Rising authoritarianism and the need to upend the failed Southern economic development model

For generations, Southern politicians backed by powerful business interests have promoted a Southern economic development model—characterized by low wages, regressive taxation, lax environmental regulations, a weak social safety net, and vicious opposition to unions—while claiming such policies will attract business and thereby generate regional economic gains. But data actually show a grim reality. The South lags all other regions on most indicators of economic health including job growth and wages, and Southern workers and their families experience significantly higher rates of poverty than in other parts of the country (Childers 2024a).

The truth is that this Southern economic development model was never designed to benefit most Southerners; rather, it is historically rooted in efforts of white plantation owners to retain their wealth following emancipation and ensure continued access to the labor of Black people for as little compensation as possible (Childers 2025). Foundational to these efforts was an authoritarian approach to state governance that suppressed popular democracy and worker organizing—an approach that also sanctioned prison labor, sharecropping, a century of Jim Crow laws, lynching, and other forms of state-sponsored terror and exploitation. Until partially challenged by federal legal and policy interventions won by post-WWII civil rights movements, many Southern states for decades held elections that served merely to provide a cover of legitimacy to one-party rule of white, wealthy elites—functionally excluding Black voters from the electorate and blocking working-class constituencies from any meaningful participation in governance (Mickey 2015; Perez 2024; Mast 2025).

Today, the Trump administration’s increasingly authoritarian actions echo this troubling Southern history. At their foundation, the administration’s approaches to bypassing constitutional checks and balances—while rolling back civil rights, worker rights, and environmental protections; terrorizing immigrant communities; deploying military troops in U.S. cities; and attempting to engineer election outcomes via gerrymandering and other forms of voter suppression—are rooted in authoritarian models developed and tested in the U.S. South, and that Black, brown, and immigrant communities across the country are no stranger to.

Recent attempts to terminate federal employee collective bargaining agreements, for example, are familiar to public employees in Southern states for whom collective bargaining has long been banned or severely restricted. The Trump administration’s use of military-style policing in communities across the country echoes Southern histories of weaponizing law enforcement (or National Guard troops) to suppress organizing and instill fear, while prioritizing the expansion of the carceral state over investments in housing, education, and public services. Trump’s efforts to override the authority of state officials mirror Southern state uses of abusive preemption laws to strip policymaking authority from local governments. And administration attempts to halt clean energy investments and environmental protections threaten to repeat harms familiar in Black and brown communities in the South, where corporations have insisted on lax environmental regulations that allow them to degrade air, water, and climate quality, while profiting from the exploitation of local natural resources and labor.

Seizing opportunities to reverse decades of anti-worker, anti-democratic policymaking in the South at a moment of rising authoritarianism in the U.S. is a daunting and unavoidably urgent challenge. It will require robust new forms of multiracial organizing and labor-community coalition building across a broad set of industries in the South. Labor-community coalitions can leverage community benefits agreements (CBAs) as a powerful tool to transform economic power relations in Southern workplaces and communities. Because CBAs are private agreements between labor-community coalitions and project owners, they do not rely on government action and can therefore shape economic outcomes of major projects even in otherwise hostile political environments. CBAs have traditionally been fought for and won by labor and community groups coming together and building necessary public pressure to hold developers, corporations, and elected leaders accountable for ensuring that public investments in major new developments truly benefit workers and communities.

In this report, we analyze the potential for labor-community coalitions to pursue strong CBAs that secure significant economic benefits for Southern manufacturing workers and communities, drawing on examples of existing agreements to model potential impacts. We examine the scale of recent public investments in Southern manufacturing and examine how strong CBAs on major publicly-subsidized private projects could improve the quality of newly created construction and production jobs; open up pathways to unionization; ensure equitable hiring and training opportunities for local residents; and address community needs such as child care, affordable housing, and natural resource protection.

We contend that upending the failed Southern economic development model and the authoritarian structures that underpin it will require building new forms of labor and community power to increase union density in the South. Well-known research shows that unions promote economic equality and help workers win improvements in pay, benefits, and working conditions (Economic Policy Institute 2021). But unions also powerfully affect people’s lives outside of work. They help foster solidarity, increase democratic participation, enable working-class communities to shape economic policies affecting their lives, and serve as a counterweight to corporate power in our economy and democracy (McNicholas et al. 2025). Historically, unions have been engines of resistance to entrenched and undemocratic power—mobilizing working people to challenge inequality, defend civil rights, and push back against authoritarianism in all its forms. For all these reasons, strengthening labor-community coalitions and pathways to unionization in growing Southern industrial sectors is not just good economic policy—it is also a democratic imperative amid national authoritarian backsliding.

Worker and community power can ensure new manufacturing investments yield good jobs and community benefits

The latest wave of manufacturing growth in the South presents both opportunities and pitfalls for workers and communities. Southern states continue to lure businesses—including large manufacturing facilities—with promises of low corporate tax rates, low wages, lax regulations, and massive public subsidies. The automotive manufacturing industry has been a key recipient of public subsidies, receiving billions of dollars from Southern states in recent decades (Childers 2024a; Todd 2021). This system of low taxation and corporate giveaways starves other essential public goods, like education and social safety net programs (Mast 2025b). Likewise, weak or nonexistent environmental regulations have contributed to toxic sites and resource degradation that disproportionately affect Black and brown families, reflecting often intentional decisions to site hazardous facilities in low-income communities of color (Bergman 2019).

Some announced manufacturing projects have been cancelled or reduced in size after the Trump administration’s slashing of federal supports for strategic industries, but many projects launched during the Biden administration continue to move forward. These manufacturing investments, both in traditional industries and nascent ones such as electric vehicle (EV) and EV battery manufacturing, are spurring significant job growth in some Southern communities. Yet past experience shows that new investments and resulting jobs are unlikely to generate economic benefits for most Southerners unless local residents are able to ensure that developers and corporations respect workers’ rights, protect local natural resources, and contribute a fair share toward addressing priority community needs.

Community benefits agreements can be powerful vehicles for communities to secure lasting local economic benefits from major industrial development, at both new and existing facilities. A CBA is a legally enforceable contract between a private developer or company and a local coalition—typically made up of labor, community, faith, environmental, and other grassroots organizations—that details how a project will benefit workers and the community, and in turn how the community will support the project (including via potential public investment). Benefits spelled out in a CBA can include commitments to strong labor standards; respect for workers’ rights to organize; equitable workforce recruitment, training, and hiring practices; affordable housing; environmental protections; or a broad range of other community-identified priorities. CBAs are a well-developed model for responsible community development—so far mostly, but not entirely, in regions outside the South—and have been used for many different types of major projects including sports stadiums, events centers, manufacturing plants, airports, transit projects, and more (WRI n.d.).

CBAs can likewise mitigate risks for project developers by ensuring local project support and addressing important concerns early on, whereas failure to engage local communities in major development decisions can otherwise lead to strong community opposition, interruption of development, obstacles to obtaining necessary siting permits or rezoning approvals, or significant legal costs. In an example from June 2024, developers shelved plans for a $1.3 billion data center in Indiana after facing significant local opposition over environmental concerns (Fazili et al. 2025).

Because a CBA is a private, legally binding agreement, it does not require government action and can be used to shape outcomes of major projects even in contexts (as in most of the South) where state legislators have preempted local governments from establishing their own job quality or environmental standards (EPI 2025a). That being said, state and local governments can still have a role in facilitating, negotiating, or enforcing community benefits. Cities like Detroit and Cleveland have ordinances requiring developers of projects using public resources to engage in a community benefits plan process (City of Detroit n.d.; City of Cleveland n.d.). In 2005, Atlanta passed an ordinance specifying worker and community benefits for the Beltline redevelopment (WRI 2025). However, government involvement in community benefits plans does not guarantee strong agreements on its own. A strong labor-community coalition remains essential for securing meaningful community benefits.

Another key strength of a CBA is that it can set standards across all stages of a project’s development to ensure long-term benefits for the community at large. Private developers or public entities sometimes negotiate Project Labor Agreements (PLAs) or Community Workforce Agreements (CWAs) with building trades unions and community partners to set wages, working conditions, and timelines for the construction phase of a complex development project. A CBA can be negotiated alongside a PLA to also ensure pathways to quality jobs for local residents during the operational phases of a project, including any future expansions of the facility or additions to its workforce. A CBA can also secure commitments to build affordable housing, strengthen environmental standards, and provide other benefits to the community such as child care, public parks, or other community spaces.

To be successful, a CBA must also include defined enforcement mechanisms that hold all parties to the agreement accountable. It must clearly establish the obligations of each party, metrics for measuring progress, and ongoing monitoring of compliance with the agreement’s provisions (Last 2025; PWF and CBLC 2016). If the company or the coalition fails to make good-faith efforts on the agreement’s commitments, an arbitration process is initiated. While monitoring of the agreement is an ongoing responsibility of all members of the coalition, providing a pathway for workers to organize in the operational phase of a project is of particular importance. A newly established union at the project site is well-positioned to monitor the commitments of the CBA and hold the company accountable over the long term.

Organizers and advocates should be clear-eyed that while strong CBAs can yield powerful economic outcomes, such agreements are by no means easy to win. There are generally no legal requirements for a particular company or developer to recognize or engage with a labor-community coalition, much less to agree to negotiate and implement a CBA. Building the broad-based, durable coalitions and leverage necessary to compel private interests to engage in CBA negotiations (and then to implement and enforce the terms of a CBA) is unavoidably a challenging, long-term, resource-intensive organizing project. And like any worthwhile organizing, the formation of strong, durable labor-community coalitions is itself a key outcome of successful CBA campaigns. Vastly expanding the capacity of broad-based coalitions and labor, faith, environmental, and other grassroots organizations to gradually build community and worker power in Southern communities is the most essential ingredient for transforming existing power imbalances and, ultimately, upending the failed Southern economic development model.

Indeed, recent initiatives to win CBAs in Southern states have proven so threatening to some corporate interests that they have sought to undermine them. In 2025, Tennessee Republicans passed legislation prohibiting any company that enters into a CBA from receiving state economic development funds—aiming to create obstacles to replication of a highly successful CBA covering Nashville’s soccer stadium, and to discourage a coalition of West Tennessee residents and allied groups calling on Ford and SK Innovation to negotiate a CBA covering its massive BlueOval electric vehicle and battery manufacturing complex (Abrams 2025). In Tennessee and elsewhere, however, labor-community coalitions are nonetheless continuing to organize to ensure that massive, publicly subsidized new facilities yield good jobs and community benefits.

A new wave of Southern manufacturing is an opportunity to transform working conditions in growing industries—and across the South

Growth in Southern manufacturing industries presents a significant opportunity for labor-community coalitions to shape labor standards and community benefits in new plants and facilities—and to shape economic outcomes for generations of Southern workers to come. In recent years, the South has seen a wave of manufacturing investments. Between 2017 and 2023, manufacturing construction doubled in the East South Central Census division (Alabama, Kentucky, Tennessee, and Mississippi) (O’Brien 2023). The West South Central division (Arkansas, Louisiana, Oklahoma, and Texas) has the highest amount of manufacturing construction spending of any division in the U.S. These investments are part of a long-term trend of manufacturing industries locating in the South, which in recent years was accelerated by large federal investments through the Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act. These federal investments included both direct public subsidies and tax credits to businesses that invested in key clean energy manufacturing industries such as the production of batteries, electric vehicles, solar panels, and wind energy products.

In contrast to the typical economic development approach of many Southern states, some recent federal investments have included incentives meant to encourage strong labor standards on projects receiving public funds. While the future of many of these investments (and accompanying incentives) is now uncertain, the U.S. has in the past two years experienced its largest investment in clean energy manufacturing ever, and much of that has occurred in Southern states.1 Since the third quarter of 2023, more than $125 billion worth of clean energy manufacturing investments were announced across Georgia, North Carolina, South Carolina, Tennessee, Kentucky, and Texas (CET 2025). Advancing even a portion of these projects would result in thousands of jobs for Southern workers.

Independent of the future of federal support for clean energy manufacturing, the South will likely continue to be the largest manufacturing employer of all U.S. regions. Figure A shows manufacturing employment by region in the United States since 1990. While manufacturing employment overall has fallen during the last three decades, the South has retained the largest share of manufacturing employment of any region. In 2024, 35% of U.S. manufacturing employment was in the South. Furthermore, since 2010, manufacturing employment in the South has grown by 17%, the quickest growth of any region.

Figure A

Manufacturing jobs are often considered to be well-paid, benefit-providing “middle-class” jobs, but there is nothing inherent to the sector that determines their quality. Manufacturing jobs in some industries became “good jobs” thanks to relatively high levels of unionization during the mid-20th century, which improved wages, benefits, and working conditions (Bayard et al. 2024; Rhinehart and McNicholas 2020). As Figure B shows, unionization in manufacturing has fallen in all regions since 1983, but the South has almost without exception had the lowest unionization rate of any region.

Conservative Southern policymakers have long been hostile to union organizing. For example, every Southern state except Maryland and Delaware has passed anti-union so-called right-to-work (RTW) laws, which make it harder for workers to form, join, and sustain unions. Southern states like Florida and Arkansas were among the first to pass such laws in the 1940s, amid a wave of big business backlash against new federal labor laws and white supremacist campaigns to maintain racial hierarchies and suppress multiracial worker organizing. RTW laws suppress unionization rates and, as a result, have driven down wages for both union and nonunion workers alike across the South (Sherer and Gould 2025; Childers 2023).

Figure B

In 2025, Southern manufacturing had a 6.7% unionization rate—slightly below the national unionization rate for private-sector workers (6.8%). Unionization in Southern manufacturing grew by more than a percentage point between 2024 and 2025, a notable one-year reversal of the industry’s long-standing unionization decline, consistent with overall union gains in the South (McNicholas, Poydock, and Shierholz 2026). Nevertheless, Southern manufacturing’s unionization rate remains well below the Midwest’s (11.2%), the region where manufacturing is the most heavily unionized. Unions have a strong impact on job quality because they leverage worker power collectively to raise wages, win benefits like health care and retirement, and enact other meaningful workplace improvements, such as improved health and safety standards. These benefits can extend beyond unionized workers themselves, helping set standards across a workplace, and with enough density, across an industry.

As unionization declines in an industry or region, so does job quality. For instance, as unionization rates have fallen in auto manufacturing, the pay advantage for auto workers compared with the median worker has declined significantly (Barrett and Bivens 2021). Figure C demonstrates how this relationship holds across regions in 2025. Manufacturing jobs in the South have a pay advantage of 7%, the lowest of any region. Southern manufacturing workers also experience the lowest median hourly pay of any region ($24.41).2

Figure C

The Southern economic development model clearly hurts the region’s workers by denying them their right to organize and suppressing their wages, but there are harmful spillover effects for their communities as well. Corporate tax breaks with no strings attached provide billions of dollars to corporations that could otherwise be used to invest in schools and other essential government services. These types of tax breaks might be worthy of consideration if manufacturing employers were required to create high-quality jobs for local workers and make long-term investments in local community development needs (i.e., housing, infrastructure, education, etc.). Without such protections, they are simply taxpayer-funded giveaways that often drain the very resources needed to develop the local workforce recruited by large new facilities.

Southern states enact little to no regulation of workplace safety or environmental pollution. This results in unsafe workplaces with greater levels of injury and death (Childers 2024a). Environmental pollution from manufacturing sites can negatively affect public health by contaminating water, air, and soil. New manufacturing investments also can mean significant changes to the demand for housing in a community. A new plant or factory can drive up the cost of living for nearby residents without yielding any economic benefits to a local community. Labor, community, and environmental groups need to collaborate on shared solutions to effectively address these intertwined challenges.

Labor-community coalitions can obtain commitments that ensure “economic development” means shared prosperity for all

Labor-community coalitions organizing around manufacturing projects can secure commitments that offer direct economic benefits to workers and communities, while also establishing groundwork for the growth of worker and community power in the area. While a campaign to win a CBA can be the impetus for forming a local labor-community coalition, the alignment and relationships built through this shared work can lead to longer-term, sustainable coalitions capable of transforming local and state power relationships.

The following section analyzes a set of commitments that can be included in a CBA for a manufacturing project. The CBA framework is flexible and allows for the inclusion of many different types of commitments prioritized by particular groups of workers, community members, and environmental groups. This report focuses on key types of commitments including union neutrality agreements, living wage floors, equitable workforce development practices (such as local or targeted hire policies and programs to expand pathways to apprenticeship training), affordable housing provisions, child care benefits, and environmental protections. Each type of commitment is analyzed in terms of its economic impacts and effectiveness in reshaping local economic development to ensure that public investments generate broadly shared community benefits.

The construction phase and Project Labor Agreements (PLA)

This report mostly focuses on community benefits for workers during the operational phase of a manufacturing plant. Nevertheless, it is just as vital to set high labor standards during the construction phase. Strong community benefits agreements are ideally developed in tandem with strong project construction labor standards set via project labor agreements (PLAs). A PLA is a multiparty agreement between a project owner and a coalition of labor unions that sets out labor standards and dispute resolution procedures to promote stability and efficiency on complex infrastructure projects while also ensuring the project will generate good jobs. PLAs ensure that construction projects run smoothly, are safer, and pay workers fairly (Mangundayao, McNicholas, and Poydock 2022). By setting negotiated wage and benefit levels for each type of work on a project, PLAs level the playing field in highly competitive construction bidding processes; they ensure that contractors base bids on their ability to deliver on quality and efficiency, rather than low-ball cost estimates that reflect intent to pay substandard wages or cut corners on safety. By standardizing wage and benefit levels and taking them out of the competition in the bidding process, PLAs incentivize the use of skilled union labor, which is 14% more productive than nonunionized construction work (McFadden, Santosh, and Shetty 2022). PLAs typically set wages, fringe benefits, and working conditions but can also include requirements to utilize certain numbers of apprentices, hire locally or from certain target worker populations, and/or provide child care or other benefits that open up pathways to good union construction jobs for members of underrepresented groups.

Several of the types of standards for construction workers typically included in a PLA have analogous labor standards in the operational phase. For instance, a CBA can secure commitments for local or targeted hiring and the development of registered apprenticeship programs in a manufacturing facility, extending equitable recruitment and high-quality training requirements that a PLA typically sets for construction into the operational phase of a project.

Removing obstacles to unionization: Neutrality and labor peace agreements

Protecting workers’ freedom to unionize has historically been key to turning manufacturing jobs into good jobs. This remains just as true today. However, like workers across the country, Southern manufacturing workers continue to face formidable obstacles—including weak labor laws, powerful anti-union corporations, and hostile politicians—to exercising their legally protected rights to form or join a union. Employers are charged with violating federal labor law in more than 40% of union elections and spend more than $400 million a year on “union avoidance” consultants (McNicholas et al. 2019; McNicholas et al. 2023). Because existing weak labor laws do not effectively deter employers from union busting, these tactics are treated by many employers as a normal cost of doing business—stacking the deck unfairly against workers seeking to exercise their rights to organize and collectively bargain.

Union neutrality agreements can help safeguard workers’ right to form unions free of the types of interference employers often deploy. Under a neutrality agreement, an employer agrees to remain “neutral” and not interfere with workers’ decisions on whether to unionize. Such agreements typically include joint commitments to a “card check” process for verifying whether a majority of employees have indicated interest in forming a union. Unions and employers sometimes also enter into a labor peace agreement, where unions agree not to engage in certain types of picketing, work stoppages, or other economic disruptions during the organizing process in exchange for employer neutrality.

Employers can also choose to commit to union neutrality as a matter of principle or company policy. Union neutrality—providing workers a more free and fair choice to decide whether to unionize—has been a key component of successful unionization drives in Southern manufacturing. To take two recent examples:

• In 2024, workers at the Volkswagen (VW) Chattanooga plant voted to join the United Auto Workers. Like many European corporations, the German-based VW has an established policy of maintaining neutrality in union election processes, although workers still voiced concerns that in its U.S. facilities, VW management tried to intimidate and dissuade workers from forming a union (Bomey 2024).
• In tandem with community benefits agreement negotiations with New Flyer in Anniston, Alabama, the United Steel Workers and Communications Workers of America negotiated three neutrality agreements with New Flyer and its subsidiaries in 2022. Over the two years that followed, these union neutrality agreements enabled workers to pursue five successful union drives, including at the New Flyer facility in Alabama (Last 2025; Sasha 2024).

Successful recent instances of union organizing in Southern manufacturing facilities have been powerful enough to generate their own backlash. Because of the threat that union neutrality agreements represent to the reigning Southern economic development model, several conservative state legislatures in the South have used model legislation developed by the American Legislative Exchange Council to pass laws intended to interfere with these agreements (Sachs 2024). While the legality of such measures remains in question and has not yet been tested, Alabama, Tennessee, and Georgia now all have legislation in place stating that employers who agree to a union neutrality agreement will be barred from receiving state economic development funds, disincentivizing companies from participating in these agreements (Stephenson 2024).

Importance of unionization to improve manufacturing jobs and wages

Securing unionization in Southern manufacturing can have significant wage benefits for workers. Unionized manufacturing jobs are more likely to provide family-sustaining wages. Unionization in manufacturing is associated with a 17.9% wage premium for workers (Scott et al. 2022). This means that compared with similar workers in terms of education, occupation, experience, race, and ethnicity, unionized manufacturing workers are paid almost a fifth more per hour than their nonunionized counterparts.

Table 1 translates this union premium into how much more unionized workers in the South could make on an hourly, annual, and plant-wide basis. The average nonunionized manufacturing worker in the South earns $34.50 an hour, so with the typical union premium, that worker would be earning an additional $6.18 an hour. If that worker works full time, year-round, the hourly premium translates to $12,846 more a year. To illustrate the potential impact of unionization in an entire plant, we take the example of the BlueOval auto manufacturing investment in Tennessee, which is projected to create 6,000 jobs (TN Office of Governor 2023). For a plant of that size, unionization could mean more than $77 million in additional wages for workers.

Table 1

Wage gains from successful unionization are not hypothetical for manufacturing workers in the South. For example, in 2024, workers at New Flyer in Anniston, Alabama, ratified a union contract with significant pay raises, with some workers gaining raises of up to 38% through 2026 (CWA 2024). Establishing a union contract with transparent pay ladders will also help New Flyer workers combat persistent pay gaps between white and Black workers in Anniston’s manufacturing industry (Erickson 2021).

The benefits of unionization go far beyond hourly wage increases. The workers at New Flyer also achieved significant gains in terms of vacation time and retirement contributions. Unionized workers secure critical benefits like health care and sick days at greater rates than their nonunion peers. Adjusting for differences in industry, sector, and region, union workers are 18.3% more likely to have employer-covered health insurance than their nonunion counterparts (EPI 2021). Almost 9 in 10 private-sector union workers have paid sick days, compared with less than three-fourths of nonunion private-sector workers (EPI 2021).

Unions also contribute to safer and healthier working conditions across a wide range of industries (Dean, McCallum, and Venkataramani 2022). By strengthening workers’ voice on the job, unions empower workers to report safety issues and demand better protocols. One example of this is that unionized construction sites experience significantly lower rates of Occupational Safety and Health Administration (OSHA) violations than nonunionized sites (Manzo IV, Jekot, and Bruno 2021). This is despite the fact that unionized workplaces actually experience greater rates of OSHA inspections than other workplaces, likely because many unions maintain active health and safety committees and because unionized workers have greater access to education on how to recognize safety hazards and are less afraid of reprisals from their employer for reporting them (Leigh and Chakalov 2021).

As the New Flyer agreement demonstrates, a strong CBA includes (or is negotiated in tandem with) union neutrality commitments ensuring that workers have a free and fair choice to unionize, without employer interference or retaliation. Securing a pathway to unionization can provide direct benefits to workers at a particular facility, while also increasing local organizing capacity and coalition strength for future negotiations over new projects and local development decisions. Not only is a new union a legally recognized institution that can monitor and hold the company accountable for commitments in the CBA, but it can also play a critical role in amplifying demands of workers and communities outside of the workplace and building power for working people more broadly.

Living wage floor

CBAs can also include commitments to minimum wage floors for the workers who will operate a new facility. For example, the 2018 Nashville Soccer CBA in Tennessee included a commitment to an hourly wage of at least $15.50 for stadium workers (SUN 2018). This provision set the stadium’s wage floor well above the minimum wage in Nashville, where workers—like all Tennessee workers and many across the South—are otherwise subject to the federal minimum wage of $7.25 an hour.

If a wage floor set by a CBA is high enough, it can help workers achieve a living wage in the place that they live. What constitutes a living wage must be determined by labor and community partners (Gould, Mokhiber, and DeCourcy 2024). For example, a living wage could be defined narrowly as covering the necessities for a single adult, or more broadly as including the needs of a working parent and their children. A living wage target must also make assumptions about nonwage income such as health care benefits and government transfers. Manufacturing workers in the South can also rightfully seek wages that not only cover bare necessities but provide the family-sustaining resources needed to be healthy and thrive.

Figure D shows the share of manufacturing workers in the South earning less than $30 an hour, or $62,400 a year in wages for a full-time worker. More than 3 in 5 (60.8%) manufacturing workers in the region earn less than $30 an hour. Around 80% of Southern Black and Hispanic manufacturing workers earn below the $30 threshold. Women in manufacturing are also more likely to earn below $30 an hour (71.8%) than men (59.1%).

Figure D

A $30 wage floor exceeds the minimum costs for a single adult in most jurisdictions in the U.S., but still barely covers needs for many families with children in manufacturing-dense counties nationwide. EPI’s Family Budget Calculator estimates living wage standards by county that cover modest but necessary costs families face like food, rent, and transportation in the United States. Table 2 shows three Southern counties with significant clean energy manufacturing investments in recent years (CET 2025). Each county has significant manufacturing employment, exceeding the U.S. average for manufacturing employment density. For each county, living wage standards from the Family Budget Calculator are listed for different family types. In Morgan County, Georgia, and Maury County, Tennessee, a single adult with a child must earn at least $30 an hour to cover basic needs. For a single economic provider to cover the costs of a four-person family, they must earn over $35 an hour in all the counties listed. These living wage standards indicate that a $30 wage floor would provide significant economic security for workers with smaller families or multiple wage-earners.

Table 2

A CBA that secures a strong living wage standard in a manufacturing facility can create a virtuous cycle that brings about greater prosperity in the area. Higher wages for low- and middle-income workers boost spending in the local economy because these workers spend a greater share of their paycheck than high-income workers (Anderson 2014). Other employers in the area might have to raise their wages to compete for workers with the CBA-bound employer. The establishment of a living wage also demonstrates to other workers in the area that higher wages are a feasible goal through collective action.

Local and/or targeted hire policies

Local and targeted hiring refers to policies that prioritize recruitment of individuals from the local community, or workers from specific groups who are otherwise underrepresented in a given workforce relative to local population demographics, such as women, people of color, veterans, low-income workers, formerly incarcerated workers, or workers with disabilities (Lawliss, Finfer, and Sherer 2022). A local hire policy can require that a certain percentage of hours worked on a project be completed by local workers. These policies can also require giving local workers the first option to apply for jobs on a project. For the prosperity created through manufacturing investments in the South to be shared equitably, it is important that local community members have access to the jobs that are created during both the construction and operation phases of a development. Workforce policies also should be designed to remove barriers to employment for groups of workers—especially workers of color and women—who have historically been excluded from many construction and manufacturing career opportunities. Increasing access to these well-paying jobs can increase economic mobility for workers with more limited opportunities.

Despite these benefits, some state policymakers have been hostile to local hire as a public policy. In 2015, Nashville voters passed a ballot initiative that required city-funded construction projects to dedicate 40% of construction hours to Nashville residents, with 25% of those hours going to low-income Nashville residents (Blair et al. 2020). The Tennessee state legislature then quickly passed a bill that preempted the city from creating its own local hire policy.

As Figure E shows, the harm of Tennessee’s preemption of local hire falls disproportionately on workers of color. The construction workforce in the Nashville metro area has a higher share of workers of color and immigrant workers compared with the state construction workforce overall. Black workers are 8.2% of the construction workforce in Davidson County, but 5.5% of the overall state workforce. More than half (51.5%) of construction workers in Davidson County are Hispanic, compared with less than a quarter (20.1%) of the state overall. Davidson County construction workers are also more than twice as likely to be immigrants (40.2%) than in all of Tennessee (14.8%). State preemption of local hire prevented Nashville from ensuring that public spending would benefit local workers. However, private agreements like CBAs offer an opportunity to incorporate local hire and/or targeted hire requirements into publicly subsidized developments, even in heavily preempted jurisdictions.

