At a time when families across the country are struggling to afford housing, health care, and education, the Trump administration and its allies in Congress have been cutting support for basic needs and diverting huge sums of money to deportations.

In Minnesota, $4.4 billion in federal taxpayer dollars is being spent on detaining immigrants—many of whom are in the country lawfully—and even some U.S. citizens. That means, on average, every household in the state is paying roughly $2,000 to track down, intimidate, detain, or deport people.

If that money were spent instead on programs proven to improve the lives of working families—education, health care, living wages—it could improve Minnesota communities dramatically. Here are a few different ways the money could be spent over the remaining 2.5 years of the Trump administration:

• Schools across the state are being forced to cut staff and increase class size. With the money being spent on mass deportations, the state could hire 14,000 more full-time school teachers. This would mean, for example:
  • 1,100 more teachers in Minneapolis
  • 340 more teachers in Minnetonka
  • 215 more teachers in Bloomington
  • 140 more teachers in Duluth
• With the cuts to the Affordable Care Act, over 140,000 people in Minnesota are projected to lose their health insurance. Due to cuts in Medicaid funding, hospitals are at risk of closing down in Austin, Staples, Mahnomen, Baudette, Little Falls, Hibbing, and Minneapolis. With the money being spent on deportations, we could keep 129,000 people on health insurance, which would also help keep hospitals open.
• Over 400,000 Minnesotans rely on food stamps, primarily working families with children and elderly people on fixed incomes. But because of cuts in the 2025 Republican tax and spending megabill (the OBBBA), 45,000 people across the state are at risk of being cut off. With the money being spent on deportations, Minnesota could protect food stamps for all hungry families in the state.
• Last year, over 600 Veterans Administration positions were cut in Minnesota. With the funds being diverted to deportations, we could reverse all these cuts and guarantee Minnesota veterans the care they deserve.
• Or, instead of restoring any of these services, every household in Minnesota could be given a $2,000 tax refund.

EPI and others have documented the economic harms of a draconian immigration policy and enforcement on immigrants and their families, as well as U.S.-born workers and the economy as a whole. Any of the alternatives listed above would be a better use of taxpayer dollars for improving the welfare of everyday Minnesotans. It is critical that we take into account the missed opportunities of funding a mass deportation regime, including the badly needed services being ignored or cut off to keep this policy funded and to keep immigrants living in fear.

The bill includes a combined $71.9 million cut for the Department of Labor’s Wage and Hour Division (WHD) and the Occupational Safety and Health Administration (OSHA). Further, the measure implements a 3% cut to the National Labor Relations Board (NLRB). While the legislation slightly increases funding for the Equal Employment Opportunity Commission (EEOC) that the Trump administration has weaponized for political reasons, the amount overall remains insufficient. The appropriations measure now moves to the Senate, where the budget cuts face an uncertain future.

If enacted, these reductions would further strain these agencies that have faced over a decade of flat funding that hasn’t accounted for inflation or rising labor force participation (see Figure A). This chronic underfunding has severely impacted their ability to enforce worker protection laws.

Figure A

The consequences of underfunding worker protection agencies

The Department of Labor serves the nation’s workers by administering and enforcing most federal worker protection laws, such as the Fair Labor Standards Act, the Occupational Safety and Health Act, and the Family and Medical Leave Act. Within this framework, WHD ensures that workers receive wages earned while OHSA evaluates safe workplace conditions and standards. Moreover, independent agencies such as the EEOC enforce a range of anti-discrimination laws while the NLRB enforces private-sector labor law, including workers’ rights to a union and collective bargaining. Together, these government agencies are designed to equip workers with the tools to combat workplace abuses and rectify unequal bargaining power. However, enforcement agencies are unable to fulfill their mandates with reduced staffing and resources.

Since 1992, OSHA has experienced a 16.0% decrease in inspectors. OSHA has been left with so few resources that it would take 191 years for its inspectors to visit every workplace under its coverage just once. Furthermore, a recent Government Accountability Office report flagged critical agency shortcomings, noting OSHA’s weak efforts to address the rising tide of workplace violence against health care and social service workers.

WHD has faced similar staffing challenges. The number of WHD investigators is at its lowest point since at least 1973, despite being tasked with protecting many more workers. As a result, the total number of resolved WHD investigations has dropped significantly over the past few years (see Figure B).

Figure B

Meanwhile, the EEOC has experienced an uptick in discrimination claims over the decades alongside rising labor force participation, yet its resources have not matched the pace of these shifts. For the NLRB, funding for the agency has remained flat except for a recent $6 million reduction in case-handling. The lack of funding has severely impacted field offices—the primary point of contact for union elections—with six closing between 2014 to 2025. In 2024, the NLRB released a statement describing their struggle to meet responsibilities such as conducting hearings and elections amid funding and staffing shortages. The consequence of these challenges is evident. Although favorability for unions nears a record high, major efforts to undermine worker organizing persist.

House budget cuts would leave workers more vulnerable to exploitation

If enacted, the House’s budget cuts would exacerbate an already precarious workplace reality. There were 5,070 fatal work injuries in 2024, according to the Bureau of Labor Statistics (see Figure C). Put another way, a worker died every 104 minutes from a work-related injury. Foreign-born Latinx workers were disproportionately impacted. Reducing OSHA funding and staffing will make it even harder to ensure preventable deaths do not occur.

Figure C

Additionally, amid eroding worker protections, workers have had billions of dollars of wages stolen each year. Undocumented workers are especially impacted, with many fearing to report violations especially amid the Trump administration’s anti-immigrant policies.

Furthermore, workers continue to face discrimination, filing an average of 83,000 charges per year since 1997. Political attacks on diversity, equity, and inclusion have only eroded the mechanisms designed to address these injustices.

The House budget proposal claims to champion efficiency, but true efficiency cannot be achieved by dismantling an already vulnerable labor protection ecosystem or by slashing public-sector resources. The chronic underfunding of worker protection agencies turns legally guaranteed protections into hollow promises and leaves workers exposed to unchecked exploitation and vulnerability. A budget that truly supports U.S. workers would pass robust funding for staffing, investigators, and programs that guarantee safety, fairness, and justice across every workplace.

As part of the passage of ARPA, the U.S. Department of the Treasury issued extensive rules outlining both how State and Local Fiscal Recovery Funds (SLFRF) could be spent and how the spending should be tracked. Unlike most other federal disbursements to state and local governments, recipients had great discretion in how they used their SLFRF allocation. This was one of the great strengths of the program, as it allowed each recipient to tailor its use of the funds to meet their specific needs.

Because of the wide flexibility they were given, state and local governments had to follow very clear procedures in accounting for the funds. Passing a budget alone was insufficient; governments had to formally obligate their ARPA funds through written contracts or interagency memoranda.

While this process did indeed cause some confusion, especially among smaller local governments with less experience dealing with federal funds, Treasury provided local governments with regular updates, held informative webinars, and created an extensive FAQ document to address the many issues that arose. Additionally, groups like the National League of Cities and the National Association of Counties provided extensive assistance to local governments to help them navigate SLFRF.

