Industrial Policy Synergies: Industrial Policy + Labor Policy

Modern, forward-thinking industrial policy can help our economy be more inclusive and productive, and can increase good jobs and strengthen worker power. Now is the time to use the levers of policy to coordinate efforts of economic actors to increase the economy’s productive capacity as efficiently as possible, using government to rebalance power between workers and employers. By focusing resources, regulations, and enforcement where workers have historically been mistreated and stripped of dignity, industrial policy can be a power-building tool for those workers. Of particular importance are workers who have traditionally been mistreated and left out—such as the Black, Latina, Asian, and immigrant women who dominate the care and service industries.

For too long, to the extent that our nation had an industrial policy, it was unspoken and primarily focused on the manufacturing sector and its largely white, male workforce—leaving behind critical sectors of our economy in which public investment has been lacking and we’ve fallen behind foreign competitors.

Policymakers on both sides of the aisle have resisted government engagement in the economy and decried industrial policy as being a policy of “picking winners and losers.” All the while, our country has routinely picked winners and losers by putting forward policies and regulations that specifically benefited corporations and certain sectors of the economy. In contrast, industries that are staffed largely by women and people of color have been ignored and skipped over for widespread investment.

Care and the Service Sector

Renewed industrial policy efforts must call for public investment in the service and care sectors, two of the fastest-growing industries in our economy.¹ The COVID-19 recession made clear that our society cannot function without care and service workers, whose labor helped us through the darkest days of the pandemic and will continue to be a backbone of our communities moving forward. We need policies that support these growing sectors and their workers. Federal investment in the service sector would be a game changer, turning these often minimum wage jobs into family-sustaining careers and making it easier to recruit workers to fill open positions.

The care economy is changing rapidly, and we need industrial policy that accounts for and addresses these shifts. A large share of service sector jobs can’t be outsourced or automated, and the need for in-home care has never been higher: Roughly 10,000 people turn 65 every day;² by 2028, the US will need to fill an estimated 4.7 million home care jobs,³ including over 1 million new jobs. Almost one in five net new jobs created over the next decade are projected to be either home health aides or personal care aides. As of February 2023, more than 100 million people work in private service-providing industries, and 75 percent of the workforce is in the service industry.⁴ Investing in childcare and home care workers means investing in women of color,⁵ and creating policy for these industries that supports workers and also helps the rest of the economy.

Sectoral Bargaining as Industrial Policy

Sectoral bargaining comes in many forms,⁶ but at its core it sets agreements on pay and working conditions across an entire industry, rather than these standards being set at each individual firm. Sectoral bargaining has a long tradition in the US economy: While often described as a European way of work, sectoral bargaining and wage boards have been part of our economy since World War I, and continuing into the New Deal era.⁷ Similar to today, these types of policies were used to set minimum standards for workers across employers who lacked union representation. These agreements were widespread, spanning across the country.

The auto industry was one in which industry standards were quite strong. The big three car companies—Ford, General Motors, and Chrysler (now Stellantis)—were all organized under the United Auto Workers (UAW) and would often strike in order to secure a contract with one company that the other two would then accept. Unsurprisingly, this sectoral approach was strongest when working in concert with strong union membership, and examples of this type of policy remain in our economy today. Sectoral bargaining still exists in various ways in the entertainment industry and in major league sports, and Arizona, Colorado, California, and New Jersey have state authority to establish industry-wide wage boards.

Setting standards across a sector stops a race to the bottom in every industry and geography, and will raise the floor economy-wide, benefiting both workers and employers. Sectoral bargaining prevents low-road companies—those that do not offer good wages and benefits—from undermining high-road companies that treat their workers well. Studies also indicate that sectoral bargaining can help boost productivity: It incentivizes companies to compete based on greater productivity rather than lower pay because it sets higher compensation floors, and encourages employers to provide similar pay to workers who do similar jobs.⁸ Broad-based bargaining can also reduce employee turnover, promote workplace collaboration, and incentivize worker training. Finally, researchers also find that sectoral bargaining achieves more inclusive economic outcomes for workers, including closing pay gaps and reducing economic inequality.

New legislation in California recently showed how a reimagined industrial policy and a sectoral approach can uplift working people. In 2022, the state’s FAST Recovery Act, AB257, was signed, representing a gigantic step forward for workers in California and across the country. If enacted in 2024, as stated in the legislation, it would give half a million workers a seat at the table with their employers and government to address systemic, industry-wide issues like violence, low pay, sexual harassment, health and safety, and more.⁹ The bill is the most significant advance in workers’ ability to organize and bargain for a better future in a generation, and is a watershed moment in the history of the labor movement, building a new model for industrial policy in the service sector. Putting workers, fast-food employers, and government at a table together instantly creates a new model where working people can have a direct voice in raising standards across the entire industry. For workers in industries like fast food, who face systemic obstacles to joining together in a union, organizing by sector and pushing for industry-wide changes is an industrial policy with real potential to rebalance power between workers and employers.

Sectoral Bargaining and Unions

Industrial policy that uses sectoral bargaining cannot work well without strong unions. Unions are key to sectoral bargaining in a few ways. First, they are a crucial part of any effective enforcement strategy. Government should be a regulator and enforcer, but federal and state enforcement agencies have been stripped of funds and understaffed as part of the broader disinvestment in government.¹⁰ Union partnership is therefore critical. Unions have local entities spread across states and cities all over the country, and because they represent members already doing the work, they have firsthand knowledge of how to effectively and efficiently enforce it.

Second, there is power in the numbers that can come from gathering the members of, or at least being affiliated with, many local union shops. Unions are able to bring large numbers of workers to the table, giving an even stronger hand in negotiating for minimum standards.

And third, unions are a source of advice and expertise as workers come together to use their voice for the first time in negotiations with employers. Local labor leaders will have relevant experience to navigate negotiations and be practical about what is possible. Sectoral and enterprise bargaining can complement one another in building out an industrial policy that increases worker power.

In the US right now, worker power seems to be synonymous with labor unions. Unions are an effective and necessary check on corporate power and behavior, but strengthening unions is not the only way to build worker power. Wage boards, worker centers, and worker voice on corporate boards are among the myriad ways to ensure workers have more of a say with their employers and in how their workplaces function. Government has a crucial role to play as the third actor in the tripartite arrangement between workers and employers when it comes to setting wage and standard boards. It can set minimum requirements and guidelines so the floor is raised across industries and workplaces. Sectoral bargaining, in turn, can lead to higher union density because it lessens employer opposition and facilitates efficiency by setting a standard across employers in multiple locations.^{11, 12}

The Biden administration is using a robust industrial policy framework to invest billions of dollars into our nation’s vital industries and fundamentally transform our economy. This transformation should be worker-centered and should create good union jobs. One of the most exciting paths for industrial policy to increase worker power is through sectoral bargaining. By focusing on the care and service sectors, policy can better help workers and communities of color who have traditionally been left behind. As we use industrial policy to improve our nation’s infrastructure and transition to clean energy, we must ensure that it is being implemented in ways that right historical wrongs and lift up generations of workers now and into the future.