What the Biden Admin’s Labor-Forward Clean Energy Strategy Tells Us About Inclusive Industrial Policies

This week, delegates from around the world are descending on Washington, DC, to attend the annual spring meetings of the International Monetary Fund (IMF) and World Bank. Attracting a lot of attention this year is a new report from World Bank economists Ana Margarida Fernandes and Tristan Reed, entitled Industrial Policy for Development: Approaches in the 21st Century. In it, the authors essentially scrap the Bank’s famous 1993 East Asian Miracle report, which argued that industrial policy is so unlikely to be effective that it is essentially impossible to get right. For decades thereafter, industrial policy—the government taking an active role in shaping which industries survive and thrive—was treated as what the IMF later called the “policy that shall not be named.”

But looking at the evidence in the decades since, Fernandes and Reed find that, actually, industrial policy never went away. And often, it is developing countries—which conventional wisdom would claim can’t afford or can’t do it well—that are doing it the most, and often, competently and increasingly with encouragement from the World Bank itself. They find that a slowdown in global growth has made industrial policy increasingly indispensable, and increased access to global knowledge flows and markets means governments can do industrial policy smarter and more efficiently than in the past. 

Despite the welcome paradigm shift, it’s hard to not read the 276-page report as an attempt to craft a limited set of “post-neoliberal” exceptions to a neoliberal default. The report’s rules of thumb appear to be, in my paraphrasing: (a) don’t mess with macroeconomic fundamentals if subsidies will suffice; (b) don’t do industry-specific subsidies if industry-neutral public services will suffice; (c) only spend money on these services if the market would not provide it (i.e., if there is what economists call a “market failure”); and (d) stay relentlessly focused on keeping institutions “insulated from politics and interest-group pressures” (emphasis added). Moreover, instead of a focus on structural change, the volume catalogs a set of 15 distinct industrial policy tools, from tariffs to R&D support, and warns about the risks and inadequacies of each on their own—even as they find certain limited circumstances where they might be appropriate or the least-bad option.

On the one hand, this is unobjectionable. It’s unwise to spend public money in an unnecessary or inefficient manner, and safeguards against self-dealing and corruption are an essential component in maintaining faith in government. Desk officers at your country’s sovereign wealth fund should be focused on technical details, not triaging lobbying from the prime minister’s daughter-in-law over her latest crypto scheme. And it would be policy malpractice to launch into using a tool without being clear-eyed about its limitations and trade-offs.

On the other hand, as the report acknowledges, its rubric is less useful for understanding some of the reasons that the United States has turned to industrial policy in recent years: namely, bolstering national security in a time of fragmenting geoeconomic order, ensuring the energy use of every firm and household in the country is clean, and making sure communities and workers are not left behind as the economy navigates these deep structural changes. The US, particularly under President Biden, has not been deploying one tool (e.g., tariffs) in isolation. Rather, at its best, it has deployed an all-of-government approach, with the various tools balancing against one another.  Moreover, as we have seen over the last few years—and as documented in a February 2026 paper from political scientists Alexander F. Gazmararian, Nathan M. Jensen, and Dustin Tingley—policies had limited popular salience. Green industrial investments need speed, visibility, and traceability to succeed in embedding policy feedback loops. In other words, it is precisely through small-p politics and interest group mobilization that you can make industrial policy not only effective, but legitimate.

What the Evidence Shows About Labor-Forward Industrial Policy

The Roosevelt Institute’s latest report, The Receipts: The Untold and Underappreciated Outcomes of Biden’s Clean Energy Strategy, authored by Roosevelt Senior Fellow Betony Jones and Fellow Joe Peck, shows how early and systematic workforce strategies at the Department of Energy (DOE) over 2021–24 helped fuel a boom in manufacturing construction, high construction wages, and apprenticeship programs to develop the clean energy workforce of the future. Contrary to strategies focused on building a competitive advantage through lower wages (as tried by many of the examples in the new World Bank study), the approach under Biden focused on high-road workforce standards that were not fatal and were even helpful in the eyes of private-sector project developers. As one interviewee said, for example, “[Unions] can guarantee the safety and operationability of a high-stakes industry that requires multiyear training. So, having [our company] integrated into the union apprenticeship programs is what we needed.” In particular, DOE set up innovative programs to ensure project compliance with the 95-year-old Davis-Bacon Act (DBA), which requires payment of prevailing wages for all construction projects receiving federal money.