Pulaski County, like all other cities, counties, states, and tribal governments, was required to fully obligate its fiscal recovery funds by December 31, 2024. Despite this, the Democrat-Gazette found that the county could not account for over half of the funds it received—at least $38.6 million of the $76 million—and much of the information the county did provide the paper did not meet the Treasury Department’s reporting standards.

An EPI analysis of the county’s most recent filings with Treasury, from the end of 2025, bear this out. Pulaski County reported over $41 million falling under “Administrative Expenses,” but that category is supposed to be used only for the costs of “administering the SLFRF program.” Only five governments (out of more than 30,000 total state and local governments receiving funds) reported spending more than $41 million on administrative expenses: Three were states/commonwealths, and the other two were the City of Detroit and Fulton County, Georgia, whose SLFRF allocations were much larger than Pulaski County’s. It is difficult to imagine that Pulaski County needed to use 54% of its total SLFRF funds just to administer its use of SLFRF funds.

Moreover, the Democrat-Gazette reported the county’s reserve fund ballooned by almost $40 million during the same period. Treasury’s rules specifically prohibit SLFRF from being used for rainy-day funds or to replenish reserves. The funds were intended to be spent to address the myriad challenges arising from the COVID-19 pandemic.

SLFRF was a vital resource

It is important that state and local governments are held to account for their use of fiscal recovery funds. The case of Pulaski County illustrates that accountability safeguards for the program are necessary and effective rather than being bureaucratic burdens. Pulaski County’s apparent failure to follow the guidelines for using SLFRF funds is a rare exception. The Treasury Department implemented a novel, flexible program with guardrails and responsibilities that the vast majority of state and local governments were able to abide by. SLFRF was a vital component of ARPA, and did much to speed the economic recovery and prevent a Great Recession like the U.S. saw in 2008–2009.

SLFRF was vital in preserving and rebuilding the public-sector workforce. In the wake of the Great Recession, it took 11 years for state and local government employment to recover. Because of SLFRF, it took a fraction of that time (just three years and eight months) for the public sector to recover from the COVID-19 downturn. 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.

Additionally, 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.

Pulaski County, therefore, missed a tremendous opportunity to use its fiscal recovery funds to spur economic recovery and provide assistance to working families. The $350 billion SLFRF program was a vital resource during the pandemic and its aftermath. The example of Pulaski County demonstrates the importance of federal accountability requirements for largely unrestricted funds, not the failure of the program. Lessons from the vast majority of localities that successfully used SLFRF funds and the rare exceptions in which local governments failed to do so should continue to inform future policy design for similar programs.

Our decisions about whom and how to tax are decisions about which community needs we have the capacity to address and at what scale. Progressive taxes like personal, investment, and corporate income taxes generate more revenue from those who have the greatest ability to pay, and for whom the cost of losing the next dollar is small, relative to the last dollar of a family struggling to make rent and afford groceries. On the other hand, regressive revenue strategies like non-strategic tariffs, fees and fines, and an overreliance on sales taxes, especially when combined with cuts to social programs, heighten the sense that the system is unfair. Where progressive revenue strategies can bind a community together in mutual support and expand capacity to meet needs through good governance, regressive strategies erode people’s trust in the public sector.

H.R. 1 presents a vision of public finance that is unsustainable and erodes trust in government

Much of the federal tax code is in fact progressively structured, but for decades conservatives have weakened and attacked that progressivity. H.R. 1 (which the White House has referred to as the “One Big Beautiful Bill Act” or “OBBBA”) is the latest Republican-led effort toward breaking down trust in the public sector and social contract. H.R. 1 provides a suite of tax breaks to households across the income distribution; however, the wealthiest households and corporations see a far bigger tax cut from the package than the typical household does. In service to these tax breaks, the bill introduces devastating cuts to Medicaid, SNAP, and critical government agencies designed to help workers and their families thrive. Despite their size and the pain they will cause, these drastic cuts in the federal government’s capacity to serve and support working families are not enough to cover the costs of the corporate tax breaks; the Tax Policy Center estimates that H.R. 1 could increase the federal deficit by between $3.7 trillion and $5.1 trillion by 2034.

But unlike the federal government, states and localities cannot run budget deficits; their budgets must be balanced yearly. When major federal cuts happen, states and localities that rely on federal dollars to maintain critical services are forced to curtail and eliminate services, dive into emergency savings where they exist, or else shift to revenue generation strategies that often fall disproportionately on Black, brown, and poor households. The combination of directly hampering public services working people rely on while shifting more of the burden of raising revenue toward Black, brown, and poor workers and their families weakens worker power and exacerbates racial disparities.

H.R. 1 combines a shift toward regressive revenue strategies with massive tax breaks to corporations and the wealthiest households, in service to the Trump administration’s overarching goal: reasserting white, wealthy, and corporate privilege through tax cuts, deregulation, and the defunding of public institutions.

Regressive revenue strategies: Taking from the poor to give the rich even more breaks

The Trump administration has floated using tariffs as a replacement (either in full or part) for the federal income tax. This is not a new Republican strategy: Tariffs are a kind of consumption tax (on imported goods, along with the intermediate products businesses need to create goods and provide services domestically), and Republican-led state governments tend to rely more on consumption taxes1 (like sales taxes) and less on income taxes to increase revenue. Because poorer households spend a larger share of their income purchasing goods and services than the rich do, consumption taxes are inherently more regressive. The current federal income tax is progressively structured, in spite of the ways conservatives have attempted to weaken that progressivity over time. While tariffs can be a sensible part of a larger industrial policy strategy, governments place too large a burden on low- and moderate-income households when they try to use consumption taxes as a primary source of revenue. 

States and localities may turn to fines and fees to raise revenues in the absence of adequate federal support. These penalties are a poor substitute for progressive taxes. Fines and fees historically have only been able to cover a small fraction of state and local budget costs. And this is baked into the design: If the point of a fine or fee is to deter behavior, the best-case scenario (ending the behavior) would result in no revenue.

Even so, fines and fees cause significant economic pain for working-class families in the Black communities that are most affected by them. On an ethical level, a modern idiom applies: “If the penalty for a crime is a fine, that crime only exists for the poor.” The criminal justice system can trap poor folks in a cruel cycle of penalization for being unable to pay traffic tickets, court fees, and even their own surveillance through ankle monitors. Fines and fees increase the economic burden on those with the least ability to pay, all for a low return, making them a poor substitute for broad, progressive taxes.

Faux-progressive revenue strategies are ineffective and distract workers, their families, and policymakers from the need for real change

Ineffective tax gimmicks like temporary deductions on overtime and tipped income distract from the need for real reform around worker pay and scheduling. The point of requiring businesses to pay time-and-a-half for overtime is to discourage pushing workers to work beyond what we have collectively decided is a full and reasonable period of labor. Tipping is an outdated practice with racist roots, designed to shift the cost of maintaining a workforce onto consumers, rather than having employers properly compensate employees. Instead of cynically gesturing toward affordability through encouraging bad business practices, we should empower workers to fight for better wages and consistent scheduling.