Figure E

In 2018, three years after the preemption of Nashville’s local hire policy, the labor-community coalition Stand Up Nashville was able to leverage $275 million in public subsidies for a new professional soccer stadium into a successful CBA (SUN 2018). The Nashville Soccer CBA included commitments to local hire for stadium workers, particularly workers from “Promise Zones,” i.e., high-poverty areas with fewer economic opportunities (SUN 2020). Through the CBA, Nashville Soccer Holding, LLC agreed to consider qualified Promise Zone resident referrals for jobs at the stadium. So far, the program has succeeded in hiring Promise Zone residents. In 2023, Nashville Soccer Club had hired 180 employees, 80 of whom were residents of Promise Zones (SUN 2023).

CBAs in the South and throughout the country are securing similar commitments to local and targeted hiring in clean energy and manufacturing investments. In Alabama, the New Flyer CBA commits the company to ensuring that at least 45% of new hires and 20% of promotions are members of “Historically Disadvantaged Groups” (Sabin 2022).4 In Massachusetts, a new offshore wind terminal entered into a CBA with the City of Salem—setting targets for hiring of local workers, workers of color, and women workers (Sabin 2024). The CBA for Maine Aqua Ventis, an offshore wind facility, includes local hiring opportunities for residents of Monhegan, Maine (Sabin 2017). 

These types of agreements help ensure that local residents benefit from large investments in their communities, particularly when policymakers have invested public dollars in the form of tax breaks or corporate subsidies to support a new facility. Ensuring local workers are prioritized in training programs and hiring processes for newly created jobs also helps community members stay in the area when housing costs are driven up by a large new manufacturing investment. And in the longer term, providing pathways for local workers to benefit directly from these investments strengthens the labor and community alliances needed to hold developers and corporations accountable over time.

Equitable workforce development through apprenticeships and pre-apprenticeships

In addition to local hire policies, which help create equitable pathways for local workers to secure good jobs at a manufacturing site, construction and manufacturing projects require a skilled workforce to operate safely and productively. A robust ecosystem of registered apprenticeship and pre-apprenticeship programs can help ensure both that employers find the skilled workers they need in a large new manufacturing facility, and that local workers can access pathways to newly created jobs.

Registered apprenticeship programs are training programs vetted by federal or state agencies to ensure use of high-quality, best-practice training standards and approved curriculum aligned with skills needed to succeed in a particular occupation. Registered apprenticeships combine paid on-the-job and classroom training and result in a recognized, portable credential certifying that a worker has the skills and experience necessary for a specific occupation. Pre-apprenticeship programs (also known as apprenticeship readiness programs) recruit and prepare participants for registered apprenticeships—often partnering with community organizations—to open pathways to apprenticeship for women, Black and brown youth, immigrants, workers with disabilities, or others historically excluded from skilled trades occupations. The best practice is for these apprenticeships and pre-apprenticeships to be joint programs between unions and employers, providing high-quality instruction tailored to industry needs and training that leads to placement in a high-quality job with wages, conditions, and benefits negotiated into a union contract. Often, a vital building block for successful manufacturing apprenticeship programs is the establishment of a unionized workforce at a facility.

Unlike lower-quality workforce development programs, registered apprenticeships pay workers fairly for their labor during their training—and in joint apprenticeship programs, the wages and benefits of apprentices are negotiated into a union contract and typically include scheduled increases as apprentices progress through the training program. Registered apprentices (across joint and non-joint programs) typically see their earnings increase 49% between the year before they enter the program and the year after completing it (Walton, Gardiner, and Barnow 2022). These increases in earnings are greater than for similar workers who do not enter the apprenticeship during the same time period (Katz et al. 2022). Apprenticeships can also be particularly attractive to workers because they are debt-free. Most apprentices (60%) consider debt avoidance the most important reason for choosing to enroll in an apprenticeship (Walton, Gardiner, and Barnow 2022).

Apprenticeships can be a powerful tool for increasing the diversity of construction and other industry workforces. While participation of women and workers of color in apprenticeships has grown in recent years, this growth has been painfully slow for decades (CEA 2024). Research finds that union-based (joint) apprenticeship programs have been more successful than other types of apprenticeships at increasing diversity in the construction industry (Ormiston and Bilginsoy 2024). Joint apprenticeships enroll a higher share of women, Black workers, and Hispanic workers than non-joint programs, and have higher program completion rates for all workers, including for women and workers of color. Community benefits agreements can secure commitments and partnerships that equitably grow this pipeline of workers and set enforceable local and targeted hiring goals which in turn spur diversification of construction and manufacturing apprenticeship programs.

For instance, the New Flyer CBA creates a partnership between the company and coalition partners to develop pre-apprenticeship and technical training programs that expand access to manufacturing jobs for workers with low incomes and from disadvantaged groups (Sabin 2022). For these programs to succeed, community groups and educational institutions must have an active role in shaping the programs and connecting workers to these opportunities. The development of a growing skilled workforce and a robust, high-quality workforce development ecosystem can in turn be a strong incentive for bringing more facilities to an area over time. In 2015, Polaris stated that a significant factor in its decision to choose Huntsville, Alabama, for a new production facility was the area’s skilled workforce (Polaris 2015). As more workers participate in high-quality training programs that lead to union jobs, the organized workforce of the region will grow, strengthening labor-community coalitions the next time there is an opportunity to shape new development in the region.

Child care

Child care is an essential but extremely costly expense for many working families across the South. Average annual infant care costs in the South range from $6,868 in Mississippi to $14,277 in Virginia.5 The Department of Health and Human Services recommends that 7% or less of family income go toward infant child care costs, but typical Southern families spend significantly more. In Alabama, infant care costs are 9.8% of median family income, while in Oklahoma the share is 15.4% (EPI 2025b).

Increasing access to high-quality, affordable child care not only makes work more accessible to parents (and especially to women, who on average continue to assume disproportionate care responsibilities), but is a powerful investment in children’s development that can help narrow class and racial inequalities (Morrisey 2020). In addition, child care workers tend to work for very low wages and experience poverty at greater rates than the typical worker.

A large manufacturing investment in a locality might produce a significant number of jobs, and in turn increase the demand of workers and their families to live nearby. This is likely to increase the need for child care services in the region. However, data show that child care employment has not kept up with manufacturing growth in Southern counties. Table 3 compares counties with high manufacturing density, where manufacturing employment makes up more than the national average (9% in 2009), with those with lower manufacturing employment density (EPI 2025c).

Table 3

Between 2009 and 2024, manufacturing employment in high-manufacturing-density counties in the South grew 15.9%, achieving faster growth than similar counties in the U.S. overall (12.1%). However, over the same period, child care employment only grew 4.5% in Southern high-manufacturing-density counties, far below the national rate of 14.2%. Child care employment growth in the South for low-manufacturing-density counties (22.3%) is also below the national level (28.5%). The South systematically underinvests in child care, despite its importance to a healthy economy in the region.

CBAs and PLAs have been used to secure both the construction of physical child care spaces and financial support for actual services. The Nashville Soccer CBA reserved 4,000 square feet for the development of a child care center (SUN 2020). In 2001, the CBA for the North Hollywood Commons mixed-use development project in Southern California secured a commitment to an on-site child care center. Fifty child care spaces at the center were reserved for low- and moderate-income families (Sabin 2001). In the Boston area, unions have secured Project Labor Agreements that seek to address the unique child care needs of the construction industry. The PLA for the Winthrop Center in Boston established a child care access fund to research, develop, and implement alternative child care models within the construction industry, with a particular focus on assisting single mothers with child care while supporting their career (NEREJ 2019).

These types of investments are vital supports for working families, particularly mothers, seeking to balance professional and care work. Combined with union neutrality for the child care workers at these facilities, commitments to providing child care can further elevate worker power in the region and help large new facilities recruit and retain the skilled, experienced workforces they need to succeed.

Affordable housing

Without strategies to address the housing needs of a community impacted by a new manufacturing investment, local residents can experience increased economic precarity or forced displacement. The local housing impacts of a large industrial investment can be complex. A significant manufacturing investment can make a local community more attractive as workers move into the area to be close to their place of work. Manufacturing investments are also likely to be paired with prospective real estate investments in anticipation of future development around the original project. State and local governments might use eminent domain and other purchasing mechanisms to secure land for roads and other new infrastructure. These dynamics can increase housing costs for residents, particularly renters who are most vulnerable to the impacts of housing speculation and prospective rent increases. For instance, the BlueOval development in West Tennessee is already reported to have increased property prices and housing rents (TCG 2023). Homeowners, particularly those with fixed incomes, can also be more burdened with housing costs as higher demand in the area increases property tax valuations (Payne 2019).

On the other hand, extreme proximity to an industrial site can expose residents to environmental hazards and noise pollution, and may be considered unsightly, which decreases property values (Currie et al. 2016; Upton and Talpur 2024). The exact distribution of these changes in demand for housing across a community will depend on the type of industry and any other types of development included in the project.

Industrial investments like manufacturing facilities tend to take place in rural and semirural areas, in part because land is relatively inexpensive (Wiley 2015). While the counties with a higher share of manufacturing employment tend to have lower housing costs than urban areas, housing affordability remains a significant issue for workers. On average, across high-manufacturing-density counties in the South, a two-adult, two-child household must cover more than $14,000 a year in housing costs.6 A large share of renters in high-manufacturing-density counties in the South still are cost-burdened by housing, meaning they spend more than 30% of their income on rent, utilities, and other housing costs. As shown in Figure F, across the Southern states, the share of cost-burdened households in high-manufacturing-density counties ranges from 28% in Arkansas to 47% in Florida. More than 2 in 5 (42%) of Texas renters in these counties are also housing cost-burdened.

Figure F

A strong CBA will secure commitments to build a certain number of affordable housing units or dedicate a share of housing at the site as affordable. The Nashville Stadium CBA created agreements that at least 12% of residential units in the development would be affordable and that 20% of those units would be three-bedroom units to accommodate families (SUN 2020). The Staples Center CBA in Los Angeles, California, was another successful example of strong affordable housing benefits. The 2001 agreement for the development of an expanded convention center, theater, and surrounding housing, hotel, and retail space secured commitments that 20% of housing units would be affordable. The developer also agreed to provide $650,000 in interest-free loans to nonprofit affordable housing developers in the local community (WRI 2001).

Even in situations where a labor-community coalition is unable to reach a final CBA with a company, coalition organizing around community demands can still deliver meaningful affordable housing victories. Between 2002 and 2006, a labor-community coalition in Denver pressured Cherokee Investment Partners to provide community benefits as part of their redevelopment of the site of the Gates Rubber Company. The coalition leveraged zoning changes necessary for the project and a potential subsidy package from the city to extract benefits including an affordable housing plan for hundreds of rental and for-sale affordable housing units (Ingram and Hong 2011; PowerSwitch Action 2025).

In 2005, the labor-community coalition organized by Georgia STAND-UP was able to attach community benefits to an Atlanta city ordinance allocating $2 billion in public funding for the Atlanta Beltline transit-oriented development project. The city resolution shaped by the coalition established an affordable housing trust fund and a goal of developing 5,600 affordable housing units (PowerSwitch Action 2025). As of 2024, more than 4,100 affordable units have been created as part of the project (Atlanta Beltline, Inc. 2024).

Labor-community coalitions can also pursue other land-use commitments beyond the development of affordable housing. The BlueOval Good Neighbors coalition in West Tennessee has demanded commitments to protect land for farmers in the area. The development of the Ford factory has pushed Tennessee’s Department of Transportation to pursue land for new roadways through purchase and eminent domain. The area targeted for new roadways is a majority Black farming community, and several farmers are engaged in lawsuits with the state over the state’s meager compensation offers for their land (Wadhwani 2023). The coalition has demanded that farmers be offered replacement land in exchange for their sold land, as well as the creation of a 10,000-acre community land trust (BlueOval Good Neighbors n.d.).

Creating or protecting affordable housing is essential for protecting the communities that are necessary for any effective labor-community coalition. Large developments can cause instability within the community as new residents arrive, and existing residents are buffeted by rising housing costs. Because of historic and ongoing racial discrimination in housing policy, labor policy, and real estate practices, the costs of these changes are most likely to impact Black and Hispanic workers. Black families and other workers of color are the most likely to be cost-burdened by housing (JCHS 2024). Creating housing for workers and families to remain in the area is vital for continued collective action to secure benefits from developers and hold those developers accountable for their promises.

Environmental standards, funding, and monitoring

Large-scale manufacturing projects often have significant environmental impacts, both during construction and once they are in operation. Air, noise, and groundwater pollution; harm to wildlife habitats; and residents’ exposure to toxic byproducts are just a few examples of common concerns, and these consequences can be severe when projects are approved without sufficient environmental consideration. The consequences of large manufacturing projects often disproportionately harm communities of color and low-wealth areas throughout the South (Brouk 2024). For decades, poor and Black residents in the region have been exposed to toxic chemicals, pollution, and other environmental dangers at alarming rates (Bergman 2019).

In 2021, the Tennessee governor approved the construction of a General Motors lithium battery supplier in the city of Spring Hill, on the banks of the Duck River. Though the project was seen as an economic success, the plant’s operation has taken a toll on the fragile river ecosystem. The lithium battery factory is not the only strain—just eight companies along the river drain tens of millions of gallons of water daily (Wadhwani 2024). This enormous water usage has lowered river water levels, threatened biodiversity, and harmed local tourism and recreation. Advocates for the river’s health blame the state’s prioritization of manufacturing expansion without regard to the long-term environmental or economic consequences for local residents or other existing local industries.

CBAs are a tool that may help community-labor coalitions address the environmental impacts of data centers in the South. Data centers are booming across the United States, but particularly in Southern states like Georgia, Texas, and Virginia (Walker and Goldsmith 2026). New centers are heavy users of water and energy, create noise and air pollution, and are driving up electricity costs nationwide both by increasing demand for energy and requiring utilities to invest in new infrastructure paid for by all ratepayers (Merchant and Guerra 2025; Bizo et al. 2021; AI NOW 2025; Reed 2025). For example, in Virginia, electric bills were on track to increase as much as 25% in 2025 because of data centers (Penn and Weise 2025).

Growing community concerns surrounding data centers could create leverage for labor-community coalitions to pursue CBAs and other community benefits strategies. In 2025, community opposition blocked or delayed $64 billion in data center projects across the nation (Data Center Watch 2025). As community resistance to data centers continues to grow, more developers may recognize the need to come to the table with local coalitions to negotiate binding commitments on environmental and economic outcomes to secure project approvals. A handful of localities have begun to create agreements with data center developers regulating water use and securing commitments to green energy use (Turner Lee and West 2026).

Past development projects provide examples of how communities have used CBAs to secure long-term commitments to clean energy transition and protection of local natural resources in a multitude of ways, from mandating that any new construction must meet specific sustainability standards to requiring companies to contribute a set dollar amount to a city’s renewable energy transition fund. In Virginia, the City of Richmond Resort Casino CBA ensured the developing and operating company would design and construct all project buildings to Leadership in Energy and Environmental Design (LEED) Silver standards and would use previously existing pavement where possible (WRI 2021). The agreement also required the developer to attempt to reduce the urban heat island effect by planting shade trees along sidewalks and using other landscaping methods (WRI 2021). These agreements can mitigate additional environmental harm in areas that have already been polluted. A CBA between the Town of Waterloo, New York, and Seneca Meadows, Inc. regarding a landfill expansion commits the waste management company to pay for the development of new public water lines and other potable water infrastructure if existing public water wells become contaminated (WRI 2005).

CBAs can also be used to expand the positive impact of an already climate-friendly project. In New York, a CBA with an offshore windfarm developer stipulates that the company must contribute $2 million to the town of East Hampton’s Ocean Industries Sustainability Program (WRI 2018). Additionally, Deepwater Wind South Fork, LLC must spend $200,000 to establish an Energy Sustainability and Resilience Fund to support East Hampton’s transition to 100% renewable energy (WRI 2018). CBAs with environmentally focused companies provide valuable opportunities for communities looking to address climate change, especially where state governments have failed to invest in environmental programs.

A CBA can achieve a variety of climate and environmental commitments from a company but is also a strong starting point for building local capacity to monitor resource use, pollution, and other environmental priorities. A strong coalition of community, labor, and environmental groups can play essential roles in implementing and enforcing CBA commitments in contexts where understaffed government agencies have limited ability to monitor or investigate pollution and other environmental harms. Instead, workers and community members are often the first to report harmful practices and safety concerns. A strong CBA can provide opportunities for labor and environmental groups to work together to monitor and protect worker and community health, natural resources, and ecosystems.

Conclusion

For decades, Southern economic policies shaped by dominant business and corporate interests have resulted in poor working conditions and failed to ensure that profits generated by publicly subsidized development are shared with local workers and communities. Confronting the deep, long-standing imbalances of power that have entrenched this failed economic development model will require significant organizing and coalition-building to increase the collective power of workers and community members to shape different outcomes from the latest Southern manufacturing boom. Building new forms of worker and community power will be equally necessary to counter escalating authoritarian actions of the Trump administration, which closely parallel many features of the failed Southern economic development model that by design prioritizes corporations over workers and communities.

Our analysis shows that community benefits agreements could be powerful tools for Southern labor and community groups building the shared power necessary to reshape local and eventually regional economies. When strong coalitions of labor, environmental, faith-based, and other grassroots community organizations are able to build the necessary power to bring a company or developer to the table to negotiate an enforceable agreement, such coalitions can secure measurable economic benefits like higher wages, respect for workers’ rights to unionize, local or targeted hiring, protection of natural resources, or more affordable housing. Such economic gains are beneficial in themselves, but they also raise expectations, build local capacity to pursue additional gains, and demonstrate to the community at large that local residents can shape their own economic futures, and that these types of victories are achievable in the face of the Southern status quo.

While the urgent project of upending the Southern economic development model will require vigorous and persistent organizing across many sectors and geographies, community benefits agreements are one key strategy for turning manufacturing jobs into good jobs, ensuring long-term local economic gains from new industrial investments, and even renewing democracy in contexts where it has long been suppressed. Forming strong, long-lasting labor-community coalitions is essential to winning concrete gains for local workers as well as reshaping the political fabric of Southern communities and increasing working people’s influence over broader state or regional economic policy decisions. Winning and implementing any strong CBA requires the formation of an empowered labor-community coalition, which ideally endures and gains greater strength, experience, and influence over time. Just as the economic benefits of unionization extend far beyond an individual workplace, establishing a strong CBA coalition can create broader positive impacts across a community or region—delivering higher-quality jobs; more equitable tax systems; stronger public services; and healthier, more inclusive political systems.

Acknowledgements

The authors wish to thank the AFL-CIO Center for Transformational Organizing for their partnership and invaluable contributions in the production of this report. The authors are also grateful to Athena Last and Ian Elder at Jobs to Move America and Ben Beach at PowerSwitch Action for their expert feedback.

Appendix

Appendix Table 1

Notes

1. Clean energy manufacturing includes manufacturing of batteries, electric vehicles, mineral products, solar energy products, and wind energy products.

2. Workers in Southern states experience lower wages than in other regions even after adjusting for cost-of-living differences (Childers 2023).

3. The facilities covered by these agreements included plants in Alabama, California, Kentucky, Minnesota, New York, and Wisconsin.

4. This category includes workers who are Black, Indigenous, and/or people of color; women; LGBTQ+ persons; systems-impacted people (formerly incarcerated people); persons emancipated from the foster care system; residents of Anniston, Alabama, lacking GED or high school diploma; and veterans.

5. Southern states excluding D.C., Delaware, and Maryland.

6. EPI analysis of Family Budget Calculator and Quarterly Census of Employment and Wages data.

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Walton, Douglas, Karen Gardiner, and Burt Barnow. 2022. Expanding Apprenticeship to New Sectors and Populations. Prepared for the U.S. Department of Labor, Employment and Training Administration. Rockville, MD: Abt Associates, August 2022.

Wiley, Jonathan. 2015. The Impact of Commercial Development on Surrounding Residential Property Values. J. Mack Robinson College of Business, April 2015.

World Resource Institute (WRI). n.d. “Database of Community Benefits Frameworks Across the US.” Accessed September 5, 2025.

World Resources Institute (WRI). 2001. Staples Center Community Benefits Agreement.

World Resources Institute (WRI). 2005. Community Benefits Agreement between the Town of Waterloo and Seneca Meadows Inc.

World Resources Institute (WRI). 2018. Community Benefits Agreement between Deepwater Wind and the Town of East Hampton.

World Resources Institute (WRI). 2021. Resort Casino Host Community Agreement by and between the City of Richmond, Virginia and RVA Entertainment Holdings, LLC.

World Resources Institute (WRI). 2025. Atlanta Beltline. Accessed September 29, 2025.

Zessoules, Daniella, and Olugbenga Ajilore. 2018. Wage Gaps and Outcomes in Apprenticeship Programs. Center for American Progress, December 2018.

The American Rescue Plan Act (ARPA) was enacted on March 11, 2021. Among other provisions, ARPA allocated $350 billion for State and Local Fiscal Recovery Funds (SLFRF). SLFRF was a recognition of the stark reality that the COVID-19 pandemic had wreaked havoc on state and local government finances (McNicholas, Bivens, and Shierholz 2020). SLFRF was also a reflection of lessons that policymakers learned from recent history. In the years following the Great Recession, inadequate fiscal support to state and local governments resulted in massive budget cuts, public-sector job losses, and reduced spending that dragged on the economy, delaying economic recovery by years (Shierholz and Bivens 2013). With the prospect of potentially devastating COVID-19-induced state and local budget shortfalls, Congress and the Biden administration made the decision to spend at the scale of the problem by making sure SLFRF was large enough to meet its recipients’ needs.

Of the $350 billion in fiscal recovery funds, $195.3 billion went to state governments, $65.1 billion to counties, $45.6 million to cities, $20 billion to tribal governments, $4.5 billion to territories, and $19.5 to small units of local government, mostly towns and villages. They could use the funds for five purposes: responding to the public health emergency caused by COVID-19; responding to the negative economic impacts of COVID-19; providing premium pay to “essential” workers; improving water, sewer, and broadband infrastructure; and replacing public-sector revenue lost by the economic downturn that accompanied COVID-19. Recipient governments had until December 31, 2024, to obligate those funds and until December 31, 2026, to spend them.

By any objective assessment, SLFRF was a transformative success. It averted a potential crisis. It empowered state and local leaders to address long-standing community needs. It helped millions of working families. It saved lives during the COVID-19 pandemic. The design and implementation of SLFRF offer many important lessons to future policymakers.

This report will highlight the smart design of SLFRF, which made it well positioned to address the needs of state and local governments in 2021 and beyond. The report will also note ways in which future policymakers could improve upon SLFRF’s design. The report will describe how SLFRF funds were deployed, showcasing the breadth and variety of uses to which they were put. State and local fiscal recovery funds were a vital part of the U.S. economic recovery post-2020. They provide a shining example of what government can achieve when it has adequate resources, and when the needs of communities and families are the main drivers of investment decisions.

SLFRF played a vital role in preventing a second Great Recession

The pandemic recession that began so suddenly in March 2020 was the biggest economic shock the country has seen since the Great Recession that started in 2008. Comparing the distinctly different policy responses to those two crises demonstrates how important SLFRF was to speeding the economic recovery and to preventing a second Great Recession.

First, SLFRF was vital in preserving and rebuilding the public-sector workforce. In the wake of the Great Recession, state and local governments faced devastating budget cuts that resulted in significant reductions in staffing and services. All faced fiscal crises because of sharp revenue declines caused by the Great Recession, but public services were further strained in many states by deliberate policy decisions, predominantly by Republican-controlled state governments, to cut taxes and slash public services (Cooper, Gable, and Austin 2012). State and local government employment peaked in July 2008, then fell for five straight years. It took a total of 11 years to reach July 2008 levels again (Cooper 2020). By contrast, the peak in state and local governments jobs before the pandemic was in February 2020. By October 2023—just three years and eight months later—state and local public sector employment had fully recovered to pre-pandemic levels.

In the first year following the passage of ARPA, there is evidence that the pace of a state’s SLFRF spending was positively correlated to the recovery of its public workforce:

Table 1

After that, the direct correlation between SLFRF spending and public-sector jobs faded, but that is hardly surprising, given all the other variables that impact job markets.

Second, this rapid recovery mirrored the recovery of the overall job market. The typical U.S. state needed 77 months after the start of the Great Recession for its job numbers to recover; it only took 29 months after the beginning of the COVID-19 pandemic for the same level of recovery. Of course, SLFRF was hardly the biggest factor in the overall economic recovery, but Cooper (2020) has shown that disinvestment in the public sector drags on growth in the private sector as well, and on economic growth overall. SLFRF supported conditions that made the private-sector economic recovery possible.

Third, SLFRF allowed states and localities to enact programs of social insurance and income support that directly responded to immediate community needs. In just the first two years of SLFRF’s operation alone, more than 4.5 million households received mortgage, rent, or utility assistance. Emergency programs offered housing to people who had been displaced by the pandemic and direct government assistance to food pantries and other programs that helped people facing food insecurity. These programs were valuable tools for helping working families in need.

Fourth, SLFRF has helped state and local governments and communities become more resilient against future downturns. Many states upgraded their unemployment insurance (UI) systems to make it easier to cope with an influx of claimants in the future. Some local governments created greater tenant protections and used recovery funds to give tenants facing eviction the right to free legal counsel. Several cities invested in pre-apprenticeship programs to help people in underserved communities gain access to high-quality infrastructure and climate jobs. These investments and others like them will help state and local governments to quickly distribute social insurance benefits when the next crisis hits and provide additional safety for working families put in jeopardy through job loss, illnesses, or natural disasters. (Kamper 2025).

SLFRF’s innovative program design meant funds could be used where they did the most good

The SLFRF program had two unusual characteristics that helped make it successful.

First, unlike previous iterations of state and local aid, SLFRF funds went directly to individual state and local governments. While payments to smaller cities were distributed first to states and then passed on to those cities, states were prohibited from imposing conditions on that distribution and could not hold back the payments; their role was purely administrative.

On previous occasions when federal money was allocated to local governments, it was much more common for the state government to hold federal aid on behalf of local governments. This was, for example, the mechanism behind the COVID-19-era financial assistance to school districts: the Elementary and Secondary Schools Emergency Relief Fund (ESSER, which had three iterations in 2020 and 2021, called ESSER I, ESSER II, and ESSER III respectively). A state’s department of education held ESSER funds and only parceled them out to school districts after the district had made a qualifying expenditure. The districts were not free to spend ESSER funds on their own. With SLFRF, however, recipients received funds before they needed to make expenditures and had complete control over how to use them.

This leads to a second important characteristic of SLFRF: Recipients were given broad latitude in how to use their funds. Under the legislation and the rules put out by the U.S. Department of the Treasury, SLFRF could be used for:

1. responding to the public health emergency caused by COVID-19
2. responding to the negative economic impacts of COVID-19
3. providing premium pay to “essential” workers
4. improving water, sewer, and broadband infrastructure
5. replacing public-sector revenue lost by the economic downturn that accompanied COVID-19

In 2023, the eligible uses for local governments were broadened to include government-built (or renovated) housing, surface transportation projects, and natural disaster relief, though in the end only a small share of recovery funds was used for those purposes.

Treasury rules also made the process simpler for smaller local governments by allowing up to $10 million to be used as public-sector revenue replacement without having to account for specific losses of funding—the SLFRF equivalent of the standard deduction on one’s taxes. Those rules also made clear that “negative economic impacts” could include existing inequities that predated the pandemic, such as long-standing racial employment and wage gaps (Economic Policy Institute 2025).

The combination of these two characteristics—state and local governments had the money within their control before making spending decisions, and great latitude in how to use it—meant that recipients could tailor the focus and pace of SLFRF spending to meet particular local needs. Given the extremely fluid state of the pandemic and the economy when ARPA was passed, this was the right decision to meet the pressing needs of the COVID-19 crisis. Overly prescriptive rules or additional bureaucratic hurdles to accessing and disbursing funds would have made it much harder for state and local recipients to respond rapidly to their specific needs.1

Lessons to apply for future policy design

Despite the great freedom given to recipients to use SLFRF in ways that best met their needs, of the roughly 31,000 local government recipients, almost 600 local government recipients did not report using their fiscal recovery funds at all and a further 600 reported using less than 99%. Another 220 local governments failed to file a single report on their use of fiscal recovery funds, and 1,089 more have been delinquent in filing for at least a year.

