A Green Industrial Economy

In 2007 the central Iowa town of Newton mourned the closing of the Maytag appliance factory that had been the economic anchor of the community for more than a century. Only a month later, local officials happily announced that TPI Composites, a producer of blades for giant wind-energy turbines, had chosen Newton as the location for a new 500-worker production facility. The announcement was important enough for Gov. Chet Culver to make an appearance and declare: "Today is a new day and a hopeful day for Newton." Defying the odds, the town was reversing the deindustrialization that has devastated so many U.S. communities.

The TPI Composites plant is not an isolated instance. About half a dozen manufacturing operations serving wind-energy generators have opened in Iowa during the past few years. The firms involved range from young companies such as Clipper Windpower to a unit of the German industrial powerhouse Siemens. And the Iowa cluster is not an anomaly. Across the country, dozens of wind- and solar-energy-equipment plants are now in operation or have been announced. They represent several billion dollars of private-sector investment and are creating thousands of jobs.

Some of these operations are modest in size, but others are intended to be major industrial installations. OptiSolar, for instance, has opened a massive factory at the former McClellan Air Force Base near Sacramento, which the company hopes will eventually employ 1,000 people. The Danish wind-energy giant Vestas has been opening plants in Colorado that it expects will together have a work force of more than 2,000. LM Glasfiber, another Danish company, has become the largest private employer in Grand Forks, North Dakota, through its 900-worker wind-blade plant.

Many proponents of green jobs have been waiting for the arrival of major federal expenditures. That spending is definitely necessary, but the private sector has already begun to create a substantial number of clean-energy manufacturing jobs to supply wind- and solar-power-generating companies. Some of these projects have experienced layoffs or delays in reaching full capacity with the onset of the recession, but they still represent an important new development in the U.S. economy.

It is encouraging that this burst of green employment is occurring in the manufacturing sector, which was the traditional path to a middle-class standard of living for those without a four-year college degree. Even after years of industrial retrenchment, the typical production worker in the durable-goods sector earns a respectable $19 an hour, almost 50 percent higher than the average retail worker.

Unfortunately, some of the production jobs being created in the new wind- and solar-energy-equipment plants have pay levels below the national manufacturing average. Research by Good Jobs First, the organization where I work, found that quite a few of those jobs are not even paying enough for a full-time, year-round worker to reach a basic family budget for a single parent with one child, according to area-specific estimates of family income needs prepared by the Economic Policy Institute. Almost none of them pay enough to achieve the basic budget for a family with two parents and two children.

Another concern relating to the viability of the new wind- and solar-energy-manufacturing jobs in the United States is that some of the same employers are simultaneously opening facilities in low-wage havens abroad. For example, TPI Composites is producing wind blades for the U.S. market not just in Iowa but also in Mexico and China -- defying the assumption that the blades are too large to ship long distances. First Solar, which sited a plant in Perrysburg, Ohio, has a factory 10 times larger in Malaysia. Some U.S. firms in the sector offshore all their production. For instance, a California-based solar-panel company called SunPower does most of its manufacturing in the Philippines; the rest is performed by a third-party subcontractor in China.

A major reason for the subpar conditions in some wind- and solar-energy-manufacturing plants is that the sector is largely not unionized. And that is not a result of a lack of interest in unions on the part of workers. In at least two instances, employees at green plants tried to organize and were thwarted by management.

In early 2008, some workers at the Clipper Windpower turbine plant in Cedar Rapids, Iowa, contacted the International Brotherhood of Electrical Workers out of frustration over dangerous conditions on the job, long reimbursement delays on health-insurance claims, and other issues. According to IBEW organizer Brian Heins, more than 70 percent of the workers ended up signing authorization cards. But then the company brought in a union-busting consultant and launched an intensive anti-union campaign. The same thing happened when workers at the DMI Industries wind-tower plant in West Fargo, North Dakota, sought to gain collective-bargaining rights through the Teamsters. In both cases, the workers were worn down to the point that they voted against unionization.

These mediocre pay rates, offshoring threats, and failed organizing drives demonstrate that green jobs are just as susceptible to the pernicious tendencies of the U.S. labor market as are jobs in sectors that are not addressing the climate crisis. The fact that an employer is part of the clean-energy transformation of the economy does not necessarily mean it has enlightened labor policies.

This is not to say that green manufacturing jobs are doomed to mediocrity. The research by Good Jobs First identified some promising situations, but these did not come about solely through the benevolence of individual employers. First, there are a few wind- and solar-energy-manufacturing facilities where workers have achieved union representation. The most celebrated examples are the plants opened in Pennsylvania by the Spanish wind-energy leader Gamesa.

After its workers launched an organizing drive with the United Steelworkers, Gamesa voluntarily recognized the union and negotiated a contract that now provides starting wages from $13 to $20 an hour plus skills-based supplements. Union officials say they are also satisfied with the benefits they have negotiated and with management's overall posture toward the union. "We voluntarily recognized the Steelworkers union," says Julius Steiner, CEO of Gamesa Energy USA. "There is no downside. There simply isn't." Last year, Gamesa was honored by American Rights at Work for its cooperative labor policies.