Conservatives may also try to balance budgets by allowing progressive tax expenditures to expire (e.g., the recent expiration of the ACA premium tax credits or the expiration of the expanded child tax credits passed as pandemic relief). Temporary tax breaks themselves are not the most effective means of addressing structural economic issues; if health care or health insurance is persistently inaccessible to wide swaths of the population, we should seek to remedy that by making access universal—or, at the very least, making the credits that allowed greater access in the first place permanent. Allowing tax breaks implemented to address structural inequities to expire without an alternative solution to the problem being addressed is negligence. There are ways to balance budgets that do not involve reversing hard-won progress toward equity.

Progressive ways to generate revenue: Worker-centered tax policies can reduce inequality and expand the tax base

There are better ways of raising revenue that will support workers and their families, rebuild public trust in government, and get us the public goods and services we want and need. Since most Americans earn their living through selling their labor, it makes sense to keep some progressive tax on income to ensure people remain invested in the social contract. But with so much wealth and income concentrated amongst a few individuals, a necessary step is shifting more of the tax burden toward extremely high earners, wealth, and investment income. This will generate more revenue to improve public services and infrastructure, while tamping down on inequality. Adding tax brackets for the highest earners, adopting a legitimate tax on wealth holdings, and taxing the income made from investments at a rate closer to that of income from wages and salaries progressively raise revenues without increasing the burden on most U.S. households.

Proper enforcement of the current tax code would go a long way toward improving both our ability to raise funds and the public’s trust in public finance. The tax code is rife with opportunities for wealthy individuals and corporations to evade paying their fair share of taxes, allowing them to skirt holding up their end of the social contract. The IRS is also critically underfunded and recovering from recent staff reductions from the Trump administration. With enough resources to enforce existing tax law effectively, the IRS could go after the largest tax evaders and see returns that matter, as opposed to disproportionately targeting Black households without the funds to instigate a drawn-out legal battle over an audit.

Table 1

We need a tax code that supports states and localities and promotes full economic participation, not temporary tax gimmicks and handouts to the wealthiest

Taxpayers (literally) cannot afford to accept the conservative propaganda that all taxation is a burden on households. Taxes are one way of binding a democratic community together and allowing us to share in the costs of creating collective prosperity and community. Especially at the state and local levels, tax revenues are essential to providing the services people need to thrive. When federal funding gets pulled back and states and localities turn to regressive revenue strategies, it is working-class families who pay the price.

If we are going to rebuild a sense of trust in the social contract, we need to structure the tax code such that it becomes more progressive, tapping into a greater portion of the massive amounts of wealth and income that have pooled at the top. We can use that revenue to fund programs and new infrastructure that allow more people to fully participate in the economy:

• improved funding for public schooling, increasing teacher pay and quality of education
• a fully funded federal food assistance program, and/or adequate funding to states to support their own cash-assistance programs more comprehensive than Temporary Assistance for Needy Families (TANF)
• expanded access to and adequacy of Medicaid, or Medicare for All

Each of these initiatives could improve affordability and remove the need for state and local governments to pursue revenue regressive strategies that do more harm than good (like fines and fees). We won’t solve every structural inequality and eliminate all disparities through reforming the tax code; but building the resources and will to collect taxes in a progressive way are steps toward a fairer economy and a government that earns the public’s trust.

1. Consumption taxes have some potential uses. Carbon taxes, for example, tax the consumption of goods whose production intensively uses greenhouse gas-emitting inputs; if consumers look to avoid these goods by switching to others whose production involves fewer greenhouse gas emissions, we achieve an important social good.

But diverting public funds away from public K–12 schools and toward private schools does not guarantee educational opportunities will be expanded for all students—and this is especially true in rural communities. Most obviously, because students in rural communities often don’t have a private school option and therefore cannot use the vouchers, state voucher programs—which are financed by all the taxpayers in a state—amount to an education subsidy for wealthy urban families at the expense of strong public schools. Moreover, for rural areas that can support multiple school systems, voucher programs introduce a potentially large cost for the students that remain in public schools, as any sharp drop in public school enrollment will raise the fixed cost per pupil of running schools. For example, school facilities and staff that are efficient for 1,000 students in a school may no longer be efficient if enrollment were to drop to 800 or 900.

Voucher programs work like this: Parents who wish to send their kid to private school can receive public funding to cover part of the tuition or education-related expenses, rather than paying out of pocket. In states with vouchers programs, this added cost to government of paying for private educational expenses makes a big dent in state budgets—see examples here, here, and here. These programs also often entail fraud and abuse of funds and strip away funding for public schools. As a share of K–12 budgets, voucher spending accounted for as much as 26% in 2025, squeezing public schools of sorely needed funds. Moreover, recent reports have documented accounts of voucher funding getting used for high-end concert tickets and rideshare apps like Uber and Lyft. For wealthy parents in urban districts who were already planning to send their kids to private school, these slippery regulations and extra funding for education expenses are a feature, not a bug, of voucher programs. Vouchers are disproportionately taken up by students already attending private school, compared with those who consider a private school option when voucher laws get passed in their state.

For students in rural areas with no private school option, voucher programs simply mean there is less to spend on public schools, which leads to teacher shortages, fewer educational opportunities, and worse building maintenance. In rural communities with homeschooling or private school options, voucher programs impose an added cost to public education when students transition from public to private school.

We call this cost the fiscal externality of voucher programs, and it is borne by school districts, students, and their families when voucher-driven declines in student enrollment intersect with the fixed nature of many school costs. In rural districts, many key education costs—such as interest on bonds issued in the past, heating, electricity for school buildings, bus drivers, and even some staff—cannot easily adjust to student enrollment declines.

While public schools’ fixed costs do not decline when they lose students to voucher programs, their revenue does. Thus, when students in rural areas take up vouchers to leave public school for private school or homeschool, public schools have less revenue to cover the same level of fixed costs. The costs that can be adjusted—such as supplies or certain personnel—will get forced down due to shrinking school budgets. These variable costs are crucial for effectively educating children, meaning students who remain in public schools will pay the price of voucher program takeup.

This fiscal externality therefore leaves districts unable to deliver the same level of instruction to the remaining public school pupils. When students leave public schools in rural areas with voucher programs, there are fewer resources available on a daily basis to educate kids—fewer teachers and other staff members and fewer curriculum and education supplies. Education quality suffers.

How large is the fiscal externality that voucher programs impose on public schools in rural districts? Take the McComb Local School District in Ohio, which had 627 students in 2022 and is classified as a rural district according to the U.S. Census. Using EPI’s Fiscal Externality Calculator, we estimate that a 5% decline in enrollment would lead to an increased cost of $520 per pupil for the remaining students in the district, or a total of $309,530.

The key assumption is that there is some fraction of schools’ costs that is fixed and can’t be adjusted in the near term when enrollment falls. We assume that instruction and services costs (the cost of teachers and services like transportation, counseling, nurses, and school administrators) can only partially adjust to changes in enrollment. Specifically, we assume that when enrollment declines, instruction costs are only able to adjust by 50% of the enrollment decline, and service costs are only able to adjust by 20%. We assume that capital and building and maintenance costs can’t be adjusted at all. (Users can set their own adjustment rates for their school districts using the fiscal externality calculator here. The method behind this calculation is detailed in our report.)

Under these assumptions, aggregating all the rural Ohio districts using the rural categorization of school districts from the National Center for Education Statistics, a voucher-driven 5% enrollment decline would impose a fiscal externality of just over $206 million on Ohio public schools.