At least part of the explanation is that while ARPA guidance allowed for fiscal recovery funds to be used for myriad reasons, recipients (especially smaller local governments) with little experience in receiving money directly from the federal government often struggled to understand Treasury rules on allowed uses of funds. Unlike state governments with experienced personnel deeply versed in Treasury’s complex rules and how to navigate them, many local governments had no such in-house expertise. Advocacy organizations reported, again and again, that even in 2024, as the deadline to obligate ARPA funds was approaching, many local policymakers were still raising questions about how funds could be used and what was allowed (Rochford, Bauer, and Wallace 2024).

Relatedly, Treasury officials who talked with EPI noted that many of the smallest local governments did not have a website or internal email system. Because all SLFRF reporting was supposed to be done electronically, some of these recipients struggled to properly report their expenditures. Sometimes the departure of a single municipal official created significant problems because that person was the only one who knew the electronic passwords.

An abundance of reports from across the country make clear recipients struggled to choose from among many appealing options, creating a kind of paralysis of choice. This is completely understandable; the needs communities were facing at this time were myriad and diverse, and prior to SLFRF, most local government officials had likely never had access to such flexible resources before then.

These challenges were exacerbated because the Treasury Department made a conscious decision not to offer specific technical assistance regarding recipient governments’ possible uses of fiscal recovery funds. When local government officials reached out to Treasury to seek guidance on whether a particular idea was within the scope of the law, Treasury rarely offered definitive answers. This was understandable given that more than 31,000 governmental units received their own fiscal recovery funds; Treasury could not possibly handle detailed queries from more than a fraction of them. What this meant, though, is that many opportunities to use fiscal recovery funds in innovative and imaginative ways were missed. Many local governments chose caution over ambition, out of fear that particular uses of the funds would not be permitted and the funds rescinded.

To prevent a similar situation in the future, policy designers might do well to study Colorado’s Regional Grant Navigator program. Colorado chose 13 community and nonprofit organizations across the state to help local governments find ways to best access funds from the 2021 Infrastructure, Investment and Jobs Act and the 2022 Inflation Reduction Act. These navigators helped local governments understand the complex regulations around the laws, helped them design proposals to apply for funding, and offered advice on which programs might be best suited to the needs of those communities (Colorado n.d.). A similar model might allow local governments to get unbiased and timely assistance from organizations committed to helping them make the most of their funds.

A final challenge of the SLFRF policy design was the lack of clear definition of what “obligating” the funds meant. As advocates, policymakers, and others reported throughout 2022, 2023, and 2024, many local governments understood “obligation” to mean something similar to “budgeting” or “allocating”—making a formal decision as to how to use the funds (Kamper 2024). Recipients unfamiliar with the language used by Treasury could and did make that mistake. It was not until May of 2024 that Treasury explicitly stated in a webinar that “obligating” funds is not the same thing as budgeting (Treasury 2024). “Obligation” required not just a budgetary decision, but concrete steps to implement the decision, such as signing a contract with a vendor or an interagency agreement to send the funds to a particular department. Future fiscal recovery efforts should be more conscious of the need to clearly define terms, especially when plain-language definitions may not match Treasury’s technical definition.

How were fiscal recovery funds used?

General spending trends

The primary use of fiscal recovery funds—approximately 50% of state allocations and 60% of local government allocations—was revenue replacement, (replacing state and local funds that were lost because the economic shock of COVID-19 reduced tax and fee revenues). Revenue replacement had not been an allowed use of previous iterations of COVID-19 fiscal relief funds. Most notably the CARES Act, the first COVID-19 relief measure passed in 2020, did not allow use of Coronavirus Relief Funds for revenue replacement.

State and local governments face considerable constraints on their ability to raise revenues. Measures like Colorado’s Taxpayer Bill of Rights and California’s Proposition 13 often prohibit states from raising taxes or require legislative supermajorities to do so (Jefferson 2025). Local governments face even more constraints, with few policy levers available to raise revenues. As such, any shock to state and local government revenues can take a long time to reverse, a lesson we learned in the aftermath of the Great Recession. By allowing revenue replacement, SLFRF made it much easier for state and local governments to maintain adequate levels of funding, even as the pandemic recession lowered income from taxes. Revenue replacement was an important innovation in ARPA that should be replicated in the future.

Although the interim rules for ARPA put out by Treasury soon after the law was enacted required complex accounting of lost revenue, the final Treasury rule made the process much easier. For amounts less than $10 million, recipients did not need to calculate lost revenue. They could simply designate funds as revenue replacement and use them as needed. The appeal of this rule to local governments is evident in data summarizing subsequent uses of SLFRF; the smaller a recipient government, the more likely they were to use their fiscal recovery funds for revenue replacement.

Table 2

After revenue replacement, the next most popular use of SLFRF was addressing negative economic impacts of the pandemic. Once again, the flexibility given to recipients under this category was almost certainly a key factor encouraging use of funds for such purposes.

Table 3

Infrastructure was the third-largest use of fiscal recovery funds, and here there is a notable regional variation—state and local governments in the South allocated a far greater share of their funds to infrastructure than those in the rest of the country. In particular, 82% of all state funds obligated for broadband were in Southern states (not shown in Figure A).

Figure A

Not only is water and sewer infrastructure essential for people’s health, these investments are vital to a well-functioning economy. As EPI has extensively documented in its Rooted in Racism series, Southern states have long underinvested in in basic physical infrastructure (Childers 2023–2025). These spending choices likely reflect, at least in part, a need to address the long-standing underinvestment in the region—underinvestment driven by Southern lawmakers’ antipathy toward raising adequate revenue.

Aside from infrastructure spending in the South, there are no clear regional trends in how fiscal recovery funds were used. This is not surprising, given the flexibility of the funding (a feature EPI has long supported) (Bivens 2020). When ARPA was enacted in early 2021, there was simply no way for the federal government, or state and local governments, to know what their needs would be. ARPA’s flexibility was the right decision. The ability of recipient governments to immediately fill unanticipated budget holes via revenue replacement meant hundreds of thousands of state and local jobs were preserved, vital public programs were maintained, and a deeper economic crisis averted. The most notable success of ARPA SLFRF lies in what did not happen: a collapse in basic public services, massive long-term unemployment, and an extended economic depression.

Innovative SLFRF investments supported working families

In all, SLFRF funded more than 159,000 different projects across the country. Some were gigantic, like a $787 million program in New Jersey to provide rental assistance to low- and moderate-income tenants, and some were very small, like the $28 that St. Clair County, Michigan, provided to help renovate the Port Huron Township Museum.

There are many examples of state and local governments using fiscal recovery funds to make transformative investments to build an economy that supports working families. Several types of uses deserve special attention: fighting the COVID-19 pandemic, investing in public health, and addressing problems with food access and nutrition.

First, ARPA SLFRF went a long way to address the health emergency the country faced in 2021. States, cities, and counties were on the front lines of keeping people safe, providing access to new vaccines once they became available, and saving lives throughout the COVID-19 pandemic.

Over $1.8 billion in SLFRF was used to test, trace, and vaccinate people against COVID-19. Much of this money was used to deal with the practical and logistical challenges of testing and vaccination. Cities and counties, especially, bought personal protective equipment for government employees, especially first responders. Scores of governments purchased testing kits and lab equipment and worked to engage the public to encourage vaccination and tracing outbreaks. For example, Milan, Illinois, rented a meeting hall in town for $43,200 to host their vaccine clinic. Jefferson County, Missouri, hired a nurse for every public school district to oversee a contact-tracing program to track COVID-19’s progress through schools. Monroe County, Indiana, was one of many governments that instituted wastewater monitoring to check for COVID-19 surges While any individual expenditure may seem minor, together these measures did much to reduce COVID-19 infections and deaths.

Second, SLFRF allowed recipient governments to make long-term upgrades to infrastructure that both mitigated COVID-19 threats and made public spaces permanently safer, healthier, and more accessible. Almost $4.3 billion was obligated to upgrade the air quality and safety of public and private facilities. At least 550 projects upgraded HVAC systems in schools, nursing homes, public buildings, and correctional facilities. Governments invested in digital communications tools to reduce the need for in-person meetings. Typical examples include Peoria, Arizona, which allocated $124,996 to install touchless drinking fountains in public buildings, and Stafford County, Virginia, which spent $115,255 to add a glass partition to the entrance of the Commissioner of Revenue’s office so that the administrative staff could be protected from visitors’ virus transmission.

The freedom given to local governments to innovate was particularly evident in the way multiple localities sought to address problems related to food access and nutrition—an issue that has received tremendous public attention resulting from New York City Mayor Zohran Mamdani’s plan to establish municipally operated grocery stores. While one commentator claimed such a project would resemble “the old Soviet Union” (McArdle 2025), the fact is that many SLFRF recipients used public funds to increase access to food for low-income communities, including by opening their own stores.

For example:

• Sioux Falls, South Dakota, set up a mobile grocery market that would operate in underserved parts of the city.
• The small town of Cutler, Illinois, set up a Community Commissary to make it easier to buy food without having to travel a long way.
• Branson, Colorado (population 74 in the 2010 census), constructed a community greenhouse to grow and sell fresh fruits and vegetables for the town and school.
• Charleston, West Virginia, opened a community grocery store that would provide access to fresh groceries for 14,000 residents, and the city of Austin, Texas, did something similar.

There were, in addition, scores of grants to food pantries and other nonprofits that help people find the food they need. The proposal for New York City fits well with how these communities used SLFRF to address food access.

Above are just a handful of the tens of thousands of useful projects made possible by fiscal recovery funds. Some uses were more effective than others, however. For example, although modernizing state unemployment insurance systems was a useful endeavor (see above), more than $22 billion was also spent replenishing state unemployment insurance trust funds, which was unnecessary. UI trust funds hold UI taxes paid by businesses, to make sure funds are available to pay UI claims during spikes in unemployment. While those funds had, indeed, been depleted by the pandemic recession, state UI trust funds are designed to be self-correcting.2 They have automatic mechanisms to raise employer payroll taxes when the trust fund has been drawn down, to rebuild the funds and be prepared for future downturns. It was wholly unnecessary to use fiscal recovery funds to refill trust funds that would have returned to full strength on their own. Spending SLFRF to refill trust funds was a missed opportunity to support economic growth and strengthened public services (Banerjee, Martinez Hickey, and Sawo 2021). Future fiscal recovery projects should not make refilling UI trust funds an allowed use, though they should continue to support modernization of and upgrades to UI systems.

SLFRF accomplished its goals without driving inflation

Finally, it is worth noting that, despite politically motivated claims to the contrary, there is little evidence that SLFRF, or indeed the entire $1.9 trillion American Rescue Plan, was a significant contributor to inflation. As Bivens, Banerjee, and Dzholos (2022) show, the rise in inflation starting in 2022 was a global phenomenon, one that impacted countries, regardless of whether they provided fiscal relief to their economies during COVID-19. Nor was inflation correlated with the rapid decrease in unemployment the U.S. saw, thanks in part to ARPA. Rather, inflation was primarily driven by the dramatic supply shocks to various sectors of the economy caused by COVID-19, and then exacerbated by the Russian invasion of Ukraine in early 2022. Given the scale of the crisis policymakers were confronted with in early 2021, they were right to spend at the scale of the problem, and critiques blaming that spending for inflation are not backed up by the data. Moreover, policy measures that prioritized lowering inflation would have led to either lower employment or lower real wage growth, as there was no policy option that would have lowered inflation, increased wage gains, and supported the strong job growth of 2021–2024 (Bivens 2024).

Conclusion

ARPA’s State and Local Fiscal Recovery Fund was a great success. By spending at the scale of the problem, the federal government aided the economic recovery, supported the maintenance of public services, and gave myriad governments the chance to make innovative choices that have improved the well-being of their communities. A smaller SLFRF would have slowed our economic recovery and made governments more cautious about enacting bold policies to protect working families.

By giving recipient governments so much flexibility in using the funds, the Biden administration allowed every state, county, city, territory, and tribal government to fashion the response most appropriate to their particular needs. When faced with a crisis that had so much unpredictability, this was the right decision.

We don’t know when the next economic downturn, global pandemic, or climate disaster will hit. Whenever it does, federal policymakers should seek to emulate the model set by ARPA.

Notes

1. The devastating Flint, Michigan, water crisis of the 2010s is a prime example of a situation in which too many bureaucratic hurdles worsened a disaster. Flint was facing a serious fiscal crisis and therefore lacked the internal capacity to apply for federal funding (which they would have received) that might have prevented lead contamination of the water supply. See GAO 2015 for more details.

2. At least they should be, provided policymakers have set adequate UI tax base rates. See Perez 2025 for more information.

References

Banerjee, Asha, Sebastian Martinez Hickey, and Marokey Sawo. 2021. “States Are Choosing Employers over Workers by Using COVID Relief Funds to Pay Off Unemployment Insurance Debt: Policymakers Shouldn’t Be Afraid to Increase Taxes on Employers to Improve Unemployment Insurance.” Working Economics Blog (Economic Policy Institute), November 19, 2021.

Bivens, Josh. 2020. “Getting Serious About the Economic Response to COVID-19.” Working Economics Blog (Economic Policy Institute), March 9, 2020.

Bivens, Josh. 2024. “The Post-Pandemic Recovery Is an Economic Policy Success Story: Policymakers Took the Best Way Through a Rocky Path.” Working Economics Blog (Economic Policy Institute), October 1, 2024.

Bivens, Josh, Asha Banerjee, and Mariia Dzholos. 2022. “Rising Inflation Is a Global Problem: U.S. Policy Choices Are Not to Blame.” Working Economics Blog (Economic Policy Institute), August 4, 2022.

Callaghan, Peter. 2021. “The Minnesota Legislature Approved $250 Million for Pandemic Worker Bonuses. Should the State Give Away More Than That?” Minnpost, August 12, 2021.

Callaghan, Peter. 2022. “How the Legislature’s Deal on Pandemic Worker Bonuses and Unemployment Insurance Got Done.” Minnpost, May 4, 2022.

Childers, Chandra. 2023–2025. Rooted in Racism and Economic Exploitation (report series). Economic Policy Institute, October 2023–June 2025.

Colorado, State of. n.d. “Regional Grant Navigators” (web page). Accessed December 3, 2025.

Cooper, David. 2020. “Without Federal Aid, Many State and Local Governments Could Make the Same Budget Cuts That Hampered the Last Economic Recovery.” Working Economics Blog (Economic Policy Institute), May 27, 2020.

Cooper, David, Mary Gable, and Algernon Austin. 2012. The Public-Sector Jobs Crisis: Women and African Americans Hit Hardest by Job Losses in State and Local Governments. Economic Policy Institute, May 2012.

Economic Policy Institute. 2025. Racial and Ethnic Disparities in the United States: An Interactive Chartbook. Economic Policy Institute. October 2025.

Jefferson, Rita. 2025. Anti-Tax Revolts Backfire: What We’ve Learned from 50 Years of Property Tax Limits. Institute on Taxation and Economic Policy, July 2025.

Kamper, Dave. 2025. “Some States and Localities Will Be Better Prepared to Fight a Possible Recession Because of How They Used ARPA Fiscal Recovery Funds.” Working Economics Blog (Economic Policy Institute), April 30, 2025.

Kamper, Dave, and Emma Cohn. 2024. “Time Is Running out for State and Local Governments to Obligate American Rescue Plan Funds.” Working Economics Blog (Economic Policy Institute), October 17, 2024.

McArdle, Megan. 2025. “Zohran Mamdani Has a Seriously Bad Idea—for Grocery Stores.” Washington Post, July 1, 2025.

McNicholas, Celine, Josh Bivens, and Heidi Shierholz. 2020. “The Next Coronavirus Relief Package Should Provide Aid to State and Local Governments, Protect Employed and Unemployed Workers, and Invest in Our Democracy.” Working Economics Blog (Economic Policy Institute), April 27, 2020.

Perez, Daniel. 2025. Holding the Line: Unemployment Insurance. Economic Policy Institute, September 29, 2025.

Rochford, Patrick, Julia Bauer, and Michael Wallace. 2024. “Obligate It or Lose It! Preparing for the Upcoming ARPA SLFRF Obligation Deadline.” National League of Cities, October 1, 2024.

Shierholz, Heidi, and Josh Bivens. 2013. “Four Years into Recovery, Austerity’s Toll Is at Least 3 Million Jobs.” Working Economics Blog (Economic Policy Institute), July 3, 2013.

U.S. Department of the Treasury (Treasury). 2024. “State and Local Fiscal Recovery Funds: New Obligation FAQs Webinar” (web page). Accessed December 3, 2025.

U.S. Department of the Treasury (Treasury). 2025. “Public Data: State and Local Fiscal Recovery Funds” (web page). Accessed December 11, 2025.

U.S. Government Accountability Office (GAO). 2015. Municipalities in Fiscal Crisis: Federal Agencies Monitored Grants and Assisted Grantees, but More Could Be Done to Share Lessons Learned. Publication number 15-222, March 2015.

Wakeley, Dev. 2021. “Alabama Is Making a Costly Mistake on COVID-19 Recovery Funds. Here’s a Better Path Forward.” Working Economics Blog (Economic Policy Institute), November 8, 2021.

The Council was preparing to discuss a wage adjustment in June 2025 when the chair resigned. It is expected to take up the issue when the governor names a new chair, which has yet to happen. Given that almost two years have passed since the initial setting of the $20 wage standard—a year and a half that has seen continued inflation—the Council should prioritize this cost-of-living adjustment in 2026 to prevent rising prices from erasing the gains made by fast-food workers. One impediment to this adjustment is opposition from fast-food restaurant operators, who argue that raising workers’ pay to $20 damaged their businesses and that they cannot absorb any further increases.

This debate in California between fast-food workers and employers highlights the importance of regular and automatic adjustments to wage standards (like minimum wages) that ensure inflation-adjusted living standards for low-wage workers do not erode over time.

Indexation is often an afterthought in debates over wage standards. But it can turn out to be the most important part of any policy that sets a wage standard. This report examines salient issues related to indexing wage standards and offers recommendations for policymakers. Its key arguments are:

• Wage standards are necessary and efficient because of unbalanced power in labor markets.
• Wage standards that are fixed in nominal terms and have no automatic adjustment (like the federal minimum wage) get weaker every single year that passes without a legislated increase. The cumulative erosion of inflation-adjusted wage standards often exceeds the initial legislated increase.
  • For example, in inflation-adjusted terms, the federal minimum wage today is lower than it was in 2007, the last time a new standard was passed into law.
• Mandating higher wages for any group of workers will set off a chain of adjustments elsewhere in labor and product markets. What these adjustments eventually mean for relative incomes, prices, and employment is an empirical question.
  • Thankfully, minimum wage increases are some of the most well-studied events in economics, and the weight of empirical evidence is that they do not measurably increase overall inflation or lead to significant job loss, but they do raise the inflation-adjusted pay of targeted workers.
• Adjusting wage standards only for increases in inflation is actually a conservative policy in the sense of minimizing potential burdens on low-wage employers. More ambitious targets for adjustment—like wages or even productivity—could be preferable depending on the specific case.
  • In the case of the California Fast Food Council, providing a price-based adjustment to account for inflation since the initial adoption of the $20 minimum wage in April 2024 is an appropriate and modest step.
  • A 3.5% increase in the wage standard—the maximum adjustment the Council can recommend—is also conservative because it will only partially offset the actual 4.2% cost of living increase since April 2024 and because it does not account for ongoing productivity improvements in the sector.
• Over the past decade—and continuing since April 2024—the inflation rate faced by lower-income households has been higher than the overall inflation rate, largely because housing is a higher share of lower-income households’ budget. This means indexing based on the average inflation rate would fail to fully restore the affordability lost to fast-food workers since the enactment of the $20 wage standard, making such an adjustment even more modest (and even more necessary).

Wage standards are necessary because of unbalanced labor market power

Modern labor markets—particularly those that low-wage workers participate in—are characterized by significant employer power. Low-wage employers rarely if ever negotiate pay with workers, instead posting take-it-or-leave-it wage offers. Further, when a given employer lets its own wages lag those of potential competitors, workers’ exit from the lower-wage firm is far less common than would be predicted under truly competitive labor markets where employers robustly compete for workers.

The seminal source for modeling labor markets as situations where employers have substantial wage-setting power is Manning (2003), who describes this situation as one of “monopsony” power in labor markets.The literal definition of monopsony is a market with a single buyer. At points in history (think 19th century “company towns” in rural and isolated areas) this kind of literal monopsony may have existed. But Manning and those who have built on this work point to several features and frictions in real-world labor markets that make it hard for workers to effectively search for better jobs. These job search barriers effectively grant employers excess market power over workers even when there are numerous employers. Some of these frictions include things like lack of information about wages and other policies of alternative employers, transportation restrictions that require workers to look for jobs only in places near their home or public transit nodes, child care considerations that require a job’s location be compatible with picking up kids at a regular time, along with many other factors.

Employers use these barriers to employees finding better outside options to “mark down” wages below what would be necessary for employers to attract and retain workers in competitive labor markets. These markdowns can be large enough to push workers’ pay well below the value they produce for the employer, making pay levels inefficient.

At the level of the total economy, the excess power of employers in labor markets and their ability to markdown wages can be seen in the gap between economy-wide productivity (the amount of income generated in an average hour of work in the economy) and the hourly pay (including benefits) of typical workers.

Figure A

Wage standards—like minimum wages—can correct for this excess employer power. This leaves low-wage workers with higher pay and living standards and moves the economy to a more efficient allocation of workers across jobs. It can in theory even lead to an increase in employment. This degree of employer power in labor markets and the inefficiency of labor market outcomes without wage standards help explain the general empirical finding that minimum wage increases in the United States have not caused significant employment declines, a finding that is counter to what one would expect if labor markets were competitive.1

California’s fast-food minimum wage has had minimal employment effects

Current evidence suggests that California’s fast-food minimum wage is no different in that it has raised wages without causing large, negative employment reductions. There are four studies on the specific wage and employment effects of the California fast-food minimum wage. Three studies show both sizable earnings effects and limited-to-no employment changes. One analysis, in contrast to the other three studies, shows moderately negative employment effects, but also found the policy raised the total earnings of fast-food workers.

Schneider, Harknett, and Bruey (2024) surveyed fast-food workers in large chains and showed that relative to other states, the California policy raised wages and had no effect on the usual number of hours of fast-food workers in the quarter after the minimum wage change. With data from Equifax, Hamdi and Sovich (2025) compared fast-food establishments within large firms across different states and found that California fast-food establishments raised wages by about 12% and increased employment by a statistically insignificant 2%. Sosinskiy and Reich (2025) used data from the Quarterly Census of Employment and Wages (QCEW) to study employment and earnings trends in fast-food restaurants in California relative to those in other states and to full-service restaurants in California, which are not directly bound by the fast-food minimum wage. The authors’ preferred specification estimated a wage increase of about 7% and an employment decline of just under 1% that was statistically indistinguishable from zero. Finally, Clemens, Edwards, and Meer (2025) used QCEW data and estimated a similar wage increase of about 8%, but also a statistically significant employment decline of over 3%.2

In interpreting employment changes from a minimum wage increase, it’s best to compare the size of estimated wage effects with the estimated employment effects. The ratio of these two estimates—the own-wage elasticity of employment3—helps to gauge whether any employment changes were small or large relative to how much the policy actually raised wages. When the ratio is more positive than -1, total fast-food worker earnings rose even after accounting for potential employment losses. Standardizing the estimates by dividing employment and wage effects also allows us to make consistent comparisons across these studies and with studies of other minimum wage increases.

For the three studies where it is possible to calculate them, the own-wage elasticities are 0.19 (Hamdi and Sovich 2025), −0.12 (Sosinskiy and Reich 2025), and −0.40 (Clemens, Edwards, and Meer 2025). The first two are consistent with small or no employment impacts, but the last one moves into “medium negative” territory. All three studies’ estimates imply that the policy increased the aggregate earnings of fast-food workers, but the last study implies that employment losses caused fast-food workers to receive only about 60% of the potential earnings increase spurred by the minimum wage hike.

Even though Sosinskiy and Reich (2025) and Clemens, Edwards, and Meer (2025) use similar data, one important difference is that the Sosinskiy and Reich (2025) study controls for population changes. Net immigration rapidly fell after the implementation of the policy, disproportionately affecting California’s population levels. For example, according to the latest Census estimates, California’s resident population did not grow in 2025, whereas the rest of the country’s population grew by about 0.5%. Not accounting for these different population trends between California and elsewhere could cause an analysis to overstate any employment declines stemming from the policy, particularly if fast-food employment levels are sensitive to falling labor supply or a shrinking customer base. In their appendix, Sosinskiy and Reich (2025) find that ignoring population changes causes their estimates to be more negative.

In addition, when selecting a comparison group for fast-food workers, Clemens, Edwards, and Meer (2025) use fast-food workers in other states and high-wage industries in California, but they do not directly compare the California fast-food sector with the California full-service sector, which is not covered by the policy. Comparing the two sectors would be especially useful for capturing underlying economic trends if slowing population growth is driving declines in both fast-food and full-service employment levels. Indeed, Clemens, Edwards, and Meer (2025) show that the policy did not raise wages in the California full-service sector, but full-service employment in California declined by close to 2%. Failing to account for this decline in full-service employment also causes the Clemens, Edwards, and Meer (2025) estimates to be more negative.

Regardless of the source of these differences, the average own-wage elasticity across the three studies is −0.11, suggesting that the fast-food policy was successful in raising wages without causing sizable job losses. This point estimate is very similar to the median elasticity of all published minimum wage studies on restaurants (see Dube and Zipperer 2025). However, even if the policy were associated with larger employment reductions, measured job losses may still overstate the consequences for low-wage workers. First, lower headcount employment in the fast-food sector does not automatically translate into reduced employment or lower wages for low-wage workers if they move to other low-wage jobs, like retail, where they must be paid at least the California $16.90 minimum wage. Second, a measured decline in headcounts in a high turnover sector like fast-food is more likely to manifest as more weeks in between jobs rather than being shut out of work completely; in that case, some fast-food workers would indeed be working less but earning more money over the course of the year due to higher hourly wage rates.4

Why wage standards need to be automatically adjusted

If wage standards stay fixed in nominal terms, they are reduced in real (inflation-adjusted) terms every year inflation is nonzero. When there is a burst of rapid inflation, these real wage cuts get large very quickly. In fact, steady inflation can combine with policy inaction to leave wage standards lower in real terms than they were the last time a legislated increase happened.

Take the example of the federal minimum wage. Its current value of $7.25 came into effect in 2009. Today’s inflation-adjusted value of the federal minimum wage is almost 40% lower than its historic peak. It reached this peak in 1968, in an economy where productivity (the income generated in an average hour of work in the economy) was just 46% as high as it is in 2025. 5

Figure B

Adjusted for inflation, the 2025 value of the federal minimum wage is in fact lower than it was in 2007 when the U.S. Congress and president last signed a legislated increase into law. Put simply, without effective and automatic indexation, higher wage standards can be eroded almost entirely over time.

Today’s debate over the cost-of-living adjustment to the California Fast Food Council’s minimum wage often frames such adjustments as imposing new burdens on low-wage employers. But inflation since April 2024 means that the real minimum wage paid to California’s fast-food workers has been steadily cut since then. From April 2024 to January 2026, as measured by the consumer price index for all urban wage earners (CPI-W), this cut amounts to 4.2%. Without indexation, any burden on employers from this wage standard has fallen considerably since its adoption, providing a windfall to low-wage employers at the expense of their frontline employees. A failure to regularly index for inflation is essentially a backdoor method for unraveling the wage standard that policymakers passed into law.

Price indexing wage standards is a necessary and conservative policy

Raising wage standards each year by an amount equal to inflation holds low-wage workers’ living standards steady at the level that prevailed when the wage standards were set. For example, the $20 minimum wage for fast-food workers in large chains in California came into effect in April 2024. If these wages are indexed regularly to account for inflation since then, this will keep California fast-food workers’ living standards frozen at April 2024 levels going forward.

This is a clear improvement compared with outright erosion of living standards. But it remains the case that price indexing wage standards is a conservative policy in the sense that it minimizes any potential burdens on low-wage employers. It is a conservative policy for two reasons: (1) indexed wage changes are very small relative to the initial phase-in of wage standards, and (2) indexing for prices allows productivity growth in the wider economy to steadily reduce any potential burden or need for adjustment imposed by wage standards.