The nitty-gritty details compiled in The Receipts are worth a read, especially in light of discourse over the last few years that the Biden administration’s policies failed because they were trying to do too many things at once. My takeaway from this study is that industrial policy that holistically approaches maximizing the sustainable supply of labor, natural resources, and capital into clean energy is not doing “too much,” but amounts to the minimum of what any productive enterprise needs to do (public or private).

However, the Biden administration’s industrial policy went through numerous agencies and pools of money. This created some incoherence, but it also gives us as researchers a lot of informative comparisons to make across agencies. In a reflective new essay at the excellent Factory Settings blog, former CHIPS Office Director Mike Schmidt details the difficulty that the Department of Commerce had at operationalizing DBA requirements. (For a primer on how this office was set up, see our 2024 interview with one of its founders, Ronnie Chatterji.) In particular, getting the global oligopoly that is the semiconductor industry to comply with nearly century-old requirements was tough, and apparently unanticipated by many of the companies. This created lots of hurdles and hiccups, and a few project cancellations.

Industrial policy that holistically approaches maximizing the sustainable supply of labor, natural resources, and capital into clean energy is not doing “too much,” but amounts to the minimum of what any productive enterprise needs to do (public or private).

This oversight is somewhat curious as a matter of timing. As a previous Factory Settings post by Skanda Amarnath documented, the investment surge for semiconductors happened in August 2021, in anticipation of the federal funding that was eventually unlocked in August 2022 by the final passage of the CHIPS and Science Act. By the time that investment took off, the Senate on a bipartisan basis had already added Davis-Bacon requirements to the legislation in May 2021. It was also after a bipartisan group had very publicly beat back a last-minute effort by Sen. John Cornyn (R-TX) in June to strip the requirements  (he said the rules were unnecessary, claiming semiconductor companies pay higher than Davis-Bacon rates). Then-Senator Marco Rubio (R-FL)—one of eight Republicans defending Davis-Bacon—said, “This type of targeted investment in a critical industry was unthinkable just a couple years ago, but the need for smart industrial policy is now widely accepted. I hope my colleagues will recognize a strong American work force is similarly important to the future of our nation.”

Is An Inclusive Industrial Policy Possible?

The interventions by Jones/Peck and Schmidt could be seen as falling on opposite sides of the so-called Abundance debate. For those who haven’t been following internet discourse over the last few years, this debate centers around the idea that government often piles on requirements for accessing public support, rather than staying laser-focused on maximizing the supply of socially useful goods and services. Superficially, either camp of the debate could read Schmidt’s essay as carrying the flag for the idea that we should be willing to sacrifice some labor standards to compete with Asia, while the Jones/Peck report could be read as arguing that government should never alter requirements if there’s any risk to workers.

But that’s not actually what they say: As I see it, Schmidt is asking policymakers to better budget and plan for high labor standards, while Jones/Peck note many instances where DOE got creative about the burden of compliance. Attention, capacity, and hiring for implementation is as—or perhaps more—important to realizing the promise of policies.

What both pieces say to me is that advanced economies need to pay close attention to industrial policy as a coordination device for maintaining—or at least, not undermining—the living standards that their citizens have come to expect.

That idea of not using public dollars to undermine workers was core to the DBA. The 1931 law was the first in a series of labor and industrial policy reforms over the 1930s. Notably, it was signed by President Herbert Hoover and cosponsored by Sen. James Davis of Pennsylvania and Rep. Robert Bacon of New York. All three were men of the Right, even as later New Deal labor laws would be driven by progressives. As Bacon noted in congressional debates, 

A practice has been growing up in carrying out the building program where certain itinerant, irresponsible contractors, with itinerant, cheap, bootleg labor, have been going around throughout the country “picking” off a contract here and a contract there, and local labor and the local contractors have been standing on the side lines looking in. Bitterness has been caused in many communities because of this situation. This bill, my friends, is simply to give local labor and the local contractor a fair opportunity to participate in this building program. I think it is a fair proposition where the Government is building these post offices and public buildings throughout the country that the local contractor and local labor may have a “fair break” in getting the contract. If the local contractor is successful in obtaining the bid, it means that local labor will be employed because that local contractor is going to continue in business in that community after the work is done. If an outside contractor gets the contract, and there is no discrimination against the honest contractor, it means that he will have to pay the prevailing wages, just like the local contractor.