Rural districts have the most to lose when states enact voucher programs. For rural communities, vouchers are not a cost-free policy that simply expands education options for children—they are a subsidy for wealthy urban and suburban families at the expense of strong public schools. Voucher programs also introduce a large potential cost for the students that remain in rural public schools. The public spending declines associated with the introduction of vouchers will reliably cause significantly worse educational outcomes at a time when states should be spending more—not less—on public schools. States that promote voucher programs at the expense of funding for strong public education are signaling that rural students are not a priority. 

Key takeaways:

• Recent Democratic proposals to exempt broad swaths of the middle class from federal income taxes accept a damaging frame of taxes as a pure drain on affordability.
• But taxes aren’t a drain on affordability; they fund the public services and social insurance programs that make a decent life possible for middle-class families.
• Progressive taxes on the ultrarich and corporations are essential and should be the immediate priority, but they cannot sustain the public sector alone, let alone expand it in ways needed.
• Middle-class tax rates have fallen by a third since 1979, yet economic anxiety remains high. Tax-cutting has failed because it has left the private-sector drivers of inequality untouched and starved public services.

For decades, anti-tax politicians have tried to smuggle in large tax cuts for the ultrarich and corporations by loudly offering tax cut crumbs to the middle class. Key to this effort has been framing taxes as a pure drain on typical families’ ability to afford a secure economic life. Any success in this dishonest campaign to foster anti-tax sentiment is a disaster for working people—and that’s why some recent tax policy ideas from Democrats and the rhetoric around them are so deflating.

Two things are true about taxes in the United States. First, taxes on the richest families and corporations are far too low. Second, it is broad-based taxes on the middle-class that are the foundation of a functioning public sector and a decent society.

Progressive taxes on the ultrarich and corporations are mostly needed to reduce the potential gains to the rich and powerful from rigging the rules of markets. When the powerful rig these rules and hugely disproportionate shares of income concentrate at the top—like in the United States today—progressive taxes can also raise significant revenue.

But if sharply progressive taxes succeed in reducing the incentive for rigging the rules of markets and if other policies help lead to more broadly shared income growth in the country, this means that progressive taxes will raise a lot less revenue over time.

To be clear, this would be a victory for a better society. For example, the purpose of a carbon tax is to lower greenhouse gas emissions and if it’s highly successful, it will by definition stop raising much revenue. Progressive taxes aimed at reducing inequality will see the revenue they raise start to decline when they are their most successful. Right now, we do have deep inequality in the U.S. and progressive taxes will raise a lot of money—but we shouldn’t make the public sector’s resources dependent on this remaining true forever.

But more importantly, taxing only the very rich has never been the primary foundation of public-sector resources and can’t be going forward. The revenue needed to support programs that provide social insurance and income support (Social Security and Medicaid, for example), as well as public investment and services like highways, transit, and public education requires broad-based taxation. Without Social Security providing secure retirement, Medicare, Medicaid, and the Affordable Care Act providing access to health care, and public schools providing universal education, a decent life for the middle-class would be entirely unaffordable. And without middle-class taxes supporting all of these things, they would collapse.

If typical Americans lose faith that paying broad-based taxes to support public services and investments is a good deal, it will be a disaster for their ability to afford a decent life. Sadly, some recent Democratic proposals capitulate to this view of taxes as a “pure burden” rather than an investment in the country and its people.

Senators Chris Van Hollen (D-MD) and Cory Booker (D-NJ) have both floated ideas that would draw a line below which nobody would pay any federal income tax (Van Hollen’s line is $92,000 for a married couple while Booker’s is $75,000). Both proposals pay for this with tax increases on the rich. If these tax increases on the rich were standalone pieces of legislation, they’d be excellent. But they are instead paired with tax benefits that mostly miss the bottom of the income distribution. In Booker’s proposal, the gains from the higher standard deduction that zeroes out taxes for many are actually largest for families between the 60th and 80th percentiles, and gains persist on average through the 99th percentile. Van Hollen’s bill phases out the “alternative maximum tax” that zeroes out taxes for many, and the biggest gains hit in the middle of the income distribution, but the proposal still provides gains on average for families between the 60th and 80th percentiles.

Both proposals clearly aim to address the affordability challenge that politicians have seized on, but in doing so both frame taxes as a pure drain on affordability, with Booker even calling his the “Keep Your Pay Act.” But taxes aren’t a drain on affordability. They provide the resources needed to run the public sector, and the public sector in turn does a great deal to make life more secure and more affordable over people’s lifetimes.

Social Security and Medicare, for example, both rely on payroll taxes on workers’ wages. But they also provide income for these workers in retirement. Instead of draining affordability, these programs smooth income over the lifecycle to ensure working families can afford a decent life even when they can no longer work. Food stamps and Medicaid are financed by taxes and provide benefits to people who otherwise would not be able to afford the most basic necessities: food and health care. The same people who receive Medicaid and food stamps in one era of their lives will contribute to them through taxes in other periods when they have found steady work. Again, the taxes collected are recycled back into families’ incomes in ways that minimize suffering and severe affordability crises throughout their lives.

State and local taxes—often borne quite heavily by the broad middle class—pay for public education. This education—both K–12 and higher education—is incredibly valuable and necessary for anyone operating in modern economies. Without the taxes to support education, families would have to dig into their own pockets to pay for private schooling, and it would be delivered less efficiently and much less equitably.

Other taxes finance infrastructure and other key public goods and services, without which life would be harder and more expensive for most families.

Cutting taxes even fails on the crass political grounds of buying voters’ short-term goodwill. It’s often underrecognized (mostly, again, because of conservative campaigns to hide this fact), but taxes for the middle class have been cut a lot in recent decades. Figure A below shows the percentage point change in tax rates of households at different parts of the income distribution between 1979–2019. We stop at 2019 to compare equivalent points of the business cycle. Tax rates tend to fall sharply during recessions, which can obscure the full extent of legislative changes to tax rates. Further, cutting taxes temporarily during recessions can make some sense—tax cuts are one form of fiscal stimulus that can be used to fight recessions (unless these tax cuts are quite well-targeted on low- and moderate-income families, they tend to be less efficient stimulus than spending measures).

Figure A

The largest tax cuts have gone to the bottom fifth of households—a key policy victory of recent decades. The expansion of refundable tax credits like the Earned Income Tax Credit and the Child Tax Credit—credits that are paid directly to lower-income families even if their amount is greater than the families’ tax liability—have essentially made the problem of taxing families into poverty almost nonexistent. These tax cuts should clearly be kept. But all households, not just those with very low incomes, have seen sizable tax cuts. Tax rates for households in the middle of the income distribution have been cut by a third since 1979.

And yet, does anybody feel like this tax-cutting has led to most U.S. households feeling great about their place in the economy and their prospects for affording a decent life today? Do these voters express warm feelings about the policymakers from both parties who provided these middle-class tax cuts?

The tax-cutting strategy has failed to make these households happy for two reasons. First, it leaves the private-sector drivers of inequality untouched, and as governments have collected less in taxes, employers and corporations have contributed less to middle-class families’ wages. Second, lower taxes have starved public-sector capacity and led to a degradation of public services. Strangely, the newly fashionable “abundance” movement often frames this degradation as a problem of public-sector excesses, but it’s clearly driven by disinvestment. In short, middle-class families value public services and the decades-long campaign to cut taxes has harmed the ability to provide them. The lessons for today’s tax debates should be clear.