Price indexations are very small increases to wage standards

The increases to wage standards that result from price indexation are significantly smaller than the increases that result when the standards are initially phased in. For example, say that the last federal minimum wage increase in 2009 also indexed for subsequent price changes. The initial phase-in of the higher federal minimum wage saw it rise from $5.15 to $7.25 between 2007 and 2009. This constituted an average annual change of 19% for these two years. The average annual inflation rate (measured by the consumer price index for all items) between 2007 and 2024 was just 2.5%.

If the initial introduction of higher wage standards does not cause problematic outcomes, then it is very hard to see how the much smaller changes spurred by indexation for price changes would cause any.

The research on minimum wages provides very little reason to worry that changes in the United States in recent decades have caused any such problematic outcomes. The most commonly expressed worries about minimum wage increases are employment losses and upward price pressure.

We noted earlier that studies looking specifically at the California wage standard continue a common pattern in research on the employment effects of phased-in minimum wages: Employment declines caused by these minimum wage changes tend to be extremely modest or even zero on average. If one applied the modest measured employment losses stemming from the large initial increase in fast-food wages to the much smaller indexed adjustments, these already small employment losses become totally trivial.

The same logic holds regarding potential upward price pressures stemming from indexation: Compared with the initial setting of wage standards, indexed changes are very small and therefore unlikely to push up prices.

It is a fact that one person’s income is another person’s cost, so as low-wage workers’ pay rises, this raises costs for their employers. These employers could pass on these costs (in part or in full) to their customers by raising prices. But even if the entirety of the wage increases driven by price indexing wage standards was passed on in the form of price increases, overall price pressures would be extremely modest and low-wage workers would still unambiguously come out ahead.

Say that low-wage workers’ pay constitutes a third of labor costs in the fast-food sector, and that labor costs in turn constitute a third of total costs of fast food.6 If low-wage workers’ pay rises by 3.5% due to price indexing, this would increase prices the employer charges customers by less than 0.4% even if the full amount was passed on as price increases. Because fast food accounts for less than 3% of the overall inflation consumption basket, even a 0.4% increase in fast-food prices would raise overall prices by only 0.01%.

Price indexing still sees reductions in low-wage workers’ relative pay and allows productivity growth to steadily erode any potential burden on low-wage employers

We noted earlier that price indexing a minimum wage essentially holds low-wage workers’ pay frozen thereafter at the level that prevailed when the wage was introduced. Again, this is better than allowing inflation to erode the real value of pay, but average incomes throughout the overall economy are not frozen over time in real terms. Instead, they rise faster than prices over any reasonable period. Inequality often keeps this growth in average living standards from reaching many (or even most) workers and families in the economy, but the potential for living standards to rise is generated every year of positive economic growth.

This means that even when wage standards are indexed to prices, low-wage workers’ relative standing in the economy still falls over time. Further, because low-wage workers’ earnings are a cost to their employers, this means that even with price indexing, any potential burden of wage standards on low-wage employers slightly declines any year that productivity rises. In this sense, price indexing of wage standards—providing regular cost-of-living adjustments based on price growth—is a conservative policy that allows the costs and benefits of wage standards to slowly erode over time relative to developments in the larger economy.

A quick example can help make this point. Say that pay for low-wage workers at a particular employer amounts to 20% of the final price of the firm’s output. Say that productivity (how much output is generated with each hour of work) rises by 2% per year. If low-wage workers’ pay rises only with inflation (and not with productivity) and all other firm costs rise with inflation and productivity, this implies that over 10 years the share of low-wage workers’ pay in total costs would fall to just 16.4% of total costs. Employers could use this decline in real costs to either lower their prices to consumers or raise their profit margins. Either way, so long as there is any growth in productivity, the burden of low-wage workers’ pay to employers falls even when this pay is indexed to inflation.

Price indexing is not the only option for adjusting wage standards. One could, for example, index growth in minimum wages to growth in wages at other parts of the wage distribution—growth in the median wage for example.7 An even more ambitious indexing choice would be to match wage changes to changes in average wages or even economy-wide productivity.8

The obvious benefit of using these alternative wage indexations would be faster wage growth and higher living standards for low-wage workers. The potential downside is that they do not allow any potential burden from higher wages for employers to relent over time—meaning that if the initial setting of wage standards is high enough to cause problematic outcomes (job losses or rapid price increases), then this would not smooth over time with wage indexation. Price indexation, conversely, would actually allow any higher than optimal initial wage standard to become less binding over time. In this sense, it is a conservative choice that is highly responsive to the pressures faced by low-wage employers.

In the case of the California Fast Food Council, the $20 minimum wage enacted in 2024 was an admirably ambitious standard. There is little persuasive evidence that it is too high in that it has caused any problematic outcomes on either the employment loss or price increase fronts. Yet it was high enough to provide a significant wage boost for affected workers. For these types of ambitious standards, indexing to prices seems necessary to protect workers’ gains yet conservative in that it puts declining pressure on low-wage employers over time. Further, since 2019, the limited-service restaurant sector has seen significant productivity growth—roughly 2% per year—which should allow any price indexation to be easily absorbed with no wrenching adjustments for employers.9

Different groups face different inflation rates: The case for discretion in indexing

The benefit of indexing wage standards for inflation is the protection it provides for the living standards of low-wage workers. The costs are the various adjustments or burdens forced onto employers. Because the group of low-wage workers and employers are heterogenous, and because inflation is measured by the aggregation of price changes across the entire economy, there remains room for judgement and discretion in balancing these costs and benefits.

The California Fast Food Council has some discretion, as they can either index wages up to 3.5% for inflation or they can decline to index these wages and let them be eroded.

We noted before that indexing only for prices (as opposed to indexing for wages or productivity growth) results in a steady reduction in any economic burden wage standards might place on employers. So long as these employers see any growth in productivity (the efficiency with which each hour of labor generates output), then having some portion of their wage costs fixed in real terms will see these costs become a progressively smaller share of total output over time. In this sense, simply choosing to index by prices means the cost of wage standards to employers is set to shrink consistently over time.

In terms of the benefits to low-wage workers, recent years have seen a large jump in the overall price level. Any given episode of inflation is likely to have uneven effects across groups in the economy. For example, the inflation of the 1970s was actually accompanied by an increase in real wages, even for low-wage workers.10 The inflationary spike in 2021 and 2022, conversely, was largely driven by large increases in profit margins, which meant that real wages for most workers fell in those years.

More systematically, inflation faced by various groups in the economy can diverge if they have different consumption baskets that skew average price growth in a predictable way. For example, housing makes up a larger share of consumption spending for lower-income households than higher-income households, and in recent decades the price of housing as measured by the consumer price index has slightly outpaced overall price growth. This implies that inflation faced by lower-income households has likely been systematically higher than that faced by higher-income households. This makes the overall CPI that informs discussions of wage indexation inadequate for fully protecting lower-wage workers from inflation in recent years.

Concretely, the CPI-W, which is the price index the Council can target, has risen by 4.2% since April 2024. This means that a 3.5% cost of living adjustment—the largest that can be granted by the Fast Food Council—would not quite neutralize the affordability losses experienced by workers since the $20 minimum wage was enacted. Research from the Federal Reserve Bank of New York (2025) indicates that households in the bottom 40% of the income distribution saw inflation between April 2024 and August 2025 (the most recent data point available) that averaged 0.2% higher than overall inflation. This means actual inflation faced by many fast-food workers in California exceeded 4% since the introduction of the $20 wage standard.

The bias in actually experienced inflation stemming from housing runs even deeper. The housing component of the CPI essentially assumes everybody is paying market rent for their housing. There are good reasons for this decision, but it means that discretion and judgement must enter into using the CPI for different purposes. Well over half of the U.S. population owns their homes, and these people have significantly higher incomes on average than renters. Homeowners either have no monthly housing payment or pay a mortgage that is fixed over time and therefore experiences no inflation. By assuming these homeowning households experience the average amount of rental inflation each month the CPI overstates actually experienced inflation for homeowners.

This means when weighing the interests of low-wage workers against other economic actors—including consumers facing potential price increases stemming from wage standards—the real gap in living standards growth is likely larger than what would be implied by assuming all households face the same CPI inflation. Given this, there is a strong case for policymakers to use their discretion to put a countervailing thumb on the scale by boosting low-wage workers’ pay.

Notes

1. For a review of the estimates of employment loss caused by minimum wage increases, see Dube and Zipperer 2025.

2. There is an additional study by Pandit (2026) that estimates the fast-food minimum wage caused an 8% decline in staffing intensity based on long-duration visits from mobile phone location data. However, the study finds almost all of the estimated effect occurred before the actual policy went into effect, with little-to-no change in the proxy for employment activity after the effective date of the minimum wage increase on April 1, 2024. It is hard to believe that in a very high turnover industry like fast food—where employers can adjust employment levels rapidly by reducing hiring—that businesses would reduce staffing levels several months before being compelled to pay higher wages, but then not change employment levels at all after actually being required to increase wages. The study also provides no evidence on wage changes, cannot distinguish between headcounts and hours reductions, and excludes new businesses that may have started during the policy period.

3. For an explanation of the importance of the own-wage elasticity in interpreting studies of the minimum wage’s effect on employment, see Dube and Zipperer 2024.

4. See Cooper, Mishel, and Zipperer 2018 for the importance of accounting for turnover rates when assessing the likely implications of any measured employment decline.

5. See Economic Policy Institute 2025a for data on productivity levels over time.

6. Both of these assumptions are likely close to true or overstate the actual price pressure that would be experienced from price indexing wage standards in fast food. For the leisure and hospitality sector—the larger sector in which fast-food (or limited-service) restaurants are embedded—aggregate weekly payrolls are roughly $10 billion. To estimate low-wage workers’ aggregate pay, we took the number of leisure and hospitality sector workers making less than $17 per hour in 2024 (5.7 million) and multiplied this by $17 and by 35 hours per week. All of these (the high $17 threshold for defining “low-wage”, the assumption that all making under $17 were making exactly $17, and the 35 hours per week) likely increase the estimate of low-wage workers’ wage bill in the sector. Making these generous assumptions yields a weekly wage bill of roughly $3.4 billion, or just over a third of the total wage bill in the sector. For total labor costs as a share of total output in the sector, we used the Composition of Gross Output by Industry table from the GDP by Industry accounts of the Bureau of Economic Analysis.

7. Growth in wages has been used to index some labor standards. Under the overtime rule enacted by the Obama administration the salary threshold for being granted automatic rights to overtime protections was set at the 40th percentile of annual earnings in the lowest-wage region of the country.

8. Social Security uses an “average wage index” to deflate workers’ past earnings to calculate their initial Social Security benefit amount. This implicitly credits recipients for overall economic growth (overwhelmingly determined by productivity) over the course of their working life.

9. This figure calculated from data provided by the Detailed Industry Productivity database from the Bureau of Labor Statistics.

10. See Economic Policy Institute 2025b, specifically the wages for workers at the 10th percentile.

References

Bivens, Josh. 2022. “Corporate Profits Have Contributed Disproportionately to Inflation: How Should Policymakers Respond?” Working Economics Blog (Economic Policy Institute), April 21, 2022.

Clemens, Jeffrey, Olivia Edwards, and Jonathan Meer. 2025. “Did California’s Fast Food Minimum Wage Reduce Employment?” NBER Working Paper no. 34033, July 2025.

Cooper, David, Larry Mishel, and Ben Zipperer. 2018. Bold Increases in the Minimum Wage Should Be Evaluated for the Benefits of Raising Low-Wage Workers’ Total Earnings. Economic Policy Institute, April 18, 2018.

Dube, Arindrajit, and Ben Zipperer. 2024. “Own-Wage Elasticity: Quantifying the Impact of Minimum Wages on Employment.” NBER Working Paper no. 32925, September 2024.

Dube, Arindrajit, and Ben Zipperer. 2025. Minimum wage own-wage elasticity repository, Version 2025.9.1., https://economic.github.io/owe.

Economic Policy Institute. 2026. “The Productivity-Pay Gap” (web page). Last updated January 16, 2026.

Economic Policy Institute. 2025a. State of Working America Data Library, “Productivity and pay levels – Productivity and pay, real dollars per hour (2024$).”

Economic Policy Institute. 2025b. State of Working America Data Library, “Minimum wage – Real minimum wage (2024$).”

Economic Policy Institute. 2025c. State of Working America Data Library, “Hourly wage percentiles – Real hourly wage (2024$).”

Federal Reserve Bank of New York. 2025. “Economic Heterogeneity Indicators.” Accessed January 2026.

Hamdi, Naser, and David Sovich. 2025. “The Wage and Employment Effects of California’s Fast-Food Minimum Wage.” SSRN, March 28, 2025.

KFF. 2025. “Population Distribution by Citizenship Status.” Accessed January 23, 2026.

MacDonald, Daniel, and Eric Nilsson. 2016. “The Effect of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context.” Upjohn Institute Working Paper no. 16-260, June 2016.

Manning, Alan. 2003. Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton, N.J.: Princeton Univ. Press.

Pandit, Hitanshu. 2026. “Simply Can’t Wait: Evaluating the Effect of California’s Fast-Food Minimum Wage Increase.” SSRN, February 23, 2026. 

Schmitt, John. 2013. Why Does the Minimum Wage Have No Discernible Effect on Employment? Center for Economic Policy and Research.

Schneider, Daniel, Kristen Harknett, and Kevin Bruey. 2024. Early Effects of California’s $20 Fast Food Minimum Wage: Large Wage Increases with No Effects on Hours, Scheduling, or Benefits. The Shift Project, October 2024.

Sosinskiy, Denis, and Michael Reich. 2025. “A $20 Minimum Wage: Effects on Wages, Employment and Prices.” Institute for Research on Labor and Employment Working Paper, September 2025.

United States Census Bureau (Census). 2026. Annual Estimates of the Resident Population for the United States, Regions, States, District of Columbia and Puerto Rico: April 1, 2020 to July 1, 2025. NST-EST2025-POP. Accessed January 27, 2026.

Zipperer, Ben. 2024. “Most Minimum Wage Studies Have Found Little or No Job Loss.” Working Economics Blog (Economic Policy Institute), September 9, 2024.

The Federal Mediation and Conciliation Service (FMCS) is a small, independent agency whose mission is to support businesses and workers in resolving workplace disputes and building positive labor-management relationships. FMCS has no authority to adjudicate disputes or issue regulations. Outside of the health care industry, it cannot require any business, worker, or union to participate in mediation or take any particular action. Rather, FMCS uses its expertise and experience to help parties find mutually agreeable solutions to workplace disputes. Through its work, FMCS has helped resolve thousands of workplace disputes and saved the U.S. economy hundreds of millions of dollars annually (FMCS 2025a).

In spite of this, the Trump administration has targeted this agency for elimination. Trump first attempted to shut down the agency by laying off almost all of its employees, but he was stopped by two lawsuits and two federal court injunctions. Trump’s proposed fiscal year (FY) 2026 budget included only $7.4 million for FMCS to use in shutting down the agency. In a series of continuing resolutions, Congress has rejected the Trump administration’s proposal and has continued to fund FMCS at close to its FY 2025 levels.1  

This report describes FMCS’s work and its importance to our national policy of supporting collective bargaining. It goes on to detail the Trump administration’s attacks on the agency and efforts to resist these attacks. The report concludes with recommendations for rebuilding and maintaining a quality, effective FMCS—recommendations that can also be implemented by states that have their own mediation agencies.

What is FMCS?

FMCS is a small, independent federal agency established by Congress to assist companies, workers, and their unions in building productive labor-management relationships and preventing costly and disruptive workplace disputes. Unlike most federal agencies, FMCS has no regulatory power and cannot force any company, worker, or union to agree to any term or participate in mediation (outside of the health care industry). It is a service agency that provides support to parties in the collective bargaining process and other aspects of labor-management relations.2

FMCS is headed by a presidentially nominated, Senate-confirmed director.4 Over the years, most FMCS directors have been individuals with broad collective bargaining experience and extensive relationships in the labor and management communities, which has brought stature and credibility to the agency and its work. However, FMCS has not had a Senate-confirmed director since 2021. President Biden’s nominee to lead the agency was not confirmed by the U.S. Senate, and President Trump has not nominated anyone to fill the director role and instead has tried to shutter the agency altogether.

FMCS is, and has always been, a small agency. In FY 2025, FMCS received a $55 million appropriation from Congress, representing .0014% of the federal budget (FMCS 2025a). This funding supported a staff of approximately 200 employees located in six regions around the country and Washington, D.C., the vast majority of whom were mediators. As previously noted, President Trump is attempting to shutter the agency and cut its funding to only the funds needed to shut down the agency (FMCS 2025b). In a series of actions, Congress has rejected Trump’s proposal and has continued to fund the agency at $48.7 million, close to its FY 2025 level.  

Because of the Trump administration’s attacks on the agency and the uncertainty created for FMCS employees, scores of mediators have left the agency. According to FMCS’s website, only 58 mediators remain at the agency (FMCS 2026).  

FMCS’s work

FMCS’s primary role is to provide training and mediation services to employers and unions engaged in collective bargaining. These services are provided at no cost to the parties.

In FY 2024, the last year for which full data are available, FMCS provided collective bargaining mediation services in 2,318 cases (FMCS 2025b). (Under the law, parties in the private sector must file a notice with FMCS when they seek to amend or renew a collective bargaining agreement. When FMCS receives such a notice—called an F-7 notice—it opens a case.) In FY 2024, 93.5% of mediated cases were settled, including several major and significant disputes (FMCS 2026b).  

Prior to the Trump administration’s efforts to shut down the agency, FMCS also provided grievance mediation services to resolve disputes arising under collective bargaining agreements (CBAs). Most CBAs include a dispute resolution process, under which workers can file grievances over alleged violations of the CBA and seek a remedy. Some collective bargaining agreements explicitly require the parties to seek FMCS mediation if their efforts to resolve the grievance are not successful. 

In FY 2024, FMCS mediated 1,362 grievances, almost half (47.2%) of which were settled in mediation. FMCS is not currently providing grievance mediation services.

Prior to Trump’s attempted shutdown, FMCS provided training to businesses and employees on the collective bargaining process and dispute resolution. These training services were especially helpful to parties entering into a new collective bargaining relationship, because they often are not familiar with collective bargaining and ways of building productive relationships.

In FY 2024, FMCS conducted 1,477 training programs on developing strong labor-management relationships. FMCS is not currently providing training services.

Table 1

As noted, all of these services are provided by FMCS at no cost to the parties, in furtherance of the national policy in support of collective bargaining and the peaceful resolution of workplace disputes expressed in the National Labor Relations Act (NLRA) and the Labor Management Relations Act. The provision of these services at no charge is especially important for smaller employers and unions who lack the financial resources to hire mediators on the private market.

Most grievance procedures in CBAs call for arbitration if the parties are unable to resolve a grievance themselves. FMCS supports the arbitration process by maintaining a roster of arbitrators that the parties can request for a nominal fee. In FY 2024, FMCS provided 10,000 panels of arbitrators for the parties to utilize in selecting an arbitrator to resolve a workplace dispute.

Congress has broadened FMCS’s mandate several times over the years, including to provide mediation and alternative dispute resolution services to the public sector. Many states reference FMCS in their state collective bargaining statutes, and many state public-sector CBAs similarly call on the parties to utilize FMCS’s services to resolve disputes.5 FMCS has also been directed to assist in negotiated rulemaking proceedings, although rulemakings of this nature have been rare in recent years.  

In 1978, Congress also broadened FMCS’s mandate to include support for labor-management committees and similar labor-management cooperative activities. Initially, FMCS received additional appropriations to support this work, including the ability to offer grants to support this work, but labor-management grants have not been funded for many years.

The Trump attacks

On March 14, 2025, President Trump issued Executive Order (EO) 14238, “Continuing the Reduction of the Federal Bureaucracy,” which directed several agencies, including FMCS, to reduce their operations to their bare statutory minimum. FMCS’s leadership stated that FMCS needed at least 80–100 mediators to meet its statutory duties, and could only do so if mediation was held virtually instead of in-person. Nevertheless, representatives of Trump’s Department of Government Efficiency (DOGE) ordered the agency to reduce its staff to five mediators and approximately eight additional staff (AFL-CIO 2025). All other staff were placed on administrative leave as of March 26, 2025, mediation and training sessions were canceled, and FMCS’s regional offices were closed. Employees began receiving formal Reduction in Force notices at the end of March 2025.

The impact on FMCS’s operations was immediate. Mediators who were working with employers and unions to reach collective bargaining agreements abruptly canceled mediation sessions, leaving the parties in the lurch. Some of the affected parties included the United Federation of Teachers and the Bronx Global Learning Institute for Girls, who were working with an FMCS mediator on reaching an initial collective bargaining agreement when the mediator was placed on administrative leave and canceled scheduled mediation sessions.  Providence Place and Service Employees International Union (SEIU) Healthcare Minnesota and Iowa were working with a mediator to settle their contract and avoid additional strikes, but mediation was canceled when their mediator was placed on administrative leave. The same was true for grocery workers in California, represented by the United Food and Commercial Workers Union. Their efforts to mediate a new collective bargaining agreement with California grocery stores stalled when their FMCS mediator was suddenly placed on administrative leave. A school district in Illinois had been working with FMCS mediators for months when mediation sessions were canceled after the agency was all but shuttered and their mediator was placed on administrative leave. A hospital in Rhode Island faced a similar fate when FMCS mediation to resolve a dispute with United Nurses and Allied Professionals was canceled, placing the hospital at risk of a major work stoppage.6 

In addition, other valuable FMCS services were canceled. This included a Biden-era initiative under which FMCS offered to conduct free card check verification services (FMCS 2022a; FMCS 2022b). These free card check services were provided to employers and unions who agreed to begin a collective bargaining relationship upon proof of majority support for unionization among employees, rather than go through the National Labor Relations Board (NLRB) representation election process. Voluntary recognition of unions through card check is a long-standing practice that allows the parties to begin their relationship on less adversarial terms. FMCS abruptly canceled these services when Trump proposed to eliminate the agency (Eidelson 2025). 

A group of state attorneys general quickly filed a lawsuit over the Trump administration’s attempted shutdown of FMCS and other agencies, arguing that the administration’s unilateral action was contrary to the underlying statutes establishing and funding the agencies and beyond the president’s authority.7 The lawsuit described the states’ reliance on FMCS to mediate labor-management disputes involving state employees and detailed the harms to their states caused by the Trump administration’s abrupt gutting of FMCS. The lawsuit was successful, with a federal district judge issuing an injunction ordering the Trump administration to cease implementation of Executive Order 14238 and to reverse the cuts that had already been made.8 Similarly, a group of unions that rely on FMCS’s services to mediate and resolve labor-management disputes filed a lawsuit over the Trump administration’s attempt to shut down FMCS (AFL-CIO 2025). As with the state lawsuit, the unions won an injunction stopping the administration from implementing EO 14238 and ordering it to reverse the cuts it had already made.

While the lawsuits and rulings have been essential to FMCS’s survival, severe damage to the agency has already been done. Scores of talented mediators have left the agency for other jobs, worried about the uncertainty of continued employment at FMCS. Only 58 mediators remain at an agency that previously employed almost three times that number. At first, FMCS drastically limited its services, making mediation available only for bargaining units of 1,000 or more employees (or 250 for health care). After the first court injunction, FMCS issued a new policy providing mediators for all health care disputes but limiting mediation for all other private-sector disputes to those involving bargaining units of 250 or more employees—a huge change from the practices in place before March 2025. FMCS provided no reasoning or justification for the new 250-employee threshold. Moreover, FMCS is offering only virtual mediation services, which some parties find less effective than in-person mediation.

The ongoing cutbacks and chaos at the agency have left employers, workers, and unions with less confidence in the agency and its operations, not knowing whether or when the Trump administration will make another attempt to shutter the agency.

Businesses and workers have good reason to worry about FMCS’s survival under the Trump administration. The administration requested only $7.4 million in funding for the agency for FY 2026, all to be used to shut down the agency. Fortunately, Congress rejected the Trump Administration’s proposal and has continued to fund FMCS at close to its FY 2025 level.  

Because of the Trump administration’s attacks on FMCS, several states—including Michigan, California, Minnesota, Illinois, New York, and others—have expanded their state mediation bureaus to offer some of the services that FMCS is no longer able to offer (Purifoy 2025). But these state efforts do not come close to the comprehensive services FMCS was previously able to offer.

Attacks on FMCS independence and impartiality

A hallmark of FMCS’s work over the years has been its independence and impartiality in providing its services. As previously noted, outside of health care, FMCS has no authority to require any entity to utilize its services. Parties voluntarily agree to bring in FMCS. The skills, reputation, and impartiality of FMCS mediators are key to their credibility and the willingness of parties to engage and trust them.

FMCS was created as an independent agency out of the former U.S. Conciliation Service, which was housed at the U.S. Department of Labor. Employers insisted on separating the mediation service from DOL over concerns that mediators were not impartial and favored unions. As this history shows, FMCS’s independence and impartiality are central to the operations and success of the agency.

FMCS is run by a presidentially nominated and Senate-confirmed director, who is a political appointee the president can remove at any time, although no president has ever done so. FMCS directors have typically been established, respected practitioners in labor-management relations, whose expertise and relationships have given the parties confidence in the quality and impartiality of FMCS’s operations.

FMCS’s independence and impartiality are threatened by the Trump administration’s efforts to take over and run the operations of independent agencies like FMCS. As already described, EO 14238 attempted to all but shutter the agency. Another Trump executive order, EO 14215, issued on February 18, 2025, attempts to control the activities of independent agencies like FMCS by giving the Director of the Office of Management and Budget extensive control over the priorities and expenditures of independent agencies (McFerran and McNicholas 2025). And President Trump has aggressively asserted his authority to remove Senate-confirmed members of independent agencies, boards, and commissions, demonstrating his belief that these agencies and their appointees are under his ultimate authority and control. All of these actions put FMCS’s independence and impartiality at risk (leaving aside the risk posed by the Trump administration’s efforts to abolish the agency altogether.)

FMCS and the first contract problem

The challenge of reaching an initial collective bargaining agreement when workers first organize their union is a serious and persistent problem. Research shows that only slightly more than one-third of new bargaining units reach an initial agreement within one year, and one-third of all bargaining units go three years or more without reaching an initial agreement (Bronfenbrenner 2022). The National Labor Relations Act does not authorize penalties or other monetary sanctions for delaying the bargaining process. Employers exploit this weakness in the law to slow-walk the bargaining process and avoid reaching an agreement with newly organized workers, because they know workers will get frustrated. This undermines the collective bargaining process and deprives workers of the goal they organized for—a binding contract governing their terms and conditions of employment. 

During the Biden administration, FMCS and the NLRB took action to try to help address the first contract problem (FMCS 2026c; NLRB 2022). When notified by the NLRB of a newly organized unit, FMCS proactively reached out to the parties and offered its training and mediation services in an effort to help the parties in the bargaining process. The NLRB trained FMCS mediators on the law of bargaining so that mediators could bring this additional knowledge to their work. Because FMCS’s services are voluntary on the parties’ part—outside of health care—FMCS could not force the parties to engage in mediation or training. But FMCS tried to be proactive with the parties in offering its assistance.9  

FMCS successfully helped IAM Union (formerly the International Association of Machinists) and the Apple Company reach an initial collective bargaining agreement at the first unionized Apple store in Towson, Md. FMCS helped thousands of researchers reach an initial agreement with the National Institutes of Health. These are but two examples of FMCS’s work in this important area.

For decades, legislation has been introduced to address the first contract problem. The Employee Free Choice Act, introduced and passed by the House of Representatives in the late 2000s, included a first contract mediation and arbitration process to ensure that employers and unions reached an initial collective bargaining agreement in a reasonable amount of time. Similarly, provisions requiring first contract mediation and arbitration are a centerpiece of the comprehensive Protecting the Right to Organize (PRO) Act, which also would establish monetary penalties for violations of the NLRA, override state “right-to-work” laws, ban captive audience meetings and prevent other employer interference, and more.

In March 2025, U.S. Senators Josh Hawley (R-Mo.) and Cory Booker (D-Nj.) introduced the Faster Labor Contracts Act, which contains the first contract mediation and arbitration provisions from the PRO Act.10 The legislation would require parties to begin bargaining promptly after a union is certified, and if bargaining fails to produce an agreement within 90 days (or longer if the parties agree), the parties would be required to engage in mediation. If mediation was not successful, an arbitration panel would be convened to hear from both parties and render a final and binding decision on the terms of an initial collective bargaining agreement. 

