union.
All in all, the bill creates a clear victory for some and a clear loss for others – unless the automakers bend to the will of Congress and find a way for their workers to bargain collectively.
“It would be a huge strategic advantage for Ford and GM, and a strategic disadvantage for almost every other automaker,” said ZETA’s Britton. “The whole of the South, and much of the West, would be at a disadvantage.”
Grant as a baton
Supporters of the measure say it is an appropriate weapon to get non-union automakers to change their ways.
“Using taxpayer money to support temporary $ 15 jobs is not a public benefit,” said Jason Walsh, executive director of the BlueGreen Alliance, an environmental and labor advocacy group that did pressure for measurement. Some automakers offer temporary jobs at lower wages.
A tax break that promotes union work, he said, “sends a signal to foreign, overseas-headquartered automakers, virtually all of whom are unorganized in the United States but unionized in their home countries. ‘origin, that they must be consistent and genuinely negotiate in good faith with their workers.
The problem, according to Walsh and others, is that automakers are among many American companies filling in the gaps in labor law and using their imbalanced power over workers to stifle union campaigns.
Gilmore, the Tennessee labor attorney, said there’s a handy acronym for actions a business can’t take: TIPS. An employer company cannot threaten, question, promise or monitor. But that leaves the employer with many creative ways to create an atmosphere hostile to union organizing, including mandatory meetings that spread anti-union messages.
“Among the things employers can do, there are a lot more cans than impossible,” said Gilmore.
The union-friendly subsidy, if it were to become law, would apply to almost any electric vehicle Americans can buy now.
The best-selling electric vehicles of the year so far – Tesla’s Model 3 and Y, Nissan Leaf, Volkswagen ID.4, Audi e-tron, and Kia and Hyundai models – are made at abroad or by non-unionized national workers. One flagship electric vehicle, Ford’s Mustang Mach-E, is not eligible because it is made in Mexico.
One electric vehicle currently on sale that would be eligible is GM’s Chevrolet Bolt. However, production is currently on hiatus as GM fixes an issue that is causing battery fires.