The failure of tax-cutting to foster economic security and happiness is not all that surprising for scholars of U.S. attitudes toward taxes, who argue that Americans are not universally anti-tax. Instead, Americans view paying taxes as a patriotic good and a moral obligation. But they are angry about paying their taxes when they think others are shirking their part of the social contract, particularly when they think the richest people and corporations aren’t paying their fair share.

Because we are starting with such high levels of inequality and because of this public cynicism about the rich ever being forced to pay their fair share, the first priority—by far—for policymakers today should be to enact significant stand-alone tax increases on the ultrarich and corporations. The revenue raised solely from the ultrarich could close today’s fiscal gap, the difference between today’s budget deficits and what is needed to put them on a sustainable path going forward. And this act would convince the rest of Americans that the ultrarich are not always prioritized in policymaking and would make future debates about the costs and benefits of higher taxes for higher levels of public goods much healthier.

But we can’t run a decent society based on just taxing the rich and telling everybody else that taxes are an unfair drain. Oliver Wendell Holmes famously said that taxes are the price you pay for civilization. But if the taxes are paid only by the rich, we will get the civilization they want. That doesn’t seem good enough to me.

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.

References

Abrams, Cynthia. 2025. “As West Tennessee Community Pressures Ford for Promises, Lawmakers Curb ‘Community Benefits Agreements’.” WPLN News, March 25, 2025.

AI NOW. 2025. “North Star Data Center Policy Toolkit: State and Local Policy Interventions to Stop Rampant AI Data Center Expansion.” December 2025.

Anderson, Sarah. 2014. “Wall Street Bonuses and the Minimum Wage.” Institute for Policy Studies, March 12, 2014.

Aquiles-Sanchez, Pablo, and Laura Dresser. 2022. Worker Power Levels the Playing Field: Community Benefits for Public Subsidies in the Iron District. High Road Research Center, November 2022.

Aquiles-Sanchez, Pablo, and Laura Dresser. 2024. From Community Benefits, to Collective Bargaining, and Back: Building Worker Power in Milwaukee. High Road Research Center, March 2024.

Atlanta Beltline Inc. 2024. Relentless Momentum, Undeniable Results: 2024 Annual Report.

Barrett, Jim, and Josh Bivens. 2021. The Stakes for Workers in How Policymakers Manage the Coming Shift to All-Electric Vehicles. Economic Policy Institute, September 2021.

Bayard, Kimberly, Tomaz Cajner, Vivi Gregorich, and Maria Tito. 2022. Are Manufacturing Jobs Still Good Jobs? An Exploration of the Manufacturing Wage Premium. Federal Reserve Board, March 2022.

Bergman, Megan Mayhew. 2019. “‘They Chose Us Because We Were Rural and Poor’: When Environmental Racism and Climate Change Collide“. Guardian, March 8, 2019.

Bizo, Daniel, Rhonda Ascierto, Andy Lawrence, and Jacqueline Davis. 2021. Uptime Institute Global Data Center Survey 2021. Uptime Institute, September 2021.

Blair, Hunter, David Cooper, Julia Wolfe, and Jaimie Worker. 2020. Preempting Progress: State Interference in Local Policymaking Prevents People of Color, Women, and Low-Income Workers from Making Ends Meet in the South. Economic Policy Institute, September 2020.

BlueOval Good Neighbors. n.d. “Community Benefits Agreement Demands Summary.” Accessed September 5, 2025.

Bomey, Nathan. 2024. “Volkswagen on Factory Unionization Efforts: ‘Neutral Doesn’t Mean Silent’.” Axios, February 15, 2024.

Brouk, Allison. 2024. “Wood Pellet Manufacturing in the South Harms Communities and the Environment.” Earthjustice, October 11, 2024.

Clean Economy Tracker (CET). 2025. Clean Economy Tracker. Accessed July 15, 2025.

Childers, Chandra. 2023. Rooted in Racism and Economic Exploitation: The Failed Southern Economic Development Model. Economic Policy Institute, October 2023.

Childers, Chandra. 2024a. Southern Economic Policies Undermine Job Quality for Auto Workers. Economic Policy Institute, September 2024.

Childers, Chandra. 2024b. The Evolution of the Southern Economic Development Strategy. Economic Policy Institute, May 2024.

Childers, Chandra. 2025. The Ongoing Influence of Slavery and Jim Crow Means High Poverty Rates and Low Economic Mobility in the South. Economic Policy Institute, April 2025.

City of Cleveland. n.d. “Community Benefits Ordinance” (web page). Accessed December 4, 2025.

City of Detroit. n.d. “Community Benefits Ordinance” (web page). Accessed December 4, 2025.

Communication Workers of America (CWA). 2024. “A New Dawn: Union Victory at New Flyer in Anniston, Alabama.” May 20, 2024.

Council of Economic Advisors (CEA). 2024. “All Aboard the ApprenticeSHIP: Assessing the Changing Face of Registered Apprenticeships.” Biden White House Archives, November 20, 2024.

Currie, Janet, Lucas Davis, Michael Greenstone, and Reed Walker. 2015. “Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings.” American Economic Review 105, no. 2 (February 2015): 678–709. doi: 10.1257/aer.20121656.

Data Center Watch. 2025. “$64 Billion of Data Center Projects Have Been Blocked or Delayed Amid Local Opposition.” Accessed February 24, 2026.

Dean, Adam, Jamie McCallum, and Atheendar Venkataramani. 2022. Unions in the United States Improve Worker Safety and Lower Health Inequality. Washington Center for Equitable Growth, December 2022.

Economic Policy Institute (EPI). 2021. “Unions Help Reduce Disparities and Strengthen Our Democracy” (fact sheet). Economic Policy Institute, April 23, 2021.

Economic Policy Institute (EPI). 2025a. “Workers’ Rights Preemption in the U.S.” Accessed July 1, 2025.

Economic Policy Institute (EPI). 2025b. “Child Care Costs in the United States.” Accessed July 1, 2025.

Economic Policy Institute (EPI). 2025c. “State of Working America data.” Accessed June 25, 2025.

Economic Policy Institute (EPI). 2026. “Family Budget Calculator.” Accessed February 15, 2026.

Erickson, Emily. 2021. Are Good Jobs Possible in the Deep South? Jobs to Move America, March 2021.

Fazili, Sameera, Pronita Gupta, and Doug Bloch. 2025. “How Community Benefits Agreements Can Reduce Project Delivery Risk.” UtilityDive, October 15, 2025.

Gould, Elise, Zane Mokhiber, and Katherine DeCourcy. 2024. What Constitutes a Living Wage? Economic Policy Institute, January 2024.

Hickey, Sebastian Martinez. 2024. “Leveraging the Gulf Coast Hydrogen Hub Community Benefits Plan to Empower the Texas Workforce.” Comments submitted on behalf of Economic Policy Institute to Texas Climate Jobs Project Community Commission on Truth and Transparency in Texas Hydrogen, December 5, 2024.