Both the PRO Act and the Faster Labor Contracts Act rely on the FMCS to provide the mediation and arbitration services. It is ironic that the legislation has been introduced by members of the same political party whose president is trying to eliminate FMCS—the very agency at the heart of making the legislation work.  

Without a robust, government-supported mediation and arbitration system, neither the Faster Labor Contracts Act nor the PRO Act will live up to its promise. 

Recommendations for restoring and improving FMCS

FMCS performs a valuable service to employers and workers by helping resolve workplace disputes and build better labor-management relationships—a service that the private market cannot replace at scale. It will take years to undo the damage inflicted on the agency by the Trump administration’s attacks, but it is essential that Congress takes action to restore and sustain the agency.  

The remedies are practical, not symbolic. FMCS must be restored as a reliable, nationwide, politically-insulated service with a trained bench of labor-specialized mediators and a sustained development pipeline. The recommendations that follow are designed to stabilize service delivery quickly, rebuild workforce and leadership capacity, and restore the structural independence that labor and management count on when they engage FMCS to help resolve an important dispute.

1. FMCS’s funding and staffing must be restored to FY 2025 levels so that the agency can continue to function and provide much-needed services to employers, workers, and unions.
2. FMCS should provide services in any dispute with the potential to disrupt commerce and not impose arbitrary thresholds, and it should provide in-person mediation services, not just virtual services.
3. FMCS must remain independent from political influence and control. Independence and impartiality is the hallmark of FMCS’s existence and success. The Trump administration should stop trying to control FMCS’s spending and operations and leave these decisions to the experts. FMCS should remain an independent, expert agency—it should not be folded into the Department of Labor or any other agency. Doing so would undermine FMCS’s impartiality, and the other agencies lack FMCS’s expertise.
4. FMCS has suffered from the lack of a Senate-confirmed director. The failure of the Biden administration—widely regarded as the most pro-union administration in history—to prioritize and win Senate confirmation of an FMCS director was detrimental to the agency’s operations and stature. Every administration should prioritize, nominate, and win Senate confirmation of an experienced, respected practitioner in labor-management relations to lead FMCS’s operations.
5. FMCS should resume free card check services in support of the voluntary recognition process. If employers are willing to recognize their employees’ union based on a showing of majority support without requiring workers to go through the NLRB election process, FMCS should be there to assist them. The Trump administration’s elimination of this service was misguided and undermined a long-standing practice by which companies and workers start their collective bargaining relationships on a more positive, less adversarial basis.
6. With restored funding and staffing, FMCS should prioritize the establishment of a special unit to focus on assisting parties in reaching initial collective bargaining agreements. This unit should be specially skilled and trained in collective bargaining and should be made available to the parties in newly organized bargaining units. Relatedly, Congress should recognize the importance of FMCS to the first contract mediation process. It should ensure that FMCS has sufficient funding to carry out this work and must increase FMCS’s funding and first contract mediation staffing and expertise if the Faster Labor Contracts Act or PRO Act become law.  
7. With restored funding and staffing, FMCS should prioritize the hiring, training, and retention of mediators experienced and skilled in mediating in a collective bargaining setting. Because Congress has broadened FMCS’s mandate over the years to include a number of activities in addition to collective bargaining mediation, FMCS’s services have become more varied and diffused. In order to have the credibility and stature to effectively assist in the collective bargaining process, FMCS should highlight collective bargaining mediation as its core mission and prioritize staffing and funding for these activities.
8. Relatedly, FMCS should highlight and publicize the importance and benefits of collective bargaining to employers, workers, and our economy. Congress should specifically direct FMCS to publish research and reports in this area and to coordinate with other labor and research agencies in collecting and analyzing relevant data. Several high-profile events were held during the Obama administration during the FMCS directorships of George Cohen and Allison Beck (the first and only woman to date to run FMCS). FMCS is uniquely positioned to do this work, as an agency explicitly created by Congress to support the collective bargaining process.
9. FMCS should explore ways to maximize the impact of its work by discouraging parties from engaging FMCS too early in the bargaining process.
10. The business community needs to speak up and support FMCS. FMCS is a service agency that supports employers and workers. FMCS helps prevent costly disputes and facilitate positive labor-management relations. Unions have actively worked to save FMCS through litigation and other efforts. The utter silence of the business community in response to the Trump administration’s attempts to shut down FMCS is inexplicable. The business community should voice support for restoring and maintaining FMCS.
11. FMCS leadership should prioritize and establish relationships with key Capitol Hill offices and the White House, and hire a government affairs director to lead this work. This would help ensure that key players are knowledgeable and up to date on FMCS’s work, which would be helpful in the appropriations and oversight process. Relatedly, FMCS should prioritize external communications about its work, the importance of collective bargaining to our economy, and the benefits of resolving workplace disputes through mediation.

Conclusion

The Trump administration’s attacks on FMCS and its independence have weakened and undermined the agency, its staff and morale, its operations, and its credibility. Only through the efforts of litigation and Congress has FMCS been able to survive, albeit in its weakened state. As a result, employers, workers, and unions have been deprived of a valuable service that Congress established nearly 70 years ago to help prevent and resolve workplace disputes. The Trump administration’s attacks are counterproductive and short-sighted and have undermined our national policy in favor of collective bargaining. Adoption of the recommendations outlined in this report would help restore FMCS to its original function and benefit employers, workers, unions, and our economy.

Notes

1. Consolidated Appropriations Act, 2026, [H.R. 7148], 119th Congress (2026).

2. Parties are required to participate in FMCS mediation in the health care industry, 29 U.S.C. 158(d), but FMCS has no power to prevent parties from engaging in strikes or lockouts if they fail to reach agreement. In contrast, the National Mediation Board (NMB) can and does require parties to engage in NMB mediation if the parties are not able to resolve a dispute on their own. 45 U.S.C. 155. This system was established by Congress to minimize the likelihood of disruptive labor disputes in the rail and airline industries. 45 U.S.C. 151a.

3. 29 U.S.C. 172(d).

4. 29 U.S.C. 172(a).

5. State of Rhode Island v. Trump. https://www.pelrb.nm.gov/wp-content/uploads/2026/01/RI-Fed-Court-Decision-Imposing-Injunction-2025-05-06-1.pdf

6. State of Rhode Island v. Trump. https://www.pelrb.nm.gov/wp-content/uploads/2026/01/RI-Fed-Court-Decision-Imposing-Injunction-2025-05-06-1.pdf

7. State of Rhode Island v. Trump. https://www.pelrb.nm.gov/wp-content/uploads/2026/01/RI-Fed-Court-Decision-Imposing-Injunction-2025-05-06-1.pdf

8. State of Rhode Island v. Trump. https://ag.ny.gov/sites/default/files/court-filings/state-of-rhode-island-et-al-v-donald-j-trump-institute-of-museum-and-library-services-preliminary-injunction-2025.pdf

9. As part of the Biden administration’s White House Task Force on Worker Organizing and Empowerment, efforts were made to try to require certain federal contractors to utilize FMCS’s services when workers first organized a union, but these efforts did not come to fruition (DOL n.d; WH Task Force 2023). Acting Secretary of Labor Julie Su issued a “first contract challenge” to newly organized companies, urging them to reach an agreement with employees within one year. She worked closely with BlueBird Bus Company and the United Steelworkers on meeting this goal and celebrated in person with them in Georgia when they succeeded (DOL 2024). However, the first contract challenge was not broadly implemented before the Biden administration left office.

10. Faster Labor Contracts Act, [S. 844], 119th Congress (2025).

References

AFL-CIO. 2025. “AFL-CIO, Unions Sue Trump Administration Over Cuts to Key Labor Relations Agency” (press release), April 15, 2025.

Bronfenbrenner, Kate. 2022. “In Solidarity: Removing Barriers to Organizing.” Testimony before the U.S. House Committee on Education and Labor, Washington, D.C., September 14, 2022.

Department of Labor (DOL). n.d. “Facilitating First Contracts Between Newly-Unionized Workers and Their Employers” (fact sheet). n.d.

Department of Labor (DOL). 2024. “Acting Secretary Su Visits Georgia for Blue Bird Corp. First Contract Signing; Spotlights Biden-Harris Administration’s Support for Unions in the South” (press release). July 19, 2024. 

Eidelson, Josh. 2025. “U.S. Agency to Cease Facilitating Easier Unionization Process.” Bloomberg, March 5, 2025.

Federal Mediation and Conciliation Service (FMCS). 2022a. “FMCS Card Check Services” (fact sheet), April 2022.

Federal Mediation and Conciliation Service (FMCS). 2022b. “FMCS Offers No-Cost Card Check Services” (press release), April 26, 2022.

Federal Mediation and Conciliation Service (FMCS). 2025a. “A Strategic Investment and Vital Part of America’s Economic Future” (fact sheet), March 2025.

Federal Mediation and Conciliation Service (FMCS). 2025b. “Fiscal Year 2026 Technical Supplement.” June 2025.

Federal Mediation and Conciliation Service (FMCS). 2026a. “Our Service Areas” (web page). Accessed on February 23, 2026.

Federal Mediation and Conciliation Service (FMCS). 2026b. “Success Stories” (web page). Accessed on February 23, 2026.

Federal Mediation and Conciliation Service (FMCS). 2026c. “Initial Contracts” (web page). Accessed on February 23, 2026.

McFerran, Lauren and Celine McNicholas. 2025. Trump’s Assault on Independent Agencies Endangers Us All. Economic Policy Institute, October 22, 2025.

National Labor Relations Board (NLRB). 2022. “NLRB General Counsel Promotes Productive Collective Bargaining Through Federal Mediation and Conciliation Service Partnership” (press release), April 27, 2022.

Purifoy, Parker. 2025. “States Take on Mediation Burdens After Trump Cuts Labor Agency.” Bloomberg Law, June 2, 2025.

Rhinehart, Lynn. 2025. “Donald Trump Is Shuttering A Little-Known Labor-Management Agency that Supports Collective Bargaining.” The Nation, March 28, 2025.

White House Task Force on Organizing and Empowerment (WH Task Force). 2023. “Task Force on Worker Organizing and Empowerment.” March 20, 2023.

February 26, 2026

Good afternoon, Chair Ricks, Vice Chair Camacho, and members of the committee,

My name is Nina Mast, and I’m a policy and economic analyst at the Economic Policy Institute (EPI). EPI is a nonprofit, nonpartisan think tank founded in 1986 to research the economic status of working America and propose public policies that protect and improve conditions for low- and middle-wage workers.

I’m here today to testify in support of HB 1054, a bill to strengthen Colorado workers’ right to a safe workplace. HB 1054 represents an opportunity for Colorado to continue showing leadership in efforts to protect all workers—both adults and minors—from preventable workplace injuries or fatalities.

As a national expert on state labor standards—including state standards to prevent young workers from exposure to hazardous occupations—I have had the opportunity to work on many state-level efforts to improve state workplace laws—including in Colorado. I regularly encourage policymakers to look to Colorado as a leader in making crucial and innovative updates to its standards both through legislation and administrative rulemaking. HB 1054 is an important next step for Colorado to take in this direction at a time when long-standing federal workplace health and safety standards are at risk.

Since the 1970 passage of the federal Occupational Safety and Health Act first established basic nationwide workplace health and safety standards, OSHA has saved tens of thousands of lives and prevented millions of injuries. Unfortunately, federal OSHA today faces numerous threats including diminished enforcement capacity, efforts to block important and long-overdue new worker protection standards, and—notably—efforts to weaken the statute’s general duty clause, which ensures foundational safety protections to all workers, regardless of the occupation or industry they work in. The Trump administration has proposed carving entire industries out of coverage under the “general duty” clause. This disastrous proposal could leave many workers without any federally guaranteed right to protection from known and preventable workplace hazards.

Given the inadequacies of current federal OSHA enforcement and the risk that existing minimum federal standards could soon be eroded further, it’s crucial for states to step in to protect their workers.

HB 1054 not only enshrines the long-standing intention of the general duty clause into state law, but it also goes further to ensure stronger protections from workplace illnesses and injuries for Colorado workers today. Specifically, the bill creates a general duty of employers to provide “reasonable and adequate” protections for all workers and comply with all standards adopted through administrative rulemaking. The bill also empowers the state attorney general and the Colorado Department of Labor and Employment (CDLE) to refer cases for investigation and recover penalties to be used for enforcement. And—importantly—it provides labor organizations and individuals harmed on the job with the option to file civil actions and pursue statutory damages in cases in which employers violate legal obligations to provide a safe workplace. These provisions will strengthen enforcement of the law, encourage reporting of unsafe working conditions by workers who report abuse at great personal risk, and more meaningfully deter violations.

As a national organization that convenes a network of state research and policy organizations, we have been closely tracking the implications of federal actions for workers at the state level. In the past year, OSHA has faced unprecedented threats to its enforcement capabilities, and aggressive immigration enforcement will make workers even less likely to feel safe reporting unsafe conditions at work. Because of these threats, state lawmakers have an opportunity and responsibility to resist the erosion of hard-won worker protections and take up the mantle of advancing workers’ right to a safe workplace. The sponsors of this bill have shown that they take this commitment seriously, and we urge all members of this committee and the Colorado General Assembly to do the same by supporting the passage of HB 1054.

Thank you.

Key takeaways

The Trump administration’s unwise policy agenda has the potential to do great damage to U.S. families—and this is true even if it does not lead to recession or spiking inflation in the near term. While this agenda has heightened the risk of recession in coming years, the greatest future damage will come from slowing growth in the economy’s supply side and raising inequality. Trump’s economic policies will cause incomes and wages for typical families to grow more slowly, and this will lead to a less affordable life for many.  

How will Trump administration policies harm income growth for typical families? 

• The Trump administration inherited a fundamentally strong economy from the Biden administration. Yet the Trump administration’s policy agenda has raised the risk of a near-term recession by slowing growth in spending by households, businesses, and governments (aggregate demand).  

• • Federal workforce cuts, deportations and a slowdown in immigration, and chaos in trade policy and the administration’s approach to the Federal Reserve have all weighed on demand growth. 

• • The deportation agenda and cutbacks to the federal workforce will deeply damage the economy’s supply side as well. Further, deficit-financed tax cuts will also put headwinds in front of growth in the economy’s supply side in coming years. These growth reductions will be small in any given year but will accumulate quickly and lead to future incomes being significantly lower than they would have been under a different policy regime.  

• Finally, the 2025 Republican-led tax cuts favor the rich, while the spending cuts included in the same Republican megabill will sharply lower incomes for the bottom half of U.S. households (ranked by income) in coming years. This combination will lead to a very large spike in inequality.  

• • The Trump administration’s assaults on typical workers’ bargaining power and leverage, and its support for corporations with significant market power, will increase pre-tax inequality.  

Policy choices that fostered excess unemployment, slow growth of the economy’s supply side, and rising inequality have all contributed to making recent decades extremely difficult for typical families. The policies of the Trump administration double down on the worst policy decisions of this period and will make typical families reliably poorer in the future, even if an outright recession or spiking inflation does not happen.  

In the first months of the second Trump administration, the question that popped up frequently about its economic policy agenda was, “Will it cause a recession?” After a year and no clear signs of a recession (at least not yet), many looking to formulate an organized critique of the Trump agenda argue that it is making affordability for American families worse.

Both the concerns of heightened recession risks and deteriorating affordability are valid. Trump policies really are making a recession more likely and even if a recession does not occur, these policies will harm typical families’ ability to afford what they need. This affordability crunch will happen for two reasons: Trump policies will hamstring the economy’s ability to supply goods and services, and these policies aim to increase inequality by transferring income from the bottom and middle toward the top. Sometimes this affordability crunch will manifest as higher prices or faster inflation, but it is more likely to appear as slower wage growth and the rollback of public supports for households. But its root is always and everywhere poor economic choices, including prioritizing the interests of the rich and corporations over the concerns of typical American families.

This report provides an explanation and overview of how Trump policies will impact overall U.S. economic performance and the living standards and economic security of typical families.

• In the short run, Trump policies raise the risk of recession.
  • The U.S. economy might avoid a recession over the next year, but the Trump agenda has made a recession far more likely than it would have been without these policy choices.
    • The short-run danger from Trump policies stems from the chaotic implementation of tariff policies, the administration’s cuts to social spending in the 2025 Republican budget megabill, their rapid and random downsizing of the federal workforce, and the chilling effects their mass deportation aspirations have on spending.
• In the long run, the Trump policy agenda will significantly reduce the U.S. economy’s ability to supply goods and services without high and rising inflation.
  • The administration’s deportation agenda is slowing the size of the future U.S. labor force and has maybe even shrunk it.
  • Trump has backed mostly deficit-financed tax cuts for the rich, which will slow the size of the future U.S. capital stock.
  • His administration is attacking key federal agencies and has shown a lack of strategy in tariff policies, which are slowing the size of the future U.S. technology stock.
• In both the short and the long run, the Trump policy agenda is guaranteed to cause greater inequality.
  • In the short run, the huge tax cuts tilted mostly toward the rich and the spending cuts falling mostly on the bottom 40% will lead to an enormous rise in inequality.
  • A possible recession will damage the labor market and likely lead to rising inequality over any subsequent recovery as unemployment remains elevated.
  • Further, the Trump administration’s attacks on the leverage and bargaining power of typical workers and the administration’s toleration of monopolization and abusive financial practices will see income in the business sector reliably funneled away from typical workers and toward the already-rich owners and managers of large companies.
  • The Trump administration has hamstrung or downsized the key functions of the federal civilian workforce that work to level playing fields between the rich and corporations on one hand and typical workers and consumers on the other.
• Finally, many of the Trump administration’s policy choices will inflict significant damage on U.S. families that is not reflected in contemporaneous measures of GDP or income. Just because this damage is not reflected in real-time GDP or income data does not mean it is unimportant or cannot be measured well.
  • For example, regulations enforced by the federal government lead to greater air and water quality, and voluminous research indicates these save lives and many Americans highly value them. If the attack on the federal workforce and the Trump administration’s generally anti-regulatory stance lead to rollbacks in air and water quality, people will suffer, even as most of this suffering is not well captured in GDP.

In what follows, we provide the economic basis for these conclusions, focusing on Trump policy effects on aggregate demand, potential output (supply), and income distribution and how these drive real-world outcomes for typical families. Families will feel the bad outcomes from all three dimensions of macroeconomic performance as a deterioration in affordability.

Three key dimensions of macroeconomic performance: Demand, supply, and distribution

A quick overview of some important macroeconomic concepts can help organize thoughts about how the Trump policy agenda will tangibly affect U.S. families. The most important tasks policymakers must get right to offer typical families’ economic security are as follows: managing aggregate demand, fostering potential output (supply) growth, and ensuring equitable distribution of income.

Managing aggregate demand just means making sure unemployment and inflation stay low most of the time and are quickly returned to low levels when shocks push them higher for some stretch of time. The key to successful aggregate demand management is ensuring that spending by households, governments, and businesses is high enough to fully employ all resources in the economy—especially labor, but not so high as to generate ongoing inflation. This means ensuring that aggregate demand matches potential output.

Fostering growth in potential output (supply) involves making sure the economy’s productive capacity grows rapidly over the long run. Key elements include fostering growth in the labor force and productivity (a measure of how much output and income is generated in an average hour of work in the economy). Growth in productivity depends on the educational attainment and quality of the labor force, the size of the capital stock that workers can use to aid production, and the state of technology in the economy.

Ensuring an equitable distribution of growth means making sure the overall income growth generated in the economy is shared at least proportionally throughout the income distribution. Even better would be growth biased more toward households in the bottom half of the income distribution. This would help reverse some of the large increases in inequality that occurred over the past few generations of economic life in the U.S. Fostering an equitable distribution of growth matters for typical families for an obvious reason: If average living standards rise rapidly, but living standards for the large majority lag far behind as households at the very top see extreme above-average gains, it is hard to declare this an economic success for broad-based economic security. Without an equitable distribution of growth, too many people would be unable to afford daily life.

Trump policies will drag on aggregate demand and raise recession risks

Recessions happen and unemployment rises when spending by households, businesses, and governments (demand) lags behind potential output (supply). Because supply tends to change slowly and predictably, it is sharp cutbacks in demand that lead to recessions and rising unemployment.[1]

When demand falls short of supply, this means that there is more capacity in the economy to produce goods and services than demand to buy them. To illustrate, let’s take the example of a restaurant. It will not hire staff to cover every table and cook meals for a full house, unless there are paying customers at each table. If demand (or the number of customers) falls, then the restaurant will cut back staff and food purchases by roughly the same amount.

Figure A shows estimates of potential output and actual gross domestic product (GDP) over time. When actual GDP falls short of potential output, it can be inferred that GDP is demand-constrained (more could be produced if economic actors simply spent more). The shortfalls of actual GDP relative to potential may look small on the graph, but they correspond to significant economic distress. The growing gap between 2007 to 2009 was associated with the unemployment rate rising from 4.4% to just under 10%—meaning that roughly 9 million people lost their jobs during this time period. Others dropped out of the labor force, and wage growth even for those workers who kept their jobs was significantly damaged as well, as their main source of leverage to gain wage increases (the threat of—or ability to—leave their current job to find a higher-paying one) lost power in a labor market with huge pools of unemployed workers. Over the 2007–2017 period, excess unemployment translated into roughly 47 million years of avoidable unemployment for U.S. workers, and this period of soft labor markets kept wage growth firmly suppressed.[2]

Figure A

Throughout 2025, many have raised concerns that Trump administration policies could lead to a recession. It should be noted how surprising this development would be, considering the context. The economy handed over by the outgoing Biden administration in January 2025 was extremely strong, and there were no obvious macroeconomic threats moving forward that would have led one to forecast a recession in the next few years.[3]

For a recession to happen in the next year or two, there would need to be some short-run shock or drag on aggregate demand that forces it below the economy’s potential output. Despite the strength of the economy the Trump administration inherited, their subsequent policy agenda since his inauguration in 2025 contains plenty of reasons to worry about such drags.

For one, the Trump administration’s assault on the federal workforce directly destroys employment and incomes. Between January and December 2025, 290,000 federal workers have lost their jobs. While this is not enough by itself to drag an otherwise healthy national economy into recession (as it constitutes less than 0.2% of total employment), it certainly puts downward pressure on aggregate demand.

On top of this, the spending cuts in the 2025 Republican budget megabill (which the White House has referred to as the OBBB) will reduce aggregate demand in coming years. [4] For example, the Republican megabill will cut SNAP and Medicaid benefits by a combined $100 billion per year on average over the next decade. Households receiving Medicaid and SNAP benefits will cut back spending sharply when these benefits are reduced. Further, the megabill rolled back a set of Biden administration policies that sharply reduced student loan payments. In coming years, households will have to pay substantially higher student loan payments to the federal government.

Finally, another fiscal change that was not an explicit part of the megabill but was notable in its absence is the expiration of enhanced subsidies to buy health insurance in the marketplace exchanges established by the Affordable Care Act (ACA). The rollback of these enhanced subsidies—also passed during the Biden administration—will double out-of-pocket payments for the premiums of the 20 million Americans enrolled in these exchanges, increasing costs by more than $30 billion annually in coming years.[5]

The tax cuts in the Republican megabill are unlikely to do much to spur demand for two reasons. First, they are tilted toward high-income households whose spending is not constrained by their current incomes. Second, the tax cuts are small relative to a “current policy” baseline, meaning that they leave tax burdens unchanged, not appreciably lower, relative to 2025.[6]

The mass deportation agenda of the Trump administration will have its most predictably negative effects on the economy’s supply side, as millions of immigrant workers are forced out of the country.[7] But immigrants are not just workers; they are consumers as well. Further, immigrant workers are key complements to U.S.-born workers in many industries. Deporting these consumers and complementary workers and making it harder and more dangerous for those who remain to conduct the normal business of their lives will clearly have depressing effects on aggregate demand as well.

Most importantly, the radical uncertainty and chaotic implementation of Trump policies—particularly the trade policies—seem almost designed to freeze new business investment. Who would set up a new manufacturing facility if they had no idea what the competitive landscape of the sector was going to look like in coming years? Will tariffs protect domestic production? Will tariffs make imported inputs into the factory more expensive? Will protective tariffs vanish overnight when a foreign government meets the president’s demands of the day? Will future profits be reduced because the Trump administration arbitrarily demands ownership stakes in companies? Business investment is by far the most volatile component of aggregate demand, and it is the one that generally leads to recessions. It seems highly plausible that the Trump administration’s policies could cause business investment to seize up and slow growth.

Early in Trump’s second term, the administration’s “Liberation Day” tariffs led to most forecasters sharply raising the risk of a recession happening over the next year.[8] The sharp reversal of these historically high and broad tariffs to levels “only” half as high on average led to this risk receding a bit, yet still remaining sharply higher than it was in January 2025. So far, most of the “hard” economic data (that measure actual economic transactions like wages, employment, incomes, or gross domestic product) have yet to signal that a recession is coming.

Part of the relative robustness of macroeconomic measures likely owes to the fortuitous timing of a boom in AI-related spending, which largely began in mid-2023.[9] The valuation of stock markets has reached the second-highest levels in history—trailing only the stock market bubble of 2000–2001 (also driven by a boom in tech stocks). Much of these stock market gains have been driven by AI-related firms. A significant amount of consumption spending out of these wealth gains has likely contributed nontrivially to growth over the past year.

Further, capital expenditures related to the AI-boom have also been contributing to growth. Starting in 2023, year-over-year real growth (adjusted for inflation) in data centers, for example, has consistently exceeded 35%, peaking at just under 77% in late 2024 and remaining above 30% throughout most of 2025. While this AI-related spending has helped keep the U.S. economy well clear from recession through the third quarter of 2025, it is the kind of spending that would likely evaporate relatively quickly if business sentiment about the future use and profitability of AI investments dims.

If this happened, the depressing effect on wider business investment stemming from the uncertainty mentioned above might well dominate and lead to quick decelerations in growth. Evidence of this depressing effect seems already clear, as investment in components not related to the AI boom looks notably weak over the past year.

Figure B

The danger of a slowdown in aggregate demand highlights how much discussions about affordability need to go beyond prices.[10] Much of the discourse about affordability recently was driven by the outbreak of very high inflation in the early 2020s, following the COVID-19 pandemic. But absent very rare and sharp increases in inflation like that (and which tend to be driven by external events like pandemics and wars, not policy missteps), the main damage to affordability over time does not stem from fast inflation, but from slow growth in wages and incomes. A recession would return inflation in the U.S. to very low levels. The recession of 2008–2009, for example, led to inflation averaging below 2% for the following decade. And yet this low inflation provided next to no relief for affordability because the high unemployment of that period—which was the source of disinflation—sapped workers’ leverage and bargaining power in labor markets and led to slow wage growth.[11]

A recession in the next year would solve the price side of affordability in that it would lead to a sharp slowdown in inflation, but it would force wage growth down even faster, and hence, would exacerbate, not help, the ongoing problem of affordability properly defined.

All in all, it seems safe to say that the Trump administration’s policies have significantly elevated the risk of a recession over the next year. Their trade policy retreat has been sharp enough that a recession might well be avoided. But this hinges largely on the administration’s being able to resist whipsawing trade policy chaotically again—and this seems far from certain. But we may well navigate the next year without a recession—largely stemming from the momentum of the strong economy the current administration inherited and the lucky timing of much AI-related spending remaining strong through 2025.

Trump polices will quickly erode the economy’s ability to supply goods and services without inflation—this damages affordability for typical families

However, the avoidance of a recession would not mean the economic policy decisions of this administration were wise. If the only question on the table regarding the impact of Trump policies was “Will there be a recession?” the future of the U.S. economy would be much less bleak. Instead, the more predictable and larger amount of damage that the Trump administration’s policies will inflict will not come through downward pressure on aggregate demand but through the rapid erosion of the economy’s potential output and the upward redistribution of income instead. These influences will be experienced by typical families as wages, incomes, and public supports failing to outpace prices by sufficient margins over time, thereby damaging affordability.

In the previous section, we noted the sharp economic damage done by the aggregate demand shortfall of the early 2010s. The most obvious and acute damage stemming from this shortfall was the elevated unemployment rate of that time, along with the attendant damage to wage growth.