Unionization is not the only route to improvements in working conditions at green manufacturing firms. Another avenue is created by the fact that these companies are heavily dependent on government assistance. The Good Jobs First research found that most of the wind- and solar-energy-equipment plants are receiving substantial subsidies from state and local economic-development agencies. For example:

n A United Solar Ovonic plant being built in Battle Creek, Michigan, is receiving state and local incentives amounting to about $97 million. Most of it derives from 15 years of generous tax benefits made possible when the facility was given Renaissance Zone status (Michigan's version of enterprise zones).

n Several solar-energy-equipment firms in Oregon -- including Solaicx, Sanyo Solar, and Solar World -- are together receiving more than $75 million in business energy-tax credits from the state.

n Evergreen Solar received $44 million in subsidies for the plant it opened in Devens, Massachusetts. The package included grants, low-interest loans, and a below-market lease on state-owned land.

n The state of Arkansas and the city of Little Rock rolled out the red carpet for the LM Glasfiber wind-blade plant that opened last October. In addition to more than $33 million in direct subsidies, the company was freed from having to raise capital to build the plant, which is instead being financed by industrial-revenue bonds issued by the city. Since Little Rock will technically own the plant, the company will not have to pay property taxes. Instead, it will make a much smaller payment in lieu of taxes. Under legislation enacted by the state, LM Glasfiber will not have to pay state corporate income taxes for 27 years if it meets certain hiring criteria.

One can debate in fiscal terms whether it makes sense for state and local governments to provide such generous subsidies to these companies. In the employment context, however, the existence of this taxpayer assistance presents an opportunity to do something about job quality.

In recent years, more and more state and local governments have sought to promote the creation of higher-quality jobs by imposing wage and sometimes benefit requirements on the companies receiving subsidies such as corporate income-tax credits, property tax abatements, low-cost financing and infrastructure assistance. These strings are a way of getting the maximum boost to the local economy from the investment of taxpayer funds in private development.

In a report published in 2003, Good Jobs First found that job-quality standards were in effect for various subsidy programs in 89 jurisdictions, including 43 states, 41 cities, and five counties. Overall, some 116 state subsidy programs were found to contain their own standards, while city and county standards are in many cases linked to living-wage laws applied to government contractors and less frequently to subsidy recipients. The best wage standards are the ones that assure workers will be paid enough to meet basic needs and attain self-sufficiency. Though there are still wide variations in their form, job-quality standards are becoming a widely accepted best practice in the economic-development field.

Some of the highest wage rates found at wind- and solar-energy-manufacturing plants are in places where the company received subsidies with job-quality standards attached. For example, Sanyo Solar's plant in Salem, Oregon, is paying workers about $45,000 a year, which is based on a requirement in its subsidy deal mandating rates at least one and a half times the average manufacturing wage in the area. The company is also obliged to spend an average of at least $50,000 per worker on wages and benefits combined.

The mere existence of a job-quality standard is no guarantee of a high-quality job. In some instances, the required rate may be set too low. For example, the wage requirement imposed on the Solaicx solar-energy plant in Portland, Oregon, was only 150 percent of the state minimum wage, or $12.60 an hour. The TPI Composites plant in Iowa was required to pay only $13.47 an hour, a rate well below the $19 an hour that workers at the closed Maytag plant had been receiving.

Even in cases where the official requirement is reasonably high, officials may face demands from companies for a waiver. After United Solar Ovonic got nearly $100 million in subsidies for the plant in Battle Creek, the company brazenly demanded a waiver from the city's wage requirement. At a hearing on the issue, a retired union worker scolded company officials: "The city has bent over backwards to give you breaks. When is enough, enough?" United Solar was not swayed. It threatened to locate the plant elsewhere unless it got its way, so local officials caved. The company is now paying $14 an hour, which represents just 70 percent of what it takes for a full-time, year-round worker in the area to earn the equivalent of a basic budget for a family of four.

Still, when job-quality standards are set high enough and are rigorously applied, they can be a great boon for workers at companies receiving public subsidies. To be fully effective, however, the standards also have to come with adequate means of enforcement. In the subsidy field, that means the inclusion of "clawbacks" -- provisions under which officials can demand repayment of the subsidies if the company does not live up to its obligations. It is also helpful to adopt subsidy disclosure requirements, so that journalists, watchdog groups, and the general public can track what level of aid companies have received and what standards they are supposed to meet.

With enactment of the Obama recovery bill, with $38 billion to subsidize development of renewable energy and energy efficiency, government will gain even more leverage to produce good green jobs -- if government uses it. If employers are left to their own devices, some of the new green manufacturing jobs will remain substandard. It is only through more aggressive union organizing -- ideally done on a more level playing field -- and government intervention in the form of job-quality standards that green jobs can become truly good jobs.