Ingram, Gregory K, and Yu-Hong Hong. 2012. Value Capture and Land Policies. Lincoln Institute of Land Policy.

Joint Center for Housing Studies of Harvard University (JCHS). 2024. America’s Rental Housing. Harvard University, 2024.

Katz, Batia, Robert Lerman, Daniel Kuehn, Jessica Shakespeare. 2022. Did Apprentices Achieve Faster Earnings Growth Than Comparable Workers? Brief prepared for U.S. Department of Labor, Employment and Training Administration. Rockville, MD: Abt Associates; and Washington, DC: Urban Institute, August 2022.

Last, Athena Nicole. 2025. A Case Study of the New Flyer of America Inc. Community Benefits Agreement. Jobs to Move America, July 2025.

Lawliss, Michael, Lew Finfer, and Jennifer Sherer. 2022. Using Local and Economically-Targeted Hire to Promote Good Jobs through the Infrastructure Investment and Jobs Act. Jobs to Move America, September 2022.

Leigh, J. Paul, and Bozhidar Chakalov. 2021. “Labor Unions and Health: A Literature Review of Pathways and Outcomes in the Workplace.” Preventative Medicine Reports 24, no. 101502. https://doi.org/10.1016/j.pmedr.2021.101502

Mangundayao, Ihna, Celine McNicholas, and Margaret Poydock. 2022. “Project Labor Agreements on Federal Construction Projects Will Benefit Nearly 200,000 Workers.” Working Economics Blog (Economic Policy Institute), February 9, 2022.

Manzo IV, Frank, Michael Jekot, and Robert Bruno. 2021. The Impact of Unions on Construction Worksite Health and Safety. Illinois Economic Policy Institute, November 2021.

Mast, Nina. 2025a. Forced Prison Labor in the “Land of the Free.” Economic Policy Institute, January 2025.

Mast, Nina. 2025b. How Anti-Worker Policies, Crony Capitalism, and Privatization Keep the South Locked Out of Shared Prosperity. Economic Policy Institute, June 2025.

McFadden, Michael, Sai Santosh, and Ronit Shetty. 2022. Quantifying the Value of Union Labor in Construction Projects. Mechanical Industry Advancement Fund, December 2022.

McNicholas, Celine, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau. 2019. Unlawful: U.S. Employers are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns. Economic Policy Institute, December 2019.

McNicholas, Celine, Margaret Poydock, Samantha Sanders, and Ben Zipperer. 2023. Employers Spend More Than $400 Million per Year on ‘Union-Avoidance’ Consultants To Bolster Their Union-Busting Efforts (fact sheet). Economic Policy Institute, March 2023.

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 Heidi Shierholz. 2026. Workers’ Resolve Drives Increase in Unionization in 2025. Economic Policy Institute, February 2026.

Merchant, Zach, and Adrian P. Guerra. 2025. “Data Center Boom Impacting Georgia’s Water Resources.” 11Alive, April 14, 2025.

Mickey, Robert. Paths Out of Dixie: The Democratization of Authoritarian Enclaves in America’s Deep South, 1944-1972. Princeton, N.J.: Princeton Univ. Press, 2015.

Mishel, Lawrence. 2017. “The Increased Diversity of New York City Union Construction Employment.” Working Economics Blog (Economic Policy Institute), January 19, 2017.

Morrissey, Taryn. 2020. Addressing the Need for Affordable, High-Quality Early Childhood Care And Education for All in the United States. Washington Center for Economic Growth, February 2020.

New England Real Estate Journal (NEREJ). 2019. “MP Boston and Building Trades Unions sign Project Labor Agreement for Winthrop Center.” NEREJ, November 15, 2019.

O’Brien, Connor. 2023. “Factory Boom in the Mountain West and Upper Midwest Accelerated into the Spring.” Economic Innovation Group, June 13, 2023.

Ormiston, Russell, and Cihan Bilginsoy. 2024. “Measuring Diversity in Construction Apprenticeship Programs.” Working Economics Blog (Economic Policy Institute), November 21, 2024.

Partnership for Working Families and Community Benefits Law Center (PWF and CBLC). 2016. Common Challenges in Negotiating Community Benefits Agreements and How to Avoid Them. January 2016.

Payne, Mat. 2019. “When Nowhere Becomes Somewhere: Gentrification in Rural Communities and How Proactive Community Planning and a Progressive Property Valuation System Can Stem the Tide.” Kentucky Law Journal 207, no. 4: 727–745.

Perez, Daniel. 2015. Voter Suppression Makes the Racist and Anti-Worker Southern Model Possible. Economic Policy Institute, October 2024.

Penn, Ivan, and Karen Weise. 2025. “Big Tech’s A.I. Data Centers Are Driving Up Electricity Bills for Everyone.” New York Times, August 2025.

Polaris. 2015. “Polaris Industries Inc. Announces Expansion of Manufacturing Operations.” January 9, 2015.

PowerSwitch Action. 2025. “Community Benefits Agreements Examples.” Accessed September 1, 2025.

Reed, Rachel. 2025. “How data centers may lead to higher electricity bills.” Harvard Law Today, September 2025.

Rhinehart, Lynn, and Celine McNicholas. 2020. Collective Bargaining Beyond the Worksite: How Workers and Their Unions Build Power and Set Standards for Their Industries. Economic Policy Institute, May 2020.

Sabin Center for Climate Change Law (Sabin). 2001. North Hollywood Mixed-Use Redevelopment Project Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2017. Monhegan Plantation et al. and Maine Aqua Ventis Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2022. New Flyer of America, Greater Birmingham Ministries, and Jobs to Move America Community Benefits Agreement.

Sabin Center for Climate Change Law (Sabin). 2024. City of Salem and Salem Wind Terminal LLC Community Benefits Agreement.

Sachs, Benjamin. 2024. “Hey ALEC, Be Careful What You Wish For.” On Labor, March 8, 2024.

Saha, Devashree. 2024. Community Benefits Snapshot: New Flyer Community Benefits Agreement. World Resources Institute, December 2024.

Scott, Robert, Valerie Wilson, Jori Kandra, and Daniel Perez. 2022. Botched Policy Responses to Globalization Have Decimated Manufacturing Employment with Often Overlooked Costs for Black, Brown, and Other Workers of Color. Economic Policy Institute, January 2022.

Sherer, Jennnifer, and Elise Gould. 2025. It’s Time for Colorado to Remove Barriers to Unionization. Economic Policy Institute, February 2025.

Stand Up Nashville (SUN). 2018. “Historic Community Benefits Agreement Reached!” SUN, September 4, 2018.

Stand Up Nashville (SUN). 2020. Nashville MLS Soccer Community Benefits Agreement.

Stand Up Nashville (SUN). 2023. Community Advisory Committee Community Benefits Agreement Annual Report 2023.

Stephenson, Jemma. 2024. “Alabama Senate Bill Would Punish Companies That Voluntarily Recognize Unions.” Alabama Reflector, March 27, 2024.

Tennessee Office of Governor. 2023. “Gov. Lee, Ford Celebrate Historic BlueOval City in West TN” (press release). March 23, 2023.

The Chesapeake Group, Inc. (TCG). 2023. Haywood Market Assessment Section for Growth Strategies. September 2023.