However, the worst lingering damage from that long period of deficient aggregate demand likely came from its spillover effect in destroying potential output. When employers see that customers are scarce and workers are cheap and plentiful, their imperative to invest in worker training or newer capital or innovative technological processes to economize on labor costs and boost productivity is blunted. And when jobless workers see elevated unemployment rates and the low probability of being hired, job seekers can get discouraged, and labor force participation can falter.[12]

Over time these dynamics lead to a lower-quality workforce and smaller capital stock, which reduce productivity growth and potential output. Figure A showed actual GDP and successive estimates of potential output over time. Between 2007 and 2019, these potential output estimates continually fall as the demand shortfall bends down potential output, as productive investment is blunted. By 2019, potential output was $2.2 trillion below where its 2007 trend would have left it in that year. This translates into $6,500 less income for every adult and child in the United States in 2019 (or $26,000 less income for a family of four). In short, over a 5–10-year period, even small bends in the growth of potential output have huge real-world consequences.

Supply destruction leads directly to unaffordability

This discussion of potential output growth likely sounds abstract to noneconomists. But it has profound effects on typical families’ economic security, and the way this slowing down of potential output translates into observable real-world effects is by making affordability worse for these families. For example, in the paragraph above, we said that the slowdown of potential output growth after 2007 translated by 2019 to $6,500 less in inflation-adjusted income for every person in the United States (or $26,000 less income for a family of four). The way this happens is by wages and incomes failing to outpace growth prices by satisfactory amounts—even during times (like the 2010s) when inflation was extremely low.

And, of course, the gap in the race between wages and prices differs depending on the specific goods and services examined. In the 2010s, the output that was produced less and less, relative to historic norms, was housing.[13] This reduced output of housing translated directly into higher relative prices for rents.

While there is a lot about this collapse in housing production and rise in rental prices that is housing-specific, the root of all of this pressure on affordability stems from macroeconomic choices. If potential output growth slows for the overall economy, then the production of something will lag, and its price is likely to rise. If we had somehow kept housing construction constant in the face of a fall in overall potential output, the biggest affordability problem would have shown up someplace else, but one surely would have emerged.

How Trump policies will slow potential output and exacerbate affordability concerns

In the current moment with unemployment that is still relatively low by historical standards and so-far adequate aggregate demand, the imminent threat to the economy’s supply side today is not an extended recession, but simply the direct effect of many Trump policies. When (not if, but when) potential output growth falters in coming years, it will again represent a sharp break from the economy the Trump administration inherited, an economy that saw rapid productivity growth in the years following the pandemic.

Figure C

The potential supply destruction stemming from Trump administration policies comes along many margins.

Loosening immigration restrictions and unleashing mass deportations

The most obvious blow to the economy’s potential output would be Trump’s mass deportation policy. If the U.S. relied solely on growth in U.S.-born workers, labor force growth would shrink rapidly over the next decade (see Bivens 2025c). Successful mass deportations—besides causing great and unnecessary human misery—would actually push labor force growth in the U.S. economy into negative territory in coming years.

Further, immigrant and U.S.-born labor supply are often complementary (Zipperer 2025). One obvious example is that child care centers are disproportionately staffed with foreign-born workers. If mass deportations cause significant closures of these centers, U.S.-born parents will often be forced into stopping work in order to care for children.

Cutting back federal spending and the workforce

We noted the cutbacks to federal workforce and spending previously as short-run threats to aggregate demand. But the federal government is not just a source of short-run demand; it also provides absolutely crucial inputs needed for robust private-sector growth.[14] Recent decades have seen sharp cuts in the size of the federal workforce and the investments in the functions it provides. By January 2025, the size of the federal workforce and the spending to support it were at historically low levels relative to the broader economy. In short, it seems clear that this workforce and the state capacity of the federal government were already significantly degraded even before the Trump administration took power. Since then, the administration has unleashed an unrelenting attack on this state capacity.

Perhaps the clearest way reduced federal spending will translate into slower potential output growth in coming years comes from cutbacks to science and research. Fieldhouse and Mertens (2025), for example, have estimated that nearly a third of total factor productivity (TFP) growth stems from federally financed research and development spending.

Further, the Trump administration has significantly cut back federal spending on universities. A key driver of productivity growth over time is a more educated and skilled workforce. Today’s higher education cuts are guaranteed to slow the growth of labor quality in the U.S. workforce in coming decades.

Other federal agencies collect, analyze, clean, and provide access to free, publicly available, high-quality data on the nation’s economy and demographics. These services provide enormous monetary value to private-sector actors (see Hughes-Cromwick and Coronado 2019).

Other agencies provide crucial monitoring services that help the nation avoid financial, epidemiological, or weather disasters. These investments provide a huge rate of return relative to the (likely too small) federal spending done on them. Even monitoring and surveillance that directly aim to constrain and manage private-sector decision-making can often actually lead to better private-sector outcomes. Hirtle, Kovner, and Plosser (2019), for example, examine the outcome of banks when they receive more or less regulatory scrutiny from federal banking supervisors. The authors find that “…banks that receive more supervisory attention hold less risky loan portfolios, are less volatile, and are less sensitive to industry downturns, but do not have slower growth or profitability.”

By far the biggest long-run threat to the U.S. and global economies’ ability to produce goods and services without inflation is the effect of climate change. Climate change can be thought of as an ongoing erosion of the economy’s productive capacity. For example, key swathes of land will become less valuable as flooding and disaster exposure rise, buildings and factories will be threatened by extreme weather, and the productivity of work that must be performed outside will suffer due to either extreme weather or needed spending to mitigate the effects of it on workers. Investments that mitigate greenhouse gas emissions (GHG) and reduce the effects of climate change are incredibly valuable in the long run for maintaining the economy’s supply side. By far the biggest and most effective investments in this type of mitigation ever made by the United States were the subsidies for clean energy and its adoption in the Inflation Reduction Act (IRA) of 2022. The Republican budget megabill, however, rolled back the majority of these IRA subsidies and will hence lead to far fewer reductions in GHG emissions in coming years. Essentially these rollbacks will accelerate the destruction to the economy’s supply side that is ongoing due to climate change.

Many federal agencies are responsible for providing and enforcing transparent rules for markets that channel economic competition into productivity improvements, instead of zero-sum opportunism. For example, the Securities and Exchange Commission and the Consumer Financial Protection Bureau provide protection to investors by enforcing rules against fraud or misappropriation of their funds from companies they invest in. This promotes trust and allows more liquid capital markets that are able to provide finance for more prospective and ongoing businesses. The Federal Trade Commission and the Antitrust Division at the Department of Justice aim to keep firms’ monopoly power from distorting markets. The Occupational Health and Safety Administration and the Wage and Hour Division at the Department of Labor protect employees from abusive workplaces, allowing them to choose among prospective employers without having to factor in whether there will be unsafe or exploitative working conditions with these employers.

Another key federal agency priority that has had profoundly beneficial effects on the U.S. economy’s supply side in recent decades is enforcement of anti-discrimination laws. The Equal Employment Opportunity Commission, for example, was established in 1965. Hsieh et al. (2019) have noted that since then, there has been an enormous increase in the share of high-wage, high-skill occupational employment that is accounted for by women and Black men. In turn, the authors estimate that this more efficient allocation of workers to occupations based on talent and merit accounted for up to 40% of all growth in the U.S. economy since 1960. Much of this better allocation of talent has stemmed directly from enforcement of anti-discrimination laws. Going forward from today, there is ample scope for ongoing and/or improved enforcement of anti-discrimination laws to support future growth. If instead, the enforcement of these laws withers, and there is a reduction in the efficient allocation of talent to occupation, this could be an outright headwind to growth going forward.

Haphazardly implementing poorly designed and chaotic tariff policy

The chaotic implementation of the administration’s tariff policy is surely a short-run drag on aggregate demand. But, if the end result of the policy is to leave the United States with historically high and broad tariff rates (which is where the tariff policy has landed as of December 2025, even with the sharp reversal of many of the highest tariffs), without any obvious corresponding benefit from well-designed industrial policy considerations, then this will also slow potential output growth.[15]

Tariffs are essentially a way to block the lowest-cost method of delivering goods to U.S. households and businesses, if this lowest-cost method involves imports. Sometimes this kind of blockage is fully justified by other policy concerns besides what is the cheapest production at the moment. For example, if foreign governments subsidize their producers in a specific sector, and if the U.S. deems it imperative to have productive capacity in that sector, then tariffs can help keep domestic producers from being forced out of business by the decisions of foreign governments.

Further, if the sectors that domestic producers are being forced out of looked poised to drive productivity gains in coming decades, there might be a strategic benefit to using tariffs to protect domestic production. The case of electric vehicles (EVs) is one potential example. There is clearly going to be a large global shift toward EVs in the coming decades. EV manufacturing will scale rapidly, and often this kind of scale produces huge leaps in productivity. If today’s constellation of EV production facilities and foreign countries’ subsidies of their own EV makers threaten to shove U.S. producers entirely out of the race for EV market share, it seems like industrial policy efforts to support domestic production of EVs would make a lot of sense—and this was indeed a priority of the Biden administration.

Similarly, if some or all of the cost advantage of imports in a sector stems from objectionable practices of producers in other countries—say, blatant disregard of fundamental labor rights—tariffs can protect U.S. producers from being forced out of business by these objectionable practices.

But the historically broad and high tariffs of the Trump administration are not being calibrated in any kind of strategic or careful way. Instead, they are blocking the lowest-cost means of delivering goods to U.S. households and businesses randomly. This essentially is the equivalent of a negative technology shock. Businesses (both foreign and domestic in the U.S.) that supply goods have been forced out of the most efficient way to produce goods, and without any countervailing benefit from smartly designed industrial policy considerations.

Finally, the chaotic implementation does not only affect aggregate demand. If ever-shifting tariff levels change the patterns of production that lead to the lowest-cost ways of producing goods in random ways, this makes it impossible to set up efficient supply chains, hence stunting potential output growth.

Financing tax cuts for the rich and corporations with higher debt

In 2000, the ratio of U.S. public debt to gross domestic product (GDP) stood at less than 35%. In 2024, the debt ratio nearly tripled, rising to almost 96%.[16] A large part of this increase was due to the two historically large economic crises experienced in those years: the financial crisis and Great Recession of 2008–2009, and the COVID-19 recession.

More worryingly, even in 2024—a year in which the unemployment rate averaged 4%, the Fed’s short-term interest rates stood at over 5%, and inflation was above the Federal Reserve’s target—the federal budget deficit was 6.2% of GDP. This is too large a deficit for an economy that is at roughly full employment and not in need of fiscal support.[17]

The 2024 deficit can essentially be entirely explained by the successive rounds of tax cuts engineered by Republican administrations since 2000. In 2009, the Congressional Budget Office (CBO) projected what federal revenue as a share of GDP would be if the tax cuts signed into law by George W. Bush in 2001 and 2003 were allowed to lapse (see CBO 2009). They projected that revenue would be 20.2% of GDP by 2019. However, in 2019—after the vast majority of the Bush-era tax cuts were maintained and President Trump signed the 2017 Tax Cuts and Jobs Act (TCJA)—federal revenue came in at just 16.1% of GDP.  If revenue had remained at 2000 levels going forward, even with the extra debt incurred by economic crises, budget deficits by 2024 would’ve been effectively zero.

In the decade after the onset of the Great Recession in 2008 and during the early stages of the 2020–2021 pandemic, large deficits were not harming the economy. In fact, they were usefully propping up aggregate demand even as private sources of demand were plummeting. This chronic shortfall of aggregate demand (sometimes labelled “secular stagnation”) kept spending weak and interest rates and inflation historically low (short-term interest rates stood at essentially zero in all these years).[18] And so long as interest rates were low, no damage was being done by higher deficits.

But in the post-pandemic recovery, aggregate demand (aided by a robust fiscal response to the crisis) has been stronger, and interest rates and inflation have moved decisively off their historic lows. In this environment—when the economy is no longer demand-constrained—further increases in federal debt now compete with private-sector borrowers to find available savings. This, in turn, pushes up interest rates and threatens to crowd out private sector investments in new factories, plants, and equipment. This slowdown in the growth of the nation’s capital stock, in turn, leaves U.S. workers with less capital to aid them in doing their jobs and hence slows the pace of productivity growth.

This potted history of fiscal policy debates in recent decades tells us that after a decade and a half of warnings about the crowding-out effect of higher deficits on investment not ever coming to pass, there is now strong evidence to suggest this might be an important influence on growth going forward. Figure D shows the “real debt service ratio,” a measure of how sharply the government’s borrowing costs are rising. After a long stretch of being under 1%, this measure has recently surpassed its historic high.

Figure D

This historic high was surpassed even before the passage of the 2025 Republican budget megabill—a bill that will add nearly $4 trillion to the federal debt over the next 10 years. Borrowing costs are guaranteed to spike further going forward from now in any time period when the economy sits near full employment.

If the worried-about recession comes to pass in the next year or so, the collapse in private spending will reduce competition for available savings and interest rates will fall and the supply destruction effect of higher interest rates will be muted. But so long as the underlying fiscal structure of the U.S. sees large budget deficits even when the economy is at full employment, this means that interest rates will be high during these full employment periods and investment will be suppressed, leading to slower future productivity growth.

A key aggravating factor of the supply-destroying effects of higher deficits in coming years is what they were used for: simply to give much higher disposable incomes to rich households in the United States.          

One could imagine a counterfactual in which instead of using debt to finance higher disposable incomes for the rich, the federal government used this debt to make significant investments to mitigate emissions of greenhouse gases. This would leave the country with a higher stock of “green” capital (capital used to mitigate greenhouse gas emissions) and a smaller stock of conventional capital. This would be an affirmatively good thing. It would effectively be leaving future generations with slightly lower productivity in producing conventional goods and services, but a more livable and viable climate. Consistent economic growth essentially guarantees that future generations will be significantly richer than the current one in their ability to buy conventional goods and services. Trading off a bit of this advantage for a livable planet would be welcomed by this future generation—and it’s a trade-off they won’t be able to make. Only their ancestors can make it for them.

Alternatively, one could imagine a world in which the federal government took on additional deficits of the size generated by the 2025 Republican megabill to radically increase investments in children: providing federal financing of universal, high-quality pre-kindergarten; boosting aid to K–12 public school systems; and providing a universal Child Allowance to end child poverty. This would not only raise human welfare much more than tax cuts to rich people would; it would also see some of the deficit costs defrayed in coming decades as today’s children grew up healthier and better educated and worked more and earned higher wages in the decades to come. Some of these offsets could be considerable.[19]

There are no such happy offsets that stem from running larger deficits simply to give tax cuts that are radically tilted toward households that don’t need them—the ones at the very top of the income distribution. These deficits are supply destruction for the sake of intentionally increasing inequality.

Threatening a political takeover of Federal Reserve policy decisions

The Trump administration has been far more forceful than previous ones in pressuring the Federal Reserve to fall in line with the administration’s economic goals. They have demanded that the Federal Reserve set interest rate policy to meet the administration’s short-term economic goals and have constantly demanded lower interest rates, even as conditions do not warrant cuts in interest rates (inflation remains above the Fed’s long-run target, and unemployment remains generally low).

If decision-makers throughout the economy—households, businesses, and state and local governments—begin to think that the Federal Reserve’s interest rate decisions will be managed entirely by the executive branch, they might well raise their expectations of inflation in the future. This, in turn, would likely require any future Federal Reserve that committed to reducing inflation (and inflation expectations) to raise interest rates higher than they would otherwise have to be. These higher long-run interest rates would, in turn, reduce investment and slow productivity growth (much like too-large deficits run during times of full employment).

How much will supply destruction slow growth in coming years?

It is very hard to provide any convincingly precise estimates as to how much supply destruction will result from this portfolio of Trump administration policies. What determines the ebb and flow of productivity growth in advanced economies is one of the most debated topics in economics, and one in which no consensus exists. Yet we can give some very rough bounds for how important each element of this potential supply destruction might be over the next decade. The sum of these negative effects would be highly significant for future living standards growth—or affordability.

We start with the Congressional Budget Office’s (2025b) forecasts of potential output growth for the next decade. Currently they forecast that annual growth will average 2.0% between 2025 and 2034.

About 30% of the 2.0% that CBO forecasts (or 0.6% of this growth) stems from their estimate of how much the labor force will grow in those years. However, if one accounts for the Trump administration’s meeting their mass deportation goal of removing 1 million immigrants each year from the United States, this would imply that the labor force will barely grow at all in those years, translating into a 0.4% slowdown of growth in potential output.[20]

More than half of the projected growth in potential output comes from CBO’s forecast of growth in total factor productivity—a measure of how much extra output can be obtained holding inputs constant. TFP growth is often interpreted as a measure of pure technological advance—using new processes and production techniques to get more output out of a given stock of inputs. However, as we noted before, Fieldhouse and Mertens (2025) have estimated that fully one-third of TFP growth in recent decades can be accounted for by direct federal spending on research and development. The Fieldhouse and Mertens (2025) results would imply that a 20% cut in federal research and development spending would reduce projected productivity growth in the U.S. over the next decade by 0.2% annually.[21] This, in turn, would reduce potential output enough by roughly $2,500 for every adult and child in the United States by 2035.[22]

Importantly, their estimates do not include the effect of federal support for institutions of higher education, and this support has been large and critical for these centers of scientific research—likely as important as the direct federal research and development spending. This could easily double the effects from direct federal research and development spending, especially if one accounts for the long-run loss in the labor supply of trained scientists and researchers capable of undertaking research and development that will occur as higher education funding erodes.

CBO (2025b) has estimated that the 2025 Republican megabill will add roughly 7.1 percentage points to the ratio of public debt to GDP by 2034. Using earlier estimates from CBO (2025e) to translate the effect of a higher debt ratio on economic growth, this level of debt increase (assuming no recession intervenes) would slow growth by 0.1%–0.2% by 2034 through its effect on interest rates and investment. Given that Figure D previously showed that higher interest rates really have emerged in recent years, this effect seems possible.[23]

Estimates of the growth effects of the Trump administration’s trade policy are more uncertain. The Yale Budget Lab indicates a long-run effect on the level of GDP of 0.4%. However, it is hard not to make a comparison between the strategy-free actions of the Trump administration and a similar lack of planning that went into the United Kingdom’s exit from the European free trade area (Brexit). Estimates of the effect of Brexit are substantially larger than 0.4%—on the order of 2%–3% of GDP over 10 years (Bloom et al. 2025). If we think that Brexit is a suitable potential model for the fallout from the Trump trade policy—similarly chaotic and unplanned—this would imply a reduction in productivity growth of around 0.25% over the next year.

The long-run growth effect of eroding the federal government’s state capacity through budget cuts and downsizing is harder to estimate. One suggestive paper on this is Klein Martins (2025), who looks at episodes of sharp permanent spending cutbacks in advanced countries over the past 30 years. He estimates highly persistent negative effects on GDP growth of these cutbacks, over timespans well longer (15 years) than could be explained simply by the effect of these spending reductions adding to demand shortfalls. Klein Martins finds that each 1% of GDP in public spending reductions leads to GDP that is 2% smaller 15 years later. Say that half of these effects were driven by the erosion to state capacity stemming from these cuts. The cuts to the federal workforce in 2025 will result in a reduction of federal government spending of roughly 0.1% of U.S. GDP, which would imply (using half of Klein Martins’ estimates) a reduction in GDP of about 0.1%.

Tedeschi (2024) estimates how much higher interest rates driven by political events (like the capture of Fed policymaking by the executive branch) could reduce growth in coming years.[24] He finds that if the political events just moved the “country risk premium” of the United States to look more like the United Kingdom, this could reduce growth by 0.1% annually. If instead, this country risk premium deteriorated enough to look more like other rich, stable economies like Spain, the damage could be closer to 0.3% annually.

Adding up supply destruction from Trump policies

The Trump deportation goals could reduce labor supply growth by 0.4% over the next decade. The cuts to direct public research and development spending and this spending supported by institutions of higher education could each slow productivity growth by 0.2% over this period. Financing the Trump administration’s tax cuts for the rich with debt could reduce capital investment and hence productivity by 0.2%. If Brexit is the best model for the administration’s strategy-free trade policy, this could also reduce productivity growth by 0.2%. If the Trump-led attacks on the Fed led to steep concerns in international financial markets that raise the U.S. country risk premium and other interest rates significantly, this could slow growth by up to 0.3% in coming years. The administration’s attacks on the state capacity of the federal government could reduce growth by 0.1%. Their capture of Federal Reserve policy—leading to rising interest rates—could slow growth by between 0.1%–-0.3%. Adding these up, this means growth could slow by just under 2% on average over the next decade, with productivity growth slowing by well over 1%.

Somewhat ironically, the optimistic projections of how much advances in AI could boost U.S. productivity growth over the next decade tend to cluster around 1% annually.[25] The damage being done by the Trump administration to the economy’s supply side over the next decade is hence potentially as large as the most optimistic projections for how much a new burst of technology could boost it. If this came to pass, it would constitute just the latest episode of poor policy decisions squandering the potential benefits of economic growth and technological advance. The typical U.S. household today is not poorer in absolute terms compared with decades ago. But they are shockingly poorer relative to the potential growth they could have enjoyed with smarter policy that prioritized their economic security over showering the rich with even more perks.

Trump policies will raise inequality—the worst blow to families’ affordability

As we noted before, affordability is determined simply by the race between families’ economic resources (wages, incomes, and publicly provided subsidies and benefits) and prices. When affordability is strained, it is overwhelmingly because something—a recession or slowing of potential output growth, for example—has dragged on growth in families’ economic resources. Moreover, even when the aggregate economy seems strong—free of recession or inflation and with adequate growth in potential output—affordability for the vast majority of families can be squeezed if growth in these families’ resources lags far behind average growth. This mismatch between growth in typical families’ resources and average growth is driven by strongly above-average growth at the top of the income scale—the precise problem that has afflicted the U.S. economy in recent decades and the true root of nearly all U.S. families’ concerns about affordability.

Figure E

The Trump policy agenda will push income away from low- and moderate-income families and toward the top along many different margins. Even if (as expected) inflation rates return to normal during the second Trump term, this will be unlikely to boost the inflation-adjusted resources available to most families because the policies of the administration will actively claw resources—or the market power to claim these resources—away from typical families.

In the short run, the Trump budget megabill will cause an enormous jump in inequality

The signature legislative achievement of the second Trump administration is the 2025 Republican megabill, a budget reconciliation package that continues the individual provisions (and some business provisions) of the 2017 Tax Cuts and Jobs Act. The megabill also enacts steep cuts to health care and nutrition programs (Medicaid and the Supplemental Nutrition Assistance Program, abbreviated as SNAP). On top of this, the megabill also failed to either roll back or otherwise modify the corporate income tax cuts of the 2017 TCJA, but also fails to extend the supplements to subsidies for purchasing health insurance in the marketplace exchanges established by the Affordable Care Act that were passed as part of the Biden-era American Rescue Plan.

To give a sense of scale of the bill’s impact, we compare the one-year change that will result directly from the 2025 megabill policy with the entire upward redistribution of income that happened between 1979–2019, a period widely recognized as one during which U.S. inequality exploded. The share of total income claimed by the top 10% of households over that period rose by roughly 10 percentage points over a period of 40 years (or about 0.25 percentage points per year). But the Republican megabill alone will in one year raise the share of income claimed by these top 10% of households by 1 full percentage point. The 40 years between 1979 and 2019 saw the top 10% gain an average of 0.25 percentage points in the share of income they claim. This means the Republican megabill will see the rate of inequality growth quadruple in its first year, and it will essentially accomplish 10% of the entire post-1979 rise in inequality in a single year.

In the longer run, Trump policies empower the rich and disempower everybody else

Besides these large fiscal changes, other policy priorities of the second Trump administration include stripping workers of the effective right to organize unions and bargain collectively, deregulating some of the most abusive parts of the financial sector, and shrinking the federal workforce. All of these will lead to rising inequality.[26]

Trump policies continue the conservative assault on labor and workers’ rights

The Trump administration has continued to move forward with parts of its first-term priorities like the assault on labor and the bargaining power of typical workers. Two obvious high-profile indications of this were the stripping of collective bargaining rights of more than a million federal workers (including terminating the collective bargaining agreement of the Transportation Security Administration and firing National Labor Relations Board (NLRB) Member Gwynne Wilcox for “unduly disfavoring the interests of employers.” Further, the Trump administration nominated a partner at the very law firm that is currently challenging the constitutionality of the NLRB to be the NLRB’s general counsel. [27]

The assaults on labor and the bargaining leverage of typical workers continue a long-term conservative effort that has been highly successful in suppressing wage growth for low- and middle-wage workers and which has been a primary contributor to the long-run rise of inequality in the U.S. economy. [28]

Normalizing the most abusive parts of the financial system

The rise of the financial sector’s power has played a large role in the upward redistribution of income in the U.S. economy in recent decades. Finance is possibly the economic sector that has most benefitted from the federal government’s intentional industrial policy support. Between deposit insurance, the day-to-day liquidity provisions of the Federal Reserve (like the discount window that provides overnight reserves at the Fed), and the regular occurrences of extraordinary support provided in financial crises, the financial sector is obviously far larger in capitalist economies than it would be without this public support.

Significant public support of the financial sector is warranted—finance provides needed services to the rest of the economy, and without public backing, market failures would prevent these necessary services from being continually available. But this public support also justifies a robust regulatory and supervisory framework surrounding the financial sector.

The history of finance in the United States is one of accepting public support (especially during bad times for finance) while constantly trying to escape regulation and supervision that constrain profits during good times. The period from the late 1970s to 2007 saw regulation and supervision atrophy. This resulted in exploding profits and incomes in the financial sector with very little obvious benefit to the rest of the economy and the spectacular crash of 2008 that demanded even more public support for the sector. In short, the industrial policy support that the financial sector has received is a case study for how complementary policies (regulation and supervision in this case) are needed to ensure public support for a specific sector is not siphoned off into the incomes of economic players with substantial market power.[29]

In the financial regulation space, the Trump administration has continued conservative efforts to keep public supports for finance strong while expanding the scope of what the sector can do to seek profits.[30] The administration has directed the Consumer Financial Protection Bureau to shrink its scope and cede regulatory oversight to state agencies and has supported congressional efforts to slash funding for the bureau. The administration has also stopped U.S. movements toward harmonizing regulations with the Basel III recommendations—essentially meaning that large banks are no longer required to hold as large a set of capital buffers to protect against financial market stress. These capital buffers are there to prevent the public sector from having to bail out large parts of the financial sector during these periods.

The administration has also endeavored to bring cryptocurrency into the realm of traditional financial institutions, but under a loose regulatory regime. This approach would essentially allow some parts of the crypto ecosystem to put the public sector on the hook for bailouts needed due to instability in the sector, but would also allow many of the worst abuses of the crypto ecosystem—its use in illegal transactions and its speculative excesses—to continue unregulated. The approach to crypto represents the worst of all possible worlds. It gives the public sector heavier responsibilities to ensure that crypto crashes are managed but robs them of the tools needed to supervise the sector.

Attacks on the federal workforce

Between January and December 2025, federal payroll employment fell by roughly 290,000 due to the cuts started by the so-called Department of Government Efficiency. We noted previously that these cuts would sharply hurt growth in potential output in coming years. They will also lead to a less equal economy.[31]

Besides providing key inputs to public-sector production that markets generally fail to provide, the activities of federal workers often involve providing a countervailing force against unchecked corporate power. The Federal Trade Commission and the Antitrust Division at the Department of Justice ensure that markets remain competitive and block firms from exercising monopoly power. The Centers for Medicaid and Medicare Services must set reimbursement rates for the health care delivered by private-sector providers but paid for by the federal government. Private-sector health providers have seen a wave of consolidation in recent years and often can exercise pricing power against patients and other payers—the price-setting decisions of the federal government are a key bulwark against this pricing power. The Occupational Safety and Health Administration and the Food and Drug Administration have workplace inspectors to ensure that firms do not try to maximize profits by underinvesting in basic protections for worker or consumer safety.

Further, in a country where the federal tax system remains at least moderately progressive (with richer households facing higher tax rates than low- and moderate-income households), effective administration of the nation’s tax laws is equality enhancing. The vast majority of unpaid taxes are owed by the very rich. As such, attacks on the capacity of the Internal Revenue Service to administer this tax law are intentionally designed to lighten the tax burden of the privileged without passing new legislation.

Measures of GDP and income understate harms of Trump policies

Most of the discussion above concerns economic forces that affect measured GDP and incomes. But the economic security and happiness of U.S. families cannot be captured entirely based on these measures. For example, many Americans report feeling overworked and wish they had more leisure time. Increases in leisure time do not show up as greater GDP or incomes, yet clearly are valuable to families.