The DBA came after several states had passed their own prevailing wage laws, at a time when public construction projects were often performed by child and incarcerated labor.

The public sector accounts for 40 percent of nonresidential construction, so rules like Davis-Bacon are a powerful way to shape markets in the public and workers’ interest. And the evidence is that these rules have stabilized the notoriously volatile construction industry, ensuring greater availability of human talent than without them. At a time when there is a shortage of skilled construction workers, we wouldn’t want to do anything to make a job in the trades less attractive. While there is a compliance cost, there’s also a benefit. And presumably, in the context of the Biden-era policies, those results netted positive if private sector firms ended up taking the public money from DOE and Commerce and building the factories.

Moving Beyond Construction: Historical Context on High-Road Policies 

Still, a casual observer might ask: Why does construction supported by the federal government have to pay high wages, while non-construction work and work not supported by the federal government don’t face similar obligations? Might that not disincentivize firms from engaging with the government in building nationally important projects?

Here, a bit of history is helpful context.

A few years after DBA was passed, Franklin D. Roosevelt signed into law the National Industrial Recovery Act, or NIRA. This law envisioned a collaborative partnership between government, business, and labor to set production and wage standards to bring the country out of the Depression. The vision was to set floors not just for construction, and not just for projects receiving public money, but indeed for all industries and workers. Yet NIRA was criticized by some on the Left, who saw the code-writing process as too driven by business interests. More fatally, it was opposed by some on the Right, who wanted to be able to compete on the basis of lowering standards. The latter view prevailed in Schechter Poultry v. US at the Supreme Court, which declared NIRA unconstitutional in 1935.

After NIRA was killed by the Court, lawmakers passed a stop-gap measure to try to protect some of the gains it had made for workers. Rather than attempting to regulate the conduct of all businesses, the Public Contracts Act of 1935 (also called the Walsh-Healey Act for its congressional cosponsors) sought merely to set the labor standards of companies doing business with the federal government. For example, when federal procurement officers were buying apparel for civil servants’ use, they had to be paid prevailing wages. Walsh-Healey was thus for manufacturing workers what Davis-Bacon was for construction workers. However, in Wirtz v. Baldor Electric in 1964, corporate groups convinced the courts that they should be able to drag the Department of Labor into court to dispute its prevailing wage finding. As a result, the agency never again set any wage determinations for manufacturing workers, effectively putting Walsh-Healey on ice. This has had real consequences to this day; manufacturing unions were often more critical of the Biden administration’s industrial policy than their counterparts in the buildings trades.

Why was Davis-Bacon able to survive? In US v. Binghamton in 1954, the Earl Warren Supreme Court found that:

The Act itself confers no litigable rights on a bidder for a Government construction contract. The language of the Act and its legislative history plainly show that it was not enacted to benefit contractors, but rather to protect their employees from substandard earnings by fixing a floor under wages on Government projects. Congress sought to accomplish this result by directing the Secretary of Labor to determine, on the basis of prevailing rates in the locality, the appropriate minimum wages for each project. The correctness of the Secretary’s determination is not open to attack on judicial review.

In one swoop, Davis-Bacon was effectively placed outside of court jurisdiction, which means that businesses have just had to live with it. As a result, its wage rates are relatively generous, predictable once established, and mostly immune to the litigation risk that is troubling to Abundance advocates in other contexts. Meanwhile, the dream of all industries being put on equal competitive footing has eluded us, as business groups have fought efforts to empower workers more broadly.

The new World Bank study signals the growing mainstream acceptance of industrial policy, which the Biden administration championed the experimentation of over the past few years. Still, debates persist about how friendly to labor industrial policies can and should be, indicating that there are still challenges ahead if we are to use industrial strategy to ensure not just a high quantity but a high quality of development projects.

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