Todd, Patricia. 2021. The Hidden Costs of Alabama’s Tax Incentives. Jobs to Move America, August 2021.

Turner Lee, Nicol, and Darrell West. 2026. Why Community Benefit Agreements Are Necessary for Data Centers. The Brookings Institution, January 2026.

Upton, Greg, and Sarang Talpur. 2024. Literature Review on the Impact of Utility-Scale Solar on Housing Prices. Louisiana State University, August 2024.

Wadwhani, Anita. 2023. “Black Farming Community Fights to Get Fair Deal as State Takes Land for Ford Plant Roadways.” Tennessee Lookout, April 3, 2023.

Wadhwani, Anita. 2024. “Water Wars: Groups Challenge ‘Unsustainable’ Withdrawals from Duck River.” Tennessee Lookout, May 6, 2024.

Walker, Carla, and Ian Goldsmith. 2026. “From Energy Use to Air Quality, the Many Ways Data Centers Affect US Communities.” World Resources Institute, February 2026.

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 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.

Further, the Republican-led One Big Beautiful Bill (OBBB) that passed last year will sharply cut Medicaid and SNAP over the next decade by well over $1 trillion combined.

The combination of these trends—low-road employers paying insufficient wages and big upcoming cuts to Medicaid and SNAP—has led to a flurry of policy proposals at the state level to address them. One proposal—employer assessment fees (EAFs)—appears at first glance to address both problems by imposing a tax on firms that employ workers who receive Medicaid or SNAP, with the tax often calculated as the number of workers receiving these benefits multiplied by the average cost of those benefits. But EAFs are not the optimal solution to either problem and might cause undesirable collateral damage.

Here’s why:

• Medicaid and SNAP do not make it easier for employers to offer lower wages. In fact, they likely raise the wages needed to attract workers—and that’s a good thing.
  • This is not universal across all safety net and income support programs. Some of these, like the Earned Income Tax Credit (EITC), do see some of their benefits likely bypass workers and captured by low-wage employers.
• If you make Medicaid-receiving workers more expensive to employ, then employers will try to employ fewer of them and/or lower their market wages. And if the tax is proportional to the average cost of benefits like Medicaid, this incentive is large.
• Employer assessments fees are generally a large tax imposed on a small base. But revenue is maximized when tax bases are broad.
• The targets of EAFs can be more effectively reached with other policies.
  • Raising minimum wages and passing legislation to strengthen workers’ rights to unionize and bargain collectively are alternative policies for forcing employers to pay more.
  • Broad-based taxes are alternative polices for raising revenue.
    • Higher corporate income taxes or employer-side payroll taxes would be more progressive alternatives for taxing employers.
    • Another alternative would be to penalize firms that don’t offer employer-sponsored health insurance (ESI) to workers. This is not a huge base, but it is by definition wider than those who receive Medicaid (which is just a subset of all workers not receiving ESI through the firm.)

Below, we expand on these points.

Medicaid and SNAP do not make it easier for employers to offer lower wages

A concern is often expressed that Medicaid and SNAP “subsidize” low-wage employers by making it easier for them to offer lower wages. Intuitively, thinking that Medicaid and SNAP subsidize low-wage employers actually gives these employers far too much credit for caring about the living standards of their workers. Higher pay is not given out of the goodness of employers’ hearts—it happens when policy or market conditions change. Medicaid and SNAP do not change labor market conditions in any way that lowers workers’ pay, and when these programs are cut in coming years, low-wage employers are not going to think “we need to raise our wages to help these employees who are seeing cuts to other income sources.” They will instead raise wages only if policy mandates they do or if market conditions change.

In reality, Medicaid and SNAP actually boost lower-wage workers’ meager leverage to demand higher pay by making periods of non-work less miserable. This slightly improved fallback position for low-wage workers keeps them from being forced as quickly by material deprivation into accepting any possible wage offer from employers. Policy changes that reduce how many workers receive Medicaid or SNAP will put further downward pressure on wages. We should support policies that expand the number of workers who have their wages supplemented by safety net programs, not policies that penalize and stigmatize using benefits.

This wage-boosting effect is not universal among all public income support programs. The Earned Income Tax Credit (EITC), for example, pays more as workers supply more hours to the paid labor market. This boost to labor supply puts some downward pressure on market wages and can lead to some of the EITC benefits bypassing workers and being captured by employers (unless it is complemented by strong minimum wages.)

Making workers who receive safety net benefits more expensive will reduce demand for them

If you make workers who receive safety net benefits more expensive for employers to keep on payroll, then you increase the incentive for these employers to hire fewer of them or offer them lower wages.

Supporters of EAFs could argue this logic could be employed against any effort that made workers more expensive, like minimum wages. But minimum wages apply to all workers, and employers by definition cannot lower wages to absorb the higher costs minimum wages impose. Fully substituting away from workers whose pay has been lifted by minimum wages and toward other inputs essentially means employers would have to make costly investments in plant, capital, equipment, and processes.

Conversely, only a small fraction of workers receives safety net benefits. Absent binding minimum wages, employers can lower their market-based pay to recoup the EAFs (at least until they run into the relevant minimum wage in the labor market.) Trying to substitute away from workers who receive safety net benefits toward workers who are less likely to receive these benefits is more doable for employers than substituting away from all lower-wage labor.

These employer efforts to figure out who on their payroll is likely to trigger an EAF could lead to collateral damage. Workers from groups that are more likely to receive safety net benefits might be discriminated against across-the-board, regardless of whether or not they are actually enrolled in Medicaid or SNAP. Basically, EAFs mean that populations who are more likely to use benefits—like low-income single moms—would face even greater barriers in the labor market. Workers of color are also overrepresented among the families who use SNAP and Medicaid.

Further, the direct benefits of broad-based minimum wages to workers are large—all low-wage workers get a raise if their pay was lower than the new minimum. The direct benefits to any worker from an EAF is nonexistent—their pay does not rise, and they are not more likely to receive employer benefits.

The indirect benefits of EAFs are simply the revenue they raise, and if this revenue can be raised in less costly ways, then EAFs are not optimal.

EAFs are a large tax on a small base

Workers who receive Medicaid benefits constitute roughly 10% of the overall workforce (and their share of total hours is significantly less than this). This is a relatively small base for a tax. But the size of proposed EAFs is often quite large, sometimes as large as the average Medicaid benefit. This benefit can reach more than $9,000 annually in many states. For a full-time, year-round worker making $15 an hour, this constitutes a tax on employers equivalent to 30% of that worker’s entire earnings.

Large taxes on small bases often lead to behavioral responses that erode the revenue gained from the tax. The large value of the tax incentivizes this avoidance behavior, and the small base allows substitution away from workers who trigger the tax. This means that EAFs would raise—at best—a highly uncertain amount of revenue and could well end up raising small amounts.

Sometimes, behavioral responses to taxes that reduce the revenue they raise are socially useful. For example, when cigarette taxes lead to reduced smoking or even when workers facing higher taxes are able to voluntarily substitute more leisure for work. But the behavioral response to EAFs that lowers the revenue gained from them also directly inflicts harm on low-wage workers.