A number of policy choices made by the Trump administration will have profoundly damaging effects on families’ welfare that are not captured by GDP or data on incomes. For example, much of the damage done by climate change will not be well captured in these statistics. At the starkest level, climate change is forecast to lead to worse health outcomes and more premature deaths. The famous Stern review of climate change (2021) noted that accounting for these non-GDP influences likely at least doubles the true economic cost of climate change.

Similarly, the cutbacks to health insurance coverage signed into law by the Trump administration will cause poorer health and excess deaths in the coming decade if they stand. These deaths will not directly affect GDP, but obviously they need to be accounted for when assessing the impact of these policy changes.

Some of the outcomes of public policy raise GDP but actually reduce welfare. As climate change makes people spend more money on air conditioning, for example, this shows up as an increase in GDP yet makes peoples’ lives worse. Similarly, an increase in health spending driven by maladies related to climate change will raise GDP yet reduce welfare.

Further, some government spending provides outputs that GDP does not measure well at all. The value of less air and water pollution, for example, is immense but not captured in contemporaneous GDP. Much of its value will implicitly show up in future GDP numbers, as less pollution will lead to a healthier and more productive workforce in the future, but in real time, the benefits are not precisely measured. A similar finding concerns investments in children generally. Some of the benefits might occur in the moment (say, child care subsidies that allow parents to work more and earn higher incomes), but most accrue over time as children grow up healthier and become more productive and higher-earning adults.

Just because the benefits of much public spending do not mechanically show up in contemporaneous GDP measures do not mean they cannot be measured. When they are measured, there is ample evidence that families value this spending and the output it produces immensely. Often the estimated value of such spending is on the order of $1.50 for each $1.00 spent, with most of the benefit coming from welfare gains not captured in GDP. Welfare gains this large from public spending are strong suggestive evidence that public spending is already extremely under-provided, and further cuts will make it far worse.

Conclusion

It is essentially a guarantee that the policy path charted by the second Trump administration will leave the U.S. economy poorer and less equal. But much of this damage will be subtle and hard to see in month-to-month or even year-to-year changes in economic statistics. The Trump administration’s inability to implement a policy agenda without rank chaos might lead to a short-run recession that will temporarily expose much of the damage being done. But even if the recession does not come and even when it passes, there will be a steady hollowing out of the U.S. economy’s simple ability to produce the goods and services families need, and the inadequate growth that does get generated will flow disproportionately to the richest households.

In short, the macroeconomic consequences of the second Trump administration are profound. They will leave the vast majority of American families poorer over the next decade, and if Trump’s successors continue in this vein, they will leave the current generation’s children far poorer.

Notes

[1] The obvious historical counterexample to the rule that supply tends to grow slowly and predictably occurred during and immediately after the COVID-19 pandemic and Russian invasion of Ukraine, when these shocks broke global supply chains and led to sharp supply disruptions that restored themselves only with lots of volatility. This was, however, an unprecedented behavior of supply in advanced economies over the past century and is highly unlikely to repeat in the future.

[2] For this calculation, assume a counterfactual in which the unemployment rate stood at 4.0% over the 2007–2017 period and multiply by the size of the labor force in each year. Then, subtract this level of unemployment from the actual rate and sum over the years. For evidence of the damage this excess unemployment did to wage growth, particularly for lower-wage workers, see Gould et al. 2025.

[3] For details on the strength of the economy the Trump administration inherited, see Bivens 2025a.

[4] Numbers in this paragraph about cuts in the 2025 Republican budget megabill are taken from CBO 2025b, c.

[5] See Lo et al. 2025.

[6] This current policy baseline is a wrong and dishonest one to use when grading a law’s fiscal impact in coming years, but it’s the right one to use when figuring out whether growth will accelerate or decelerate in coming years due to policy changes.

[7] See Zipperer 2025 for estimates of the employment impact of the Trump administration’s mass deportation goals.

[8] For a wide range of views on the “Liberation Day” tariffs, resulting pullback and recession risks, see Nathan, Grimberg, and Rhodes 2025.

[9] Numbers in this paragraph can largely be found in Bivens (forthcoming).

[10] See Shierholz 2025 for this broader argument.

[11] Stark evidence that it is the race between wages and prices (and not just prices) that determines affordability can be found in Gould et al. 2025. They show that inflation-adjusted wage growth for low- and middle-wage workers was extremely strong from 2019 to 2024 but was actually negative over the five years following the previous business peak (from 2007 to 2012), even as this 2007–2012 period saw much lower rates of inflation. The strength of the labor market dwarfed changes in inflation in these periods, for good and bad.

[12] See Bivens 2017 for evidence that healthy labor markets support faster productivity growth.

[13] For example, according to the National Income and Product Accounts (NIPA) Table 1.1.10, between 1979 and 2007 residential investment was about 4.7% of overall GDP, whereas between 2007 and 2019 it was just 3.3%.

[14] See Bivens 2025b for an overview of the short- and long-run effects of steep cutbacks in the federal workforce.

[15] See the Yale Budget Lab’s State of U.S. Tariffs feature for a real-time assessment of trade policy under the second Trump administration.

[16] Numbers in this section are taken from CBO 2025b.

[17] Bivens 2019 estimates that a budget deficit of 2.5% or lower is likely consistent with a roughly stable debt ratio when the economy is near full employment.

[18] See Banerjee and Bivens 2022 for an overview of secular stagnation and how it intersects with fiscal policy debates.

[19] See Lynch and Vaygul 2015 for an accounting of the costs and benefits of investments in early childhood education.

[20] Bivens 2025c looks at a scenario in which net immigration between 2025–2034 was halved relative to CBO projections made in January 2025. The goal of deporting 1 million immigrants would yield reductions in immigrant labor supply very close to that “halving net immigration scenario” in that report.

[21] Marr and Cureton 2025 note that the administration’s proposed budget calls for cuts larger than 20% in federal research and development spending.

[22] For this calculation, we compare a scenario in which the $204 billion spent on government research and development in 2024 is cut by 20% going forward and compare it with a scenario in which (as has been largely the norm) this spending was instead held constant as a share of GDP. By 2035 this implies a funding shortfall of nearly $80 billion. We multiply this funding shortfall by the high end of estimated returns to this kind of spending from Fieldhouse and Mertens to ascertain the total cumulative reduction in GDP by 2035, which is 2% of projected GDP in that year. We then divide this by 10 to get the average effect on productivity growth over that time.

[23] In CBO 2025e, they present the effect of GDP on two different scenarios regarding growth in the debt ratio over time. Using this, one could back out the implicit effect on GDP of a given increment of increase in the debt ratio. If this incremental effect holds for the increase in the debt ratio caused by the 2025 Republican budget megabill, one can hence get an estimate of its growth effects.

[24] While Tedeschi 2024 is not just writing about the takeover of the Fed, he absolutely mentions this as one thing that could threaten the very low current “country risk premium” enjoyed by the U.S. The country risk premium is essentially how much lower a return that international investors are willing to take on investments in the U.S. due to the perceived safety and stability of U.S. investments from political manipulation.

[25] See Bivens (forthcoming) for a quick discussion of these estimates.

[26] For a comprehensive assessment of policies undertaken by the Trump administration and their likely effect on typical working families, see Economic Policy Institute 2025–2026.

[27] For a comprehensive overview of actions taken by the Trump administration (including those mentioned in this paragraph) that harm workers’ leverage in labor markets, see McNicholas, Poydock, and Bivens 2026.

[28] See Farber et al. 2021 for the link between unionization and inequality throughout U.S. history.

[29] See Epstein 2018 for a good overview on how powerful economic actors in finance are able to claim a larger share of society’s incomes and resources than their economic contribution justifies.

[30] Much of this section relies on Gensler et al. 2025.

[31] Much of this discussion relies on Bivens 2025b.

References

Banerjee, Asha, and Josh Bivens. 2022. Will Secular Stagnation Return? The Stakes for Current Economic Debates and Fiscal Policy. Economic Policy Institute Report. August 4, 2022.

Bivens, Josh. 2017. A ‘High-Pressure’ Economy Can Help Boost Productivity and Provide Even More ‘Room to Run’ for the Recovery. Economic Policy Institute, March 2017.

Bivens, Josh. 2019. Thinking Seriously About What ‘Fiscal Responsibility’ Should Mean: Full Employment and Reduced Inequality Are the Most Important Targets of Fiscal Policy. Economic Policy Institute, September 2019.

Bivens, Josh. 2025a. “President-Elect Trump Is Inheriting a Historically Strong Economy.” Working Economics Blog (Economic Policy Institute), January 17, 2025.

Bivens, Josh. 2025b. “The Economic Effects of Rapid Federal Downsizing” in Gensler, Gary, Simon Johnson, Ugo Panizza, and Beatrice Weder di Mauro (eds), The Economic Consequences of the Second Trump Administration: A Preliminary Assessment. Centre for Economic Policy Research Press, December 2025.

Bivens, Josh. 2025c. The U.S.-Born Labor Force Will Shrink over the Next Decade: Achieving Historically ‘Normal’ GDP Growth Rates Will Be Impossible, Unless Immigration Flows Are Sustained. Economic Policy Institute, October 2025.

Bivens, Josh. Forthcoming. “How Are AI Investments Affecting the U.S. Economy?” Working Economics Blog (Economic Policy Institute).

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Congressional Budget Office. 2009. The Budget and Economic Outlook: 2009 to 2019. January 7, 2009.

Congressional Budget Office. 2024. The Distribution of Household Income in 2021. September 11, 2024.

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Congressional Budget Office. 2025b. Key Budget and Economic Data.

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Congressional Budget Office. 2025d. The Estimated Effects of Enacting Selected Health Coverage Policies on the Federal Budget and on the Number of People with Health Insurance. September 18, 2025.

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Fieldhouse, Andrew J., and Karel Mertens. 2025. “The Returns to Government R&D: Evidence from U.S. Appropriations Shocks.” Society for Economic Dynamics Annual Meeting Working Paper, June 26, 2025.

Gensler, Gary, Simon Johnson, Ugo Panizza, and Beatrice Weder di Mauro, eds. 2025. The Economic Consequences of the Second Trump Administration: A Preliminary Assessment. Centre for Economic Policy Research, December 2025.

Gould, Elise, Katherine deCourcy, Joe Fast, and Ben Zipperer. 2025. Strong Wage Growth for Low-Wage Workers Bucks the Historic Trend. Economic Policy Institute, March 2025.

Hirtle, Beverly, Anna Kovner, and Matthew Plosser. 2019. “The Impact of Supervision on Bank Performance.” Federal Reserve Bank of New York Working Paper no. 768. May 2019.

Hsieh, Chang-Tai, Erik Hurst, Charles I. Jones, and Peter J. Klenow. 2019. “The Allocation of Talent and U.S. Economic Growth.” Econometrica 87, no. 5: 1439–1474. September 2019.

Hughes-Cromwick, Ellen, and Julia Coronado. 2019. “The Value of U.S. Government Data to U.S. Business Decisions.” Journal of Economic Perspectives 33, no. 1: 131–146.

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Marr, Chuck, and Josephine Cureton. 2025. Administration’s Proposed Cuts to Non-Defense R&D Pose Long-Term Risk to Rising Living Standards. Center on Budget and Policy Priorities, October 2025.

McNicholas, Celine, Margaret Poydock, and Josh Bivens. 2026. 47 Ways Trump Has Made Life Less Affordable in the Last Year. Economic Policy Institute, January 2026.

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What the 2025 unionization data show

The number of workers represented by a union increased by 463,000 to 16.5 million in 2025, the highest level recorded in 16 years. These unionized workers account for 11.2% of all wage and salary workers, bringing union density back to its 2023 rate. The fact that union density is at its highest since just 2023, while the total number of union-represented workers is at its highest since 2009, reflects growth in overall employment—the denominator of the rate—over this period. When assessing trends in unionization, it is useful to examine changes in both rates and levels; rate changes capture shifts in the share of workers who are unionized, while level changes capture the net amount of successful new organizing (recalling that when new businesses open, they do not automatically adopt the unionization rate of existing firms; they must be organized, a process that requires substantial time and effort).

As a result of the government shutdown in 2025 from October 1 to November 12, the survey the union membership data are based on—the Current Population Survey (CPS)—was not conducted in October, and the 2025 figures therefore reflect an average of the remaining 11 months. To assess the impact of the missing month on reported changes in unionization, we recalculated 2024 estimates excluding October to ensure an apples-to-apples comparison between 2024 and 2025. The results indicate that the absence of October data in 2025 did not greatly affect the key findings: Union representation increased by 439,000 in this exercise—compared with 463,000 as published by the Bureau of Labor Statistics (BLS)—and union density rose by 0.1 percentage points, identical to the published change. Nonetheless, the loss of a month of CPS data—something that has never occurred in the history of the survey—represents a serious and preventable degradation of the nation’s labor market statistics, reducing their precision, even where headline estimates appear relatively unaffected.

The overall union density of 11.2% masks large differences in unionization by sector. Unionization is far more prevalent in the public sector than the private sector: In 2025, 36.4% of public-sector workers were covered by a union contract, compared with 6.8% of private-sector workers. Both the public and the private sectors saw increases in unionization in 2025.

The public sector saw a 0.7 percentage-point increase in union density in 2025, rising from 35.7% to 36.4%. This growth reflected an increase of 236,000 unionized workers. The most notable development in public-sector unionization in 2025 occurred among federal government workers. Despite—and likely because of—the Trump administration’s aggressive attacks on federal employees and their unions, federal workers increasingly turned to collective representation. Union density among federal workers rose from 29.9% to 31.1%, the largest single-year increase since 2011. This increase represented a gain of 40,000 unionized workers—notable given that federal government employment fell as the Trump administration slashed federal jobs.

Unionization among state and local government workers also rose—from 37.1% to 37.6%, reflecting an increase of 196,000 unionized workers.

Private-sector union coverage increased by 227,000 in 2025, pushing the unionization rate up from 6.7% to 6.8%. Within the private sector, there were particularly large gains in health care and social assistance, retail trade, and educational services. In contrast, the traditionally blue-collar industries of mining, manufacturing, and transportation and utilities saw declines. Construction was one heavily blue-collar sector to buck this trend, posting substantial gains in union coverage.

The BLS unionization numbers serve as a timely reminder that the conventional notion of unionized workers as predominantly white men is woefully outdated. As of 2025, roughly a third (32%) of unionized workers are white non-Hispanic men, while roughly two-thirds (68%) are people of color and/or women.2 These shares were unchanged from 2024.

The gender gap in unionization is very small—less than 1 percentage point. However, the gap widened somewhat in 2025, as the unionization rate for men rose more than that for women: Men’s unionization increased from 11.3% to 11.6%, while women’s increased more modestly, from 10.8% to 10.9%.

Of all major racial and ethnic groups, Black workers continued to have the highest unionization rates in 2025, at 12.7%. This compares with unionization rates of 11.0% for white workers, 10.4% for Asian workers, and 9.9% for Hispanic workers. Despite maintaining the highest density, Black workers experienced a decline in 2025, dropping from 13.2% to 12.7%. This decline reflected decreases among both Black men and Black women, though the underlying dynamics differed by gender. The losses were larger among Black women, and the decline among Black women in the level of union coverage was likely due, at least in part, to falling employment in 2025—a pattern not observed among Black men, whose employment rose. The drop in Black women’s employment in 2025 has been documented in recent analyses (see Wilson 2026). 

Even with the decline in unionization among Black workers, unionization among people of color overall increased more (up 289,000) than among white non-Hispanic workers (up 174,000).3 This was driven by sizeable increases in unionization among both Hispanic and Asian workers.

Although younger workers tend to have lower unionization rates, the 2025 data reflect the heightened organizing activity among younger workers in recent years. Union coverage among workers under age 45 increased by 428,000, compared with an increase of 35,000 among workers age 45 and over.

Overall unionization rates obscure large differences across the country. States in the Northeast and the West tend to have higher unionization rates—particularly New York, New Jersey, and Connecticut in the Northeast, and Hawaii, Washington, Alaska, California, and Oregon in the West. By contrast, states in the South tend to have lower unionization rates, notably the Carolinas, Arkansas, Louisiana, Georgia, and Texas. States in the Midwest tend to have unionization rates that fall somewhere in between.4

In 2025, however, this long-standing pattern showed potential signs of erosion, as the South accounted for close to half (46%) of all net gains nationwide. The region added 214,000 unionized workers, compared with 249,000 in the rest of the country combined.

More than 50 million workers wanted a union but couldn’t get one

The share of nonunion workers who would like to have a union at their workplace far exceeds the share who are actually unionized. In 2025, 11.2% of workers were covered by a union contract. Recent survey data show that 43% of nonunion workers would vote to unionize their workplace if given the opportunity.5 That is up substantially from previous decades; surveys in 1977 and 1994 found that fewer than one-third (27% and 31%, respectively) of nonunion workers said they would vote to unionize if they could.6 There were 130.2 million wage and salary workers in 2025 who were not represented by a union; 43% of that is 56 million. In other words, more than 50 million workers in 2025 wanted union representation but were unable to get it.

Unions have record high public favorability in U.S.

The 2025 rise in union density coincides with a high public favorability toward unions. Since 2021, approval for unions has remained high, with over 68% of people in the U.S. viewing unions favorably (Brenan 2025). This positive view of unions is shared across generations, with majorities of Boomers (59%), Gen X (58%), Millennials (61%), and Gen Z (63%) viewing unions favorably. Young adults (ages 18–35) have the highest favorability rate at 72% (Glass 2025). Unions are viewed positively across party lines with Democrats (90%) and Independents (69%) having high favorability rates for unions, and over 40% of Republicans approving of labor unions (Brenan 2025). Some conservative organizations recognize that unions are popular among workers: Research by American Compass finds that at least 46% of Republicans view unions somewhat favorably, with favorability increasing among young Republicans (60%) (American Compass 2025). Data from the American National Election Studies show that people in the U.S. favor unions over big business now more than ever—with the average rating for labor unions hitting a new high (60%), while big business hit a low (44%) (Sojourner and Reich 2025). Further, most people in the U.S. say the decline in union density is bad for the country (60%) and bad for working people (62%). Most young adults (69%), including young Republicans (52%) and young Democrats (82%), view the decline in union density as bad for working people (Van Green 2025).

Benefits of unions

The high favorability of unions in the U.S. makes sense when you consider the benefits unions provide for workers. When workers join together in a union and engage in collective bargaining, their wages, benefits, and working conditions improve. Further, in communities with higher union density rates, working families have higher incomes, greater access to health care, and fewer restrictions on voting. Unions:

• Boost wages. On average, a worker covered by a union contract earns 12.8% more in wages than a peer in a nonunionized workplace (EPI 2025b). Further, in places or industries where unionization is strong, unions also boost wages for nonunion workers by effectively establishing higher standards. This is the union “spillover” effect.

• Narrow racial wage gaps and raise women’s wages. On average, Hispanic and Black workers represented by a union are paid 16.4% and 12.6% more, respectively, than their nonunionized Hispanic and Black peers (EPI 2025c). The wages of women represented by a union are 9.8% higher than those of nonunionized women (EPI 2025d).
• Create healthier and safer workplaces. Unions also improve the health and safety of workplaces by providing health insurance and paid sick time, requiring safety equipment, and empowering workers to report unsafe conditions without fear of retaliation (McNicholas et al. 2025).
• Increase retirement security. More than 9 in 10 unionized workers have access to employer-sponsored retirement plans. Further, union employers are more likely to contribute more toward retirement plans than comparable nonunion employers (McNicholas et al. 2025; BLS 2025).

In the same way that unions give workers a voice at their workplace, the data suggest that unions also give workers a voice in shaping their communities. Research by EPI documents a strong correlation between high-union-density states and a range of measures that promote higher incomes, healthier communities, and a stronger democracy (McNicholas et al. 2025), as reflected in:

• Higher minimum wages. The average minimum wage of high-union-density states is $13.70, compared with low-union-density states’ average minimum wage of $9.30.
• Higher incomes. Median household incomes in high-union-density states are more than $12,000 higher, on average, than median incomes in low-union-density states.
• More spending on education. States with higher rates of unionization spend $22,777 per pupil on education, compared with $15,568 per pupil in low-union-density states. Further, states with higher unionization rates are less likely to have universal voucher programs.
• Greater access to paid sick leave. 70.6% of states with the highest union density have enacted paid sick leave legislation, compared with just 11.8% of low-union-density states.
• Fewer voting restriction laws. Since 2021, low-union-density states have passed 44 voter restriction laws, whereas high-union-density states passed six such laws.
• Stronger protections for reproductive freedom. States with abortion protections have an average union density twice as high as that of states with varying degrees of abortion restrictions and bans (Poydock 2025).

It is clear that unions provide workers with direct benefits. Further, there is an undeniable correlation between higher levels of unionization and stronger economic, community, and democratic outcomes. While these benefits have long been evident, increased recognition of unions’ role in creating a more just economy and society has undoubtedly contributed to the increase in unionization in 2025. Beyond this, unions have provided representation and support to workers targeted and retaliated against by the Trump administration.

Unions are fighting against attacks from the Trump administration

The growth in unionization in 2025 occurred despite President Trump’s relentless attacks on workers and their unions. Since returning to office, President Trump has engaged in a consistent campaign against U.S. workers, making their lives less affordable in the process. From stripping federal workers’ collective bargaining rights to canceling federal collective bargaining agreements, and compromising the independence of the sole federal agency that administers and enforces private-sector workers’ union and collective bargaining rights, Trump has made it known that he prioritizes the interests of employers over working people.

Unions have consistently been a counterforce against Trump’s attacks on workers. When the Trump administration began indiscriminately firing federal workers without cause, unions sued the administration over its efforts to downsize the federal government. Since then, a U.S. District Court judge ruled that the Office of Personnel Management wrongfully directed federal agencies to fire thousands of probationary employees (Heckman 2025). Unions have also helped win reinstatement for thousands of federal workers. In January 2026, nearly 1,000 workers at the National Institute for Occupational Safety and Health, where over 90% of the workforce received layoff notices, were fully reinstated by the Department of Health and Human Services after months of pressure from unions, public health experts, and worker advocates (AFGE 2026).

In addition to legal fights, unions have been key mobilizers in helping pass legislation that reverses harms from the Trump administration. In response to Trump’s executive order that stripped the collective bargaining rights from over 1 million federal workers, unions have shepherded the Protect America’s Workforce Act to reverse the executive order. In December 2025, the bill passed the House with bipartisan support and has moved to the Senate, where it is currently awaiting consideration (AFL-CIO 2025).

Further, as President Trump actively makes life less affordable for workers, unions are winning contracts that are raising workers’ pay. In Georgia, the International Association of Machinists and Aerospace Workers secured a four-year contract for John Deere workers that included general wage increases of at least 2% each year of the contract, a $3,000 ratification bonus, and no increases to insurance premiums during the length of the contract (IAM Union 2025). In Illinois, the Committee of Interns and Residents/SEIU Healthcare won a first contract for 1,000 resident physicians and fellows at the University of Chicago that included a 17% wage increase through the length of the contract (Moreno 2025). The News Guild of New York won a first contract for journalists at the New York Daily News that included salary minimums of $60,000 and additional wage increases of 6% during the first six months of the contract (The NewsGuild of New York 2025). These are just a few of the many examples of unions raising workers’ pay in 2025. In contrast, the Trump administration has put forward an economic agenda that has undermined workers’ wages and eroded their economic security (McNicholas, Poydock, and Bivens 2026).

Policy pathways to help workers win unions

The 2025 rise in unionization shows that workers are winning unions despite legal and political systems largely working against them. The increase is a testament to workers’ desire to have greater agency over their working lives and a more effective voice in shaping the policies that impact their families and communities. Policymakers have long failed to reform federal labor law to deliver the promise of union representation and collective bargaining first guaranteed U.S. workers nearly 100 years ago. This failure has left workers more vulnerable to attacks, as demonstrated by President Trump’s union-busting policy agenda. Still, workers are organizing their workplaces and winning contracts. If nothing else, policymakers should not allow for the passage of bad policies that make it harder for workers to win unions. But if policymakers want to deliver a pro-worker agenda that would help workers organize and collectively bargain, they should enact the following policies:

• Restore collective bargaining rights for federal workers. The Senate should pass the bipartisan Protect America’s Workforce Act, which would repeal President Trump’s executive order that stripped collective bargaining rights for more than 1 million federal workers. President Trump could also rescind his executive orders that stripped federal workers of their collective bargaining rights.
• Pass the Protecting the Right to Organize Act and the Public Service Freedom to Negotiate Act. These bipartisan bills would strengthen private-sector and public-sector workers’ rights to organize and collectively bargain.
• Ensure workers can reach a first contract. Congress should pass legislation that encourages unions and employers to reach a first contract in a timely manner. The National Labor Relations Act requires unions and management to bargain in good faith but does not require that the two sides reach an agreement. As a result, most unions fail to reach a first contract within a year of unionizing. The bipartisan Faster Labor Contracts Act would establish a mediation-and-binding-arbitration process when employers refuse to bargain in good faith.

Further, states have the opportunity to maintain—and even expand—workers’ rights and protections President Trump and Congressional Republicans are trying to roll back. They can:

• Expand collective bargaining rights to public sector, domestic workers, agricultural workers, and app-based/gig workers.
• Eliminate so-called right-to-work (RTW) laws. Twenty-six states currently have anti-union so-called RTW laws, which diminish workers’ collective power by prohibiting unions and employers from negotiating union security clauses into collective bargaining agreements. This makes it harder for workers to join, form, and sustain unions. More states should restore private-sector workers’ full bargaining rights by repealing these anti-union state laws, as Michigan did in 2023.
• Protect workers’ right to opt out of captive audience meetings. Fourteen states have passed legislation that prohibits employers from mandating worker attendance at meetings focused on political or religious matters. This includes mandatory anti-union captive audience meetings, which the National Labor Relations Board ruled were a violation of the National Labor Relations Act in 2024. However, the current NLRB General Counsel has previously voiced opposition toward the 2024 NLRB decision, which makes state action more necessary.

Notes

1. In states without so-called “right to work” laws, private sector workers at unionized workplaces who are not union members may be required to pay “fair share” fees to cover the cost of representation, but they cannot be required to become union members or pay full dues.

2. The figures in this sentence are the authors’ own calculations based on Current Population Survey microdata (EPI 2025a). We rely on our own calculations here in order to construct nonoverlapping race and ethnicity categories. BLS’s published race and ethnicity categories overlap—for example, white Hispanic workers are counted as both white and Hispanic—and therefore do not permit the desired breakdown. Unless specifically noted, all other figures cited in this report are derived from BLS’s published calculations. 

3. The figures in this sentence are the authors’ own calculations based on Current Population Survey microdata (EPI 2025a). We rely on our own calculations here in order to construct nonoverlapping race and ethnicity categories. BLS’s published race and ethnicity categories overlap—for example, white Hispanic workers are counted as both white and Hispanic—and therefore do not permit the desired breakdown. Unless specifically noted, all other figures cited in this report are derived from BLS’s published calculations.

4. Note: We use the U.S. Census Bureau’s Census Regions.

5. This number can be found in Figure B of Ahlquist, Grumbach, and Kochan 2024. It was calculated from the survey data discussed in Diaz-Linhart et al. 2023.

6. Figure B of Ahlquist, Grumbach, and Kochan 2024. 

References

AFL-CIO. 2025. “Labor Movement Delivers Bipartisan Victory as House Passes Bill to Restore Federal Workers’ Union Rights” (press release). December 11, 2025.

Ahlquist, John S., Jake Grumbach, and Thomas Kochan. 2024. The Rise of the ‘Union Curious’: Support for Unionization Among America’s Frontline Workers. Economic Policy Institute, July 2024.

American Compass. 2025. PRO-Tip: Only Some Labor Reforms Are Pro-Worker. May 1, 2025.

American Federation of Government Employees (AFGE). 2026. “Major Union Victory–NIOSH Employees Win Full Reinstatement After Nine-Month Fight” (press release). January 14, 2026.

Brenan, Megan. 2025. “Labor Union Approval Relatively Steady at 68% in U.S.” Gallup, August 28, 2025.

Bureau of Labor Statistics (BLS). 2025. “Table 1. Retirement benefits: Access, participation, and take-up rates, March 2025.” Employee Benefits in the United States. Last modified September 25, 2025.