There are better alternatives for the policy goals of EAFs

The recent pushes to use EAFs come from very good impulses: the desire to force employers to pay more and stop defecting on the social contract, and the desire to raise revenue so that states can buffer their residents from the terrible coming effects of the OBBB.

But there are better alternatives to achieve these goals. To raise wages, higher minimum wages are an obvious first step. A second step is policy changes that better enable willing workers to form unions and bargain collectively, even in the face of steep employer resistance. Policymaker inaction has largely destroyed the fundamental right of association in much of the U.S. labor market. Reversing this would, in the long run, solve many of the problems of employer behavior that EAFs are trying to target.

There are also better sources to raise reliable revenue to buffer residents from the OBBB’s steep cuts. If the desired target for these revenue increases is employers, higher corporate income taxes or higher employer-side payroll taxes (for all workers) could be used. Another revenue source specifically targeted at low-road employers could be increasing penalties for firms based on the number of their employees who are not covered by employer-sponsored health insurance through the workplace. This is not a huge tax base, but it is by definition larger than just employers with workers receiving Medicaid, as it would also include workers with no coverage at all. Further, this tax would incentivize the provision of ESI to more workers, a good thing in itself.

The same is true of government. If we want a high-functioning public sector—and we should—there is no shortcut. It requires sustained investment in the people and capacity that make government work. Starve it of resources, and its performance will inevitably suffer.

In a recent New York Times essay, academics Nicholas Bagley and Robert Gordon argue otherwise. In their telling, government underperforms because public-sector unions have too much power, driving up costs and resisting efficiencies. Their solution is simple: rein in unions and invest less—largely by cutting pay for public-sector workers. It’s a tidy story that promises an easy fix.

It is also economically incoherent.

The central constraint on public-sector performance is not the power of unions—it is chronic underinvestment. For decades, policymakers have allowed public-sector pay and prestige to fall behind comparable private-sector jobs and have outsourced key functions that should have been performed by skilled civil servants, not profit-maximizing private contractors that are the real source of excess costs for state and local governments. The predictable results have been staffing shortages, uneven service quality, and degraded state capacity—not because we are paying too much, but because we have been trying to get government on the cheap.

Start with the most basic implicit claim Bagley and Gordon return to again and again: that public-sector unions have extracted excessive compensation and resisted efficiencies at every turn. If that were true, we would expect to see the total compensation of public-sector workers rising as a share of the overall economy. In fact, the opposite has happened—the combined compensation of public employees has shrunk noticeably as a share of national income for the last quarter century.

To be sure, policymakers should always aim to deliver value for taxpayers. And—just as in the private sector—there are surely instances where some public employee’s pay is out of line or workers resist useful improvements. But if overpayment for services delivered inefficiently was a general feature of the public sector, their aggregate compensation wouldn’t be shrinking sharply over time.

Bagley and Gordon support their claims with a shotgun blast of anecdotes about public-sector unions able to muscle excess pay out of colluding Democratic politicians that are almost laughably context-free. L.A. Mayor Karen Bass gave larger-than-normal raises to public-sector employees in 2024? I’d hope so—prices had risen 23% in the previous five years (this inflation had made some news) and private-sector pay for non-supervisory employees was up 28% over that time. The suggestion by Bagley and Gordon that these raises were untoward only makes sense if you actively want the desirability of public employment to crater relative to the rest of the economy.

Bagley and Gordon also note darkly that “more than half” of local government expenditures are paid to employees. So what? Local government spending is not like federal government spending where the overwhelming majority of it is simple transfer payments—sending checks to people (Social Security) and medical providers (Medicare and Medicaid). Local governments must directly deliver public goods and services, like public education. That’s going to be done by people who need to be paid. The private sector, too, devotes the majority of its spending to labor (in the corporate sector, labor’s share is well over 70%.)

Even the data they cite for this irrelevant point show that compensation—including the benefits that Bagley and Gordon decry—in state and local jobs is lower than for similar workers in the private sector. That gap matters. Public-sector employers must compete in the same labor markets as everyone else, and low relative pay for skilled workers in the public sector compromises the ability of public-sector employers to attract and retain highly effective workers.

This ignorance of how labor markets in the private and public sectors interact is the root of many of Bagley and Gordon’s economic misunderstandings.

Consider their discussion of education spending, where they note that California spends more per pupil than Mississippi. California does spend more per pupil in nominal dollars, but prices in California are far higher than in Mississippi. Even more importantly, private-sector salaries for college-educated professionals in California are much higher than in Mississippi—and those are the jobs that set the outside options that talented college graduates weigh when deciding whether to enter and remain in teaching. Put another way, it is competition from the private sector that determines how high pay must be to attract and retain high-quality teachers. Education researchers know this, and that’s why the generally accepted way to assess the sufficiency of education spending is not nominal dollars spent per pupil, but per pupil spending scaled to per capita GDP in a state. In forthcoming work we show that on this measure, California ranks 36^th in the nation—lower than Mississippi.

This also shows why the Bagley and Gordon claim that “…blue states and cities often also pay state and local government workers more than similar jobs pay in red jurisdictions, even after adjusting for the cost of living” misses the point so spectacularly. State and local governments are embedded in their local economies and public-sector pay has to rise in line with private-sector pay in the economy around them, or the quality and quantity of available public employees will suffer.

The big problem over recent decades is that public-sector pay has not kept pace with the surrounding economy, which has made it harder to recruit and retain qualified workers. Teacher shortages, for instance, stem directly from the huge gap that has emerged in recent decades between what public school teachers earn and what comparable private sector workers earn, even in the highest-spending states. How would making these jobs lower-paying and lower-prestige add excellent new teachers and improve educational outcomes?

Another common complaint about the public sector is that it slows infrastructure projects. The public is often invited to imagine huge teams of paper-pushing bureaucrats gleefully stamping “no” on planning documents. But the clearest finding in empirical research about the drivers of higher-cost infrastructure is that costs have risen fastest where states reduced the number of transportation department employees. Fewer public-sector workers means that more of the planning work has been outsourced to more expensive private consultants.

Bagley and Gordon claim that when policymakers bargain with public-sector unions, there is no constraint on their incentives to grant union demands in exchange for electoral support. In reality, there is a crushing countervailing constraint—the overwhelming perception that voters are rabidly anti-tax. This results in a deep reluctance by policymakers to call for the level of revenue needed for public sector excellence. It is a far bigger structural problem today than any supposed excess power of public-sector unions.

Public-sector workers don’t just bear the brunt of underinvestment, they are also one of the few consistent voices arguing for robust financing of state and local governments, bargaining directly for the public good. They advocate for libraries to remain open in rural communities so that everybody has at least some access to the internet, for higher levels of K–12 education spending, and for proper training for EMTs and other first responders to ensure public safety.

Despite these efforts, public sector financing has been throttled in recent decades, and the results have been a predictable degradation of services. Even worse is coming, as the Republican tax and spending megabill will impose crushing cuts to safety net programs that states administer and jointly fund.

For decades we have been relying on the admirable intrinsic motivation of public employees to shield us from some of the damage of underinvestment—nurses, first-responders, and teachers going above and beyond the strict demands of their jobs to provide services they feel called to perform. But we’ve already asked too much while paying too little. If we want a truly excellent public sector—and we should—we need to pay for it.