Diaz-Linhart, Yaminette, Arrow Minster, Dongwoo Park, Duanyi Yang, and Thomas Kochan. 2023. “Bridging the Gap: Measuring the Impact of Worker Voice on Job-Related Outcomes.” MIT Working Paper.

Economic Policy Institute. 2025a. Current Population Survey Extracts, Version 2025.1.6, https://microdata.epi.org.

Economic Policy Institute (EPI). 2025b, State of Working America Data Library, “Union Wage Premium – Union Wage Premium, Average (Regression-Based),” 2025. 

Economic Policy Institute (EPI). 2025c, State of Working America Data Library, “Union Wage Premium by Race/Ethnicity – Union Wage Premium, Average (Regression-Based),” 2025. 

Economic Policy Institute (EPI). 2025d, State of Working America Data Library, “Union Wage Premium by Gender – Union Wage Premium, Average (Regression-Based),” 2025. 

Glass, Aurelia. 2025. “Everybody Likes Unions.” Center for American Progress, November 4, 2025.

Heckman, Jory. 2025. “Court Finds OPM Unlawfully Directed Mass Firings, Tells Agencies to Update Personnel Files.” Federal News Network, September 13, 2025.

IAM Union. 2025. “Big Win at John Deere: Georgia Local 2789 Members Ratify Strong New Contract” (press release). November 18, 2025.

McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good For Workers—They Also Benefit Communities And Democracy. Economic Policy Institute, August 2025.

McNicholas, Celine, Margaret Poydock, and Josh Bivens. 2026. 47 Ways Trump Has Made Life Less Affordable in the Last Year. Economic Policy Institute, January 2026.

Moreno, Julian. 2025. “UChicago Medicine Resident Physicians Pass First-Ever Union Contract.” The Chicago Maroon, November 11, 2025.

The NewsGuild of New York. 2025. “The NewsGuild of New York Reaches Tentative First Contract Agreement with Alden Global Capital for Journalists at the Daily News.” Editor and Publisher, November 10, 2025.

Poydock, Margaret. 2025. “Unions Can Play A Critical Role In Safeguarding Reproductive Freedom.” Working Economics Blog (Economic Policy Institute), August 25, 2025.

Sojourner, Aaron, and Adam Reich. 2025. “Americans Favor Labor Unions Over Big Business Now More Than Ever.” Working Economics Blog (Economic Policy Institute), May 20, 2025.

Van Green, Ted. 2025. “Majorities of Adults See Decline of Union Membership as Bad for the U.S. and Working People.” Pew Research Center, August 27, 2025.

Wilson, Valerie. 2026. “Black Women Suffered Large Employment Losses in 2025—Particularly Among College Graduates and Public-Sector Workers.” Working Economics Blog (Economic Policy Institute), February 10, 2026.

This FAQ answers key questions about the “no tax on overtime” policy and what it means for working people.

Since 1935, the National Labor Relations Act (NLRA) has provided most private-sector workers the statutory right to join together with coworkers for the purposes of mutual aid and protection, including by forming or joining unions to bargain collectively with employers over wages, hours, and terms and conditions of work.

Under the NLRA, workers can form a legally recognized union in two ways:

1. They can petition their employer to voluntarily recognize their union after a majority signs union cards or petitions, or
2. They can file a petition for a union election administered by the National Labor Relations Board (NLRB) and have their union certified by the NLRB after a majority vote in favor. In practice, the NLRB election process can be lengthy, and workers often face intense employer interference.

The NLRA requires employers to bargain with workers who have won a union election and prohibits employers from retaliating against workers for organizing activity. But NLRA enforcement structures are weak; employers who violate the NLRA face no monetary penalties; and workers whose rights are violated receive no compensatory damages. As a result, millions of workers seeking to unionize face daunting obstacles because the NLRA fails to reliably deter employer retaliation or to require that employers bargain in good faith to reach a contract settlement. Decades of federal policy and court decisions have further weakened the NLRA; most notably, the 1947 Taft-Hartley Act legalized new forms of employer anti-union activity and allowed states to constrain collective bargaining rights through anti-union, so-called right-to-work (RTW) laws.

Moreover, many workers have never been covered by federal labor law. Jim Crow-era occupational carveouts in the NLRA continue to exclude public-sector workers, farmworkers, and domestic workers (including millions of home care and child care workers) from coverage, as well as supervisors and independent contractors. Other federal labor laws cover some other groups of workers: Rail and airline workers’ collective bargaining rights are governed by the Railway Labor Act; U.S. Postal Service employees gained collective bargaining rights in the 1970 Postal Reorganization Act; and collective bargaining rights of most other federal employees are governed by the Federal Service Labor-Management Relations Act (enacted as Title VII of the 1978 Civil Service Reform Act).

What are the threats to workers’ federal rights to unionize and collectively bargain?

Current threats to workers’ union rights include:

• Undermining the NLRB’s ability to enforce labor law: After taking office in January 2025, one of President Trump’s first actions was removing Board member Gwynne Wilcox, attacking the NLRB’s status as an independent agency. This move left the NLRB without a quorum and therefore unable to adjudicate cases until quorum was eventually restored in December 2025. This rendered the NLRB nonoperational for the better part of a year—allowing employers to violate labor law with no immediate legal consequences—and created an enormous backlog of unadjudicated cases for an already underfunded and understaffed NLRB to consider. Even more consequentially, the attack compromised the NLRB’s long-term ability to function independently: Firing Wilcox for “disfavoring employers” made clear that under the current administration, NLRB members must favor employers to keep their jobs—essentially eliminating the independence of the agency.
• Court challenges to the NLRB’s constitutionality: Corporate lawsuits challenging the NLRB’s constitutionality and status as an independent agency may eventually be headed to the Supreme Court—which could effectively repeal the NLRA and end federal protections for private-sector workers’ rights to unionize and bargain.
• Eliminating federal mediation of difficult contract disputes: The Trump administration has attempted to use executive action to eliminate the Federal Mediation and Conciliation Service (FMCS), a federal agency that, since 1947, had provided mediation to resolve labor-management disputes and training to promote productive collective bargaining relationships. This action has so far been blocked by court challenges.
• Rendering the NLRB hostile to workers and further weakening enforcement: One of President Trump’s first actions after taking office in 2025 was the firing of NLRB General Counsel Jennifer Abruzzo. The new NLRB General Counsel has already begun to rescind key practices implemented by Abruzzo to strengthen enforcement. Likewise, newly appointed NLRB Board members may reverse recent decisions that represented steps toward shoring up workers’ rights to organize and bargain, such as the Board’s 2024 ruling declaring anti-union captive audience meetings illegal.
• Loss of bargaining rights for workers with precarious NLRA coverage: Tens of thousands of student workers at private colleges and universities have organized unions in recent years via successful NLRB elections, but the NLRB’s position on whether student workers at private institutions are covered by the NLRA has fluctuated under different administrations. It is widely anticipated that new Trump NLRB appointees could reverse this key precedent, stripping student workers of NLRA protections.
• Stripping public employees’ collective bargaining rights: The Trump administration has prioritized direct attacks on union rights of federal employees, first by terminating collective bargaining agreements covering Transportation Security Administration employees, then terminating union contracts across several other federal agencies to implement a Trump executive order aimed at eliminating collective bargaining rights for most federal employees. These actions continue to face legal challenges (and could be reversed by legislation passed by the House and under consideration in the Senate), though the administration has often pressed ahead with terminating or ignoring union contracts despite court orders. The attempt to eliminate federal employee collective bargaining advances elements of a broader proposal in Project 2025 (p. 82) that claims public employee unions are “not compatible with constitutional government” and calls on Congress to consider banning them. 
• Narrowing existing legal pathways to unionization: Project 2025 (p. 603) proposes to eliminate the default NLRA process that allows workers seeking to form a union to approach their employer to request voluntary recognition once a majority have signed union cards as verified by a neutral third party via a “card check” process. Several states have also advanced parallel attacks on workers’ NLRA-protected right to organize using this process. So far, Tennessee, Georgia, and Alabama have enacted anti-union legislation threatening to deny state economic development funds to any employer who voluntarily recognizes a union, even though voluntary recognition when a majority of workers have signed union cards remains fully lawful under the NLRA.

How can states maintain and strengthen worker rights to unionize and bargain?

States have clearly established authority to legislate in areas of labor law not covered by the NLRA (for example, regarding the collective bargaining rights of groups of workers who are excluded from NLRA coverage), but they have historically been preempted from lawmaking in areas that the NLRA “arguably protects or prohibits” or that address questions Congress intended to leave to “free forces” of the market. Moreover, in 1947 Congress explicitly granted states authority to restrict (but not expand) private-sector workers’ collective bargaining rights by enacting so-called right-to-work laws barring employers and unions from including union security clauses in collective bargaining agreements. Unless otherwise noted, the state policies and practices discussed in this brief are measures that have been previously enacted in multiple states and are not preempted by federal labor law.

Step I: Lock in and shore up existing federal protections

As noted above, the NLRA was enacted in 1935 to protect workers’ basic rights to organize for better working conditions, form unions, and collectively bargain—but current federal and corporate attacks are accelerating a decades-long trend of weakening these protections. This means even workers whose rights are legally protected on paper operate in practice on a highly uneven playing field when trying to organize a union or negotiate a fair contract. States can take several important actions to shore up workers’ existing labor rights, remove state-level constraints and obstacles to unionizing, and ensure that workers can more fully exercise their existing federal rights to organize and collectively bargain.

To lock in current federal union and collective bargaining protections, states should: 

1. Repeal so-called right-to-work laws and other anti-union state measures constraining workers’ organizing and collective bargaining rights:

At a bare minimum, states should avoid diminishing workers’ federal labor rights and refrain from imposing additional obstacles to organizing and collective bargaining.

• 26 states have in place anti-union RTW legislation that constrains collective bargaining rights by barring employers and unions from negotiating union security agreements.1 RTW laws are designed to suppress union membership by making it more difficult for workers to form and sustain unions, and data show they result in lower wages and benefits for all workers. States with RTW laws should follow Michigan’s recent lead and repeal them.
• Colorado should repeal its unique, long-standing anti-union state law that imposes RTW-like conditions on unionizing workers unless they undergo a state-mandated “second election” (and win by a supermajority) in order to win full bargaining rights.
• States (including Alabama, Georgia, and Tennessee) should repeal recently enacted anti-union laws intended to penalize employers and workers who exercise NLRA-protected rights to use majority card check and voluntary recognition to form a union, and other states now considering such legislation should reject it.

2. Protect workers’ freedom of conscience and ban mandatory “captive audience” meetings:

Workers’ right to organize without employer interference is spelled out clearly in federal labor law, but employers have long used mandatory captive audience meetings and other tactics to violate these rights in practice to block workers from organizing new unions. In 2024, the NLRB ruled that anti-union captive audience meetings constitute illegal employer interference with workers’ right to organize. Prior to this ruling, at least a dozen states had already enacted legislation to protect workers broadly from the overarching threat of employer coercion, banning mandatory captive audience meetings on political or religious matters including (but not limited to) employer opinions on unionization. Because the NLRB can only address captive audience meetings focused on anti-union speech, and because the new ruling is at risk of reversal by the current labor board, it remains important for states to enact and enforce legislation that broadly protects workers’ freedom of choice and conscience on a wide range of political and religious matters.

3. Extend unemployment insurance to striking or locked out workers:

States can help make sure workers can fully exercise their collective bargaining rights—including the right to strike if necessary—by ensuring that workers whose paychecks stop due to a strike are eligible to apply for unemployment insurance (UI) benefits under the same rules as other unemployed workers. In too many states, workers are disqualified from applying for UI when on strike (or even when locked out by an employer during a labor dispute), opening the door for employers to undermine negotiations and attempt to “starve workers out” rather than negotiating to reach an agreement. More states should join New Jersey, New York, Oregon, and Washington in ensuring that both striking and locked out workers are eligible to apply for UI. This is an extremely low-cost policy that can help level the playing field in labor negotiations, stabilize local economies during labor disputes, and potentially lead to fewer strikes and lockouts by encouraging parties to seek fair contract settlements.

4. Guarantee organizing and collective bargaining rights in state constitutions:

A handful of states have long had constitutional language in place affirming collective bargaining rights, and other states have been motivated to amend their constitutions to safeguard basic labor rights in the face of growing threats. In 2022, a supermajority of voters approved a constitutional Workers’ Rights Amendment in Illinois declaring that “no law shall be passed that interferes with, negates, or diminishes the right of employees to organize and bargain collectively.” A similar constitutional amendment will appear on the ballot in Vermont in 2026. These amendments affirm the collective bargaining rights of all employees, regardless of occupation or sector, and explicitly prohibit RTW-style legislation that limits bargaining rights. Such constitutional language can help spur legal or legislative action necessary to actualize collective bargaining rights for farmworkers or others excluded from NLRA coverage—as New York and New Jersey have done—and may help states protect the labor rights of student workers and others whose status under federal labor law has been or may in the future become precarious.

5. Enact “trigger laws” to ensure future continuity of rights for workers at risk of losing federal labor law coverage:

Given current threats to the NLRA, some states are enacting policies designed to ensure they are positioned to protect private-sector workers’ rights to unionize and bargain in the event that aspects of federal labor law are repealed, struck down, or go unenforced. Taking such actions in as many states as possible is an important stopgap measure that comes with opportunities to improve and strengthen labor laws in some states. However, it is also the case that many states instead have in place (or could pass) highly restrictive anti-union state labor laws that would take effect if no longer preempted by the NLRA and strip many workers of their collective bargaining rights.

• More states should follow the lead of Rhode Island’s 2025 legislation ensuring collective bargaining rights for student workers at private universities in the event their federal labor rights are revoked by future NLRB decisions. The new law expands state labor law’s definition of “employee” to include “teaching assistants, research assistants, fellows, residential assistants and proctors” “when not already protected” by the NLRB. 
• In 2025, both New York and California enacted trigger laws authorizing their state labor boards to assert jurisdiction over private-sector labor relations in the event the NLRB ceases to do so. Massachusetts is also considering similar legislation. NOTE: These new laws are facing legal challenges from the NLRB based on claims that federal labor law preempts states from taking such action.
  

Step II: Extend organizing and collective bargaining rights to workers who are excluded from federal labor laws

Federal labor law excludes public-sector, agricultural, and domestic workers from coverage, as well as supervisors and independent contractors. This leaves states latitude to set their own policies on union and collective bargaining rights for workers in these occupations (with the exception of private-sector supervisors, where state action has been preempted by federal courts).

1. Ensure full collective bargaining rights for all state and local government workers:

State policies on collective bargaining for different categories of state and local government workers vary widely both across and within states. Currently, many states maintain public employee collective bargaining laws with provisions roughly equivalent to (and, in a few instances, stronger than) those covering private-sector workers under the NLRA. Some other states completely prohibit some or all public employees and employers from entering into collective bargaining agreements or heavily restrict the topics public employees and employers can negotiate and include in a contract. At present, roughly half of states lack robust, comprehensive collective bargaining laws covering all state and local government workers. State collective bargaining laws can vary across several dimensions, including:

• which groups of workers or occupations are covered
• which matters related to compensation and working conditions must be or can be discussed by parties in bargaining (including topics like whether workers can opt to pay their union dues via payroll deduction)
• whether bargaining is purely voluntary or whether employers are obligated to bargain under certain conditions, such as majority support for the union
• what steps a group of workers must take to demonstrate majority support for unionization in order to gain or maintain recognition and/or legal certification for purposes of collective bargaining
• what mediation or arbitration procedures are prescribed if the two parties reach an impasse in bargaining
• whether workers have the right to strike, and
• what recourse is available to workers or unions if employers violate the law.

States should assess the current strength of public-sector collective bargaining statutes across these dimensions and prioritize addressing coverage gaps or weaknesses, looking to states with robust comprehensive frameworks (and enforcement mechanisms) in place—such as Connecticut, Minnesota, Oregon, and others—for models. Examples of states moving to strengthen aspects of existing public-sector collective bargaining laws in recent years include the following:

• Many states with strong public-sector collective bargaining frameworks already in place continue to address coverage gaps and ensure equal collective bargaining rights to occupations formerly excluded or functionally blocked from coverage. Recent examples include legislation extending bargaining rights to university graduate researchers and state legislative employees in California, student employees at public universities in Washington, and various groups of Minnesota public university employees.
• New Mexico overhauled its public-sector bargaining statute in 2020, including restructuring the state’s labor board system to strengthen previously weak or inconsistent enforcement.
• In 2020, Virginia lifted a long-standing ban on public-sector collective bargaining and began to permit local governments to bargain with employee unions. In 2026, Virginia is considering much stronger legislation to create a comprehensive statewide collective bargaining framework covering all state and local government workers.
• In Maryland—where collective bargaining coverage varies by jurisdiction and occupation under a patchwork of highly fragmented laws—lawmakers are repeatedly called on to step in to extend bargaining rights to groups of otherwise excluded workers (most recently including community college employees and library staff). This year, Maryland lawmakers should take overdue steps to enact proposed legislation to ensure similar rights for university graduate assistants and postdocs.
• Nevada, where local government employees have had collective bargaining rights for decades, extended these rights to state employees in 2019.
• Colorado granted limited collective bargaining rights to some state employees in 2020 and to some county government employees in 2022. Because (like many states) Colorado collective bargaining laws still exclude many public employees, other units of government have begun to step in as interest in unionization among Colorado public employees continues to grow. Following a successful 2024 local ballot initiative, Denver City Council adopted a strong collective bargaining ordinance covering municipal employees. And in 2026, university regents are considering a proposal to extend collective bargaining rights to faculty and staff across Colorado’s public universities.

2. Create pathways to collective bargaining for in-home child care and home health care workers:

To begin addressing some of the inequities caused by the NLRA’s exclusion of domestic occupations—work that is persistently underpaid and disproportionately performed by women, immigrants, and workers of color—lawmakers have created pathways to collective bargaining for home-based child care providers in at least a dozen states and/or home health care workers in at least eight states. These state laws classify child care or home care workers as public employees for collective bargaining purposes when providing care supported by public funds (e.g., Medicaid). Under such state laws, child care and/or home care workers who choose to unionize can negotiate legally binding collective bargaining agreements with a designated state entity. Recent examples of states taking important action to extend or restore collective bargaining rights for domestic workers include:

• California, where home care workers first won collective bargaining rights in the 1990s, enacted additional legislation in 2019 to create a pathway to collective bargaining for home-based child care workers. California lawmakers have in recent years also considered proposed legislation to shift its long-standing county-by-county collective bargaining system for home care workers to a more consistent statewide system.
• 2024 Michigan legislation restored home health care worker bargaining rights (which had been previously revoked in 2012), establishing a legal pathway to unionization for over 30,000 Michigan home care workers and creating the Michigan Home Help Caregiver Council to bargain with home care workers on behalf of the state.
• Among other reforms, Vermont’s 2024 PRO Act repealed the previous exclusion of domestic workers from coverage under the state’s labor law.

• If enacted, 2026 proposed legislation to expand public-sector collective bargaining in Virginia will include home care workers, creating a Virginia Home Care Authority to act as the public employer of home health care workers for bargaining purposes.

3. Ensure full collective bargaining rights for agricultural workers:

Agricultural workers in at least 14 states currently have some legally protected collective bargaining rights, though the strength of these rights and state-level mechanisms to enforce them vary widely. California’s 1975 Agricultural Labor Relations Act (ALRA) remains the longest-standing and most robust state law covering farmworkers’ union rights. Like many state labor laws, the ALRA is largely modeled on the NLRA, but it also illustrates how states can learn from weaknesses in federal labor law when legislating in areas not covered by the NLRA. For example, California’s ALRA explicitly allows workers to unionize through majority card check recognition, permits unions to engage in secondary consumer boycotts, and gives its labor board broad authority to enforce the statute as necessary to further state labor policy (rather than requiring it to look to federal precedents established under the NLRA). Examples of other states that have recently pursued action to extend collective bargaining rights to farmworkers include:

• Following a court case affirming the state’s constitutional obligation to protect farmworker collective bargaining rights, New York enacted 2019 legislation amending its existing state labor statute to include farmworkers and granting enforcement authority to its existing state labor board. The New Jersey Supreme Court likewise in 1989 affirmed that employers are constitutionally required to bargain with farmworker unions, though the state has not yet created a statutory framework for farmworker collective bargaining.
• Colorado 2021 legislation removed a long-standing exemption of farmworkers from state labor law and codified farmworkers’ rights to organize and collectively bargain.
• Legislation to extend collective bargaining rights to farmworkers in Maine has been introduced numerous times since 2021, including a bill that was vetoed in 2022.

4. Create pathways to collective bargaining for independent contractors:

A few states have begun to experiment with statutory frameworks to support nonmajority pathways to unionization and unique forms of sector-wide collective bargaining for rideshare drivers. While it is too soon to know what outcomes will result, these policies are intended to create a pathway to a union contract for drivers who have been persistently treated by digital platform companies as “independent contractors” rather than employees (thereby excluding them from coverage under the NLRA and most other labor and employment laws). While app-based workers continue where possible to make claims under various state and federal laws that they should rightfully be considered employees, many have concluded that legal battles to compel tech companies to respect drivers’ employee status under the NLRA have no immediate prospect of success. So far, state-administered rideshare collective bargaining frameworks (developed in part through negotiations with rideshare companies like Uber) have been enacted in Massachusetts and California. Minnesota and Illinois are considering similar legislation.

Step III: Level the playing field for unionizing workers by streamlining organizing and first contract processes, strengthening state labor law enforcement, and educating workers about their rights

1. Strengthen state labor laws by applying lessons from federal labor law’s shortcomings:

Historically, most state labor laws and enforcement systems have been modeled largely on the NLRA. This has in turn meant that most state labor laws reflect some if not all the NLRA’s weaknesses—but this doesn’t have to be the case. When legislating in areas not preempted by the NLRA, states can strengthen labor laws far beyond familiar NLRA frameworks—including by incorporating into state law aspects of previously proposed (but not yet adopted) federal labor law reform. Examples of such opportunities include:

• Require employers to recognize unions once a majority of workers demonstrate interest: Federal labor law provides that once a majority of workers have signed union cards or petitions, they can approach their employer to recognize the union and have a neutral third party “check the cards” to verify majority interest. Indeed, as written, the NLRA assumed “card check” to be the default process for unionizing, with board elections becoming necessary only in instances where an employer had reason to question a union’s majority status. But because the NLRA also allows employers to refuse to recognize a union even where clear majorities exist, today, anti-union consultants nearly always counsel employers to block this pathway to unionization—meaning it is rarely available to workers in practice. State labor laws can however ensure that covered workers can use this process to unionize, as public-sector collective bargaining laws in at least 14 states currently do. For example, in 2003, Illinois amended its public-sector labor law to require employers to recognize unions based on verified majority showings of interest, as did New Mexico in 2020 and Vermont in 2024.
• Give workers and state labor boards stronger tools to enforce labor law: Limited and often ineffective enforcement mechanisms are a long-recognized shortcoming of federal labor law, and decades worth of proposed federal labor law reforms—including the Protecting the Right to Organize (PRO) Act considered by Congress in recent years—provide roadmaps for strengthening enforcement. States could, for example, adopt PRO Act-style proposals to strengthen enforcement by authorizing state labor boards to levy civil monetary penalties on employers who violate workers’ rights; award monetary damages (in addition to back-pay) to workers who are illegally fired for organizing; and seek court injunctions to get illegally fired workers back on the job quickly while retaliation cases are pending. State labor laws could also provide workers with a private right of action so they can sue employers for labor law violations in instances where a labor board fails to intervene within a reasonable length of time. The “trigger law” legislation currently under consideration in Massachusetts provides one concrete model for embedding many of these enhanced enforcement measures in state labor laws.
• Ensure timelines and processes for reaching a first contract: Studies show that under weak federal labor law, another common tactic employers use with near impunity to block workers from obtaining a union contract is refusing to bargain in good faith, with no intent to settle a first contract. Many state public-sector bargaining laws ensure timely contract settlements by prescribing that if parties don’t reach agreement within an established timeline, their disputes are submitted to mediation and/or binding arbitration. Illinois, for example, amended its existing public-sector bargaining law in 2025 to set first contract settlement timelines for all newly formed unions regardless of size. Where state labor laws lack timelines for first contracts, lawmakers can adopt proposed PRO Act provisions requiring parties to use mediation and, if necessary, binding arbitration to reach a first contract settlement if they are unable to do so on their own within six months of a new union’s certification.

2. Establish or expand state-level systems to provide mediation and other services that support productive labor-management relations:

Given the Trump administration’s attempts to hobble the Federal Mediation and Conciliation Service (FMCS), states that don’t already provide their own mediation services to assist parties in reaching contract agreements should take steps to do so. For example, Illinois established a new mediation services program in 2025, authorizing its state labor department to appoint a mediator in situations when FMCS is unable to provide one. States should also consider pooling resources to create regional mediation and enforcement services.

3. Ensure all workers can easily learn about their rights to unionize and collectively bargain:

Research shows that worker interest in unionizing continues to grow, but most workers have very little access to information about their labor rights or the steps involved in organizing a union and bargaining a contract. States can play tremendously important roles in ensuring more workers know about and are able to fully exercise their union rights. States can:

• facilitate the ability of existing unions (in sectors governed by state labor laws) to reach all workers they represent with information about their rights under the law and relevant collective bargaining agreements, including via new hire orientation sessions and regular electronic and in-person communication at the workplace. Several states have taken steps to embed these or similar requirements in public-sector bargaining laws. For example, since 2018, Maryland has required public schools to grant unions access to new employee orientation, and New Jersey has required public employers to provide at least 30 minutes for unions to meet with new hires within their first 30 days on the job.
• provide resources for state labor agencies to provide worker rights education programming and/or to replicate online resource hubs such as the Worker Organizing Resource and Knowledge Center created by the U.S. Department of Labor to serve as a “one-stop shop for information and resources on unions and collective bargaining.” Worker rights outreach and training events like those supported by Oregon’s Bureau of Labor and Industry (often in partnership with labor and community groups) also provide excellent models for more states to emulate.
• require basic worker rights education in high schools and as part of state-funded workforce development training programs. Individual teachers or school districts can and sometimes do provide students with information about workplace rights, including information about rights to unionize and collectively bargain (as do some apprenticeship training programs, especially those jointly sponsored by unions and employers). But to ensure all current and future workers have equal access to basic knowledge of their rights on the job, more states should set minimum requirements for including this content in high schools and workforce development programs. California 2023 legislation requiring worker rights instruction for all high school students during an annual “Workplace Readiness Week” is one model for other states to consider.
• maintain and expand state funding for programs that provide adult worker rights education and equip workers to take on leadership roles in their workplaces, unions, and communities. Examples for more states to follow include California, where starting in 2022, state budgets have designated funds to expand labor education capacity across the University of California system and launch new programs in underserved areas of the state, and Maine, where 2022 legislation appropriated funds to establish a new labor and community education center at the University of Southern Maine.

Additional recommended resources 

• State and local policymakers can raise standards and build power for workers (Center for American Progress American Worker Project) 

• Eight ways states can build worker power (Center for American Progress American Worker Project) 

• Building worker power in cities and states (Center for Labor and a Just Economy) 

• How states can lead the way for workers: A state playbook (The Century Foundation) 

• How state and local government can support workers’ right to form and join unions (NYU Wagner Labor Initiative) 

1. A union security clause is language included in a collective bargaining agreement—negotiated and jointly agreed to by labor and management—that sets terms under which employees covered by a union contract in a given workplace will either join the union or (for workers who choose not to join the union) contribute an agency fee to cover their share of costs of contract and workplace representation benefits they receive from the union. In the U.S., the ability to bargain over union security has proven critical in establishing the stability and longevity of unions in the context of highly unequal workplace power. Without a union security agreement, any union’s future remains by definition “insecure” and precarious—both because future financial resources are unpredictable and because of significant risk that an anti-union employer could at any time attempt to discourage union membership in order to hinder the bargaining process; dissolve a newly formed union; or even encourage decertification of a longstanding union. Overt employer interference with workers’ freedom to join or form unions via tactics like pressuring employees to drop union membership or selecting new hires based on their willingness to oppose a union is of course illegal. However, as noted in this report, such labor law violations remain commonplace both because they are difficult to prove and even if proven, generally result in few or no consequences for employers under existing weak labor laws.

This FAQ answers key questions about the “no tax on tips” policy and what it means for working people.