Arguments about how industrial policy can work often ignore political-economy problems. Yet these problems not only are real, they are significant. Many of us have already mentioned how the CHIPS Act’s semiconductor subsidies are being saddled with counterproductive requirements such as child care, Buy American, union-engagement mandates, and more.

Unfortunately, the expenses of the Biden administration’s labor-union requirements are swelling every day and getting in the way of increasing the output of American-made semiconductors. Here is a story on how unions could slow down the construction of Taiwan Semiconductor Manufacturing Company in Arizona:

While things started on a high, with Apple touting US-made chips for older devices in its line-up, construction of the Arizona plant isn’t going well.

There have been questions about worker safety at the site, and the project is behind schedule, and over budget. Production has already been pushed into 2025, from 2024, and there is talk of US-made chips costing more than those made in Taiwan.

To help address this, TSMC wants to bring in around 500 Taiwanese workers. The company says that these workers have experience of setting up similar plants in Taiwan, so will help with faster and more cost-effective working.

However, unions say it breaks a promise to create jobs for American workers.

Any TSMC employees brought over from Taiwan will need EB-2 visas in order to work legally in the US. These visas are intended for workers with “exceptional ability,” which would justify their employment over a US worker. . . .

The Arizona Pipe Trades 469 union has started a petition to block the issuing of these visas.

As the article mentions, this is happening at a time when the company is already facing construction delays in part due to a lack of workers in the U.S.

Remember that the main reason for the semiconductor industrial policy is national security. Subsidies are supposed to incite semiconductor companies to build factories in America. The idea is to avoid disruption of supply chain in case China attacks Taiwan. (Let’s here overlook the fact that this same outcome could be achieved without increasing supplies of American-made semiconductors.) Under that reasoning, building semiconductors away from Taiwan fast should be a priority.

Meanwhile, the Wall Street Journal notes that unions are upset about the automobile industry’s transition to building more electric automobiles.

The Detroit car companies formally kicked off talks with the UAW in July with the key objective of keeping their own labor costs in check, especially following a period of high inflation. The current contract expires Sept. 14, and analysts have said the risk of a strike is high.

While the negotiations are dealing with more traditional issues such as wages, the companies’ pivot to EVs is an overarching tension point that creates an air of uncertainty with the talks.

Battery-powered cars are generally regarded as less labor-intensive to make. UAW leaders want assurances that existing jobs focused on producing gasoline-powered vehicles—such as those at factories that make gas or diesel engines—won’t be sacrificed in the coming years.

As if the transition to electric vehicles isn’t expensive enough, union demands could make the cost of some labor much more expensive, according to Bloomberg:

New contract demands made by the United Auto Workers union would add more than $80 billion to each of the biggest US automakers’ labor costs, according to people familiar with the companies’ estimates. . . .

The calculation is based on the UAW’s request for a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the work week to 32 hours from 40 and increasing retiree benefits, according to the people. . . .

The current $64 per hour labor costs at Ford, GM and Stellantis are already higher than the $55 per hour cost at non-union US assembly plants of Asian and European automakers, an estimated labor cost gap of about $900 million, according to people familiar with Ford’s costs. Labor costs at EV leader Tesla Inc. are even lower, at $45 an hour to $50 an hour, the people said. . . .

The negotiations come as US automakers are pouring tens of billions into designing and building EVs, while trying boost profits on conventional gas-fuel vehicles to pay for it. Fain has accused them of engaging in a “race to the bottom” in the transition to electric vehicles, with factories that will employ fewer workers making lower wages.

According to the AP, “Ford, for instance, says in a statement that benefits and bonuses push the yearly package value to about $112,000.”

At what point do these demands jeopardize the administration’s decarbonization goals, it remains to be seen. But the Biden people don’t seem to care, as they are proud to announce a Department of Labor rule that will increase the cost of construction. Doug Holtz Eakin reports at America Action Forum:

Yesterday Vice-President Kamala Harris announced that the Department of Labor will be issuing a final rule, Updating the Davis-Bacon and Related Acts Regulations, which will revise the implementation of the Davis-Bacon Act and Related Acts (DBRA) that apply to federal and federally subsidized construction projects. This rule will, thus, apply to the infrastructure, CHIPS, and IRA energy projects. . . .

The basic idea of DBRA is to mandate that construction firms pay a “prevailing wage.” The rule reverses a Reagan-era reform that calculated the prevailing wage by setting it so that at least 50 percent of workers made that wage. Instead, the rule reverts to using 30 percent of workers, thereby tossing out some lower-paid workers and raising the prevailing wage. It also eliminates the metropolitan-rural distinction and thereby imposes urban wages on rural projects. (Where will those wind and solar farms be?) Finally, it expands the definition of “site of work” to include material supply drivers and off-site construction.

Higher labor costs means either fewer workers or higher prices. At a time when the automobile industry and its suppliers are still trying to catch up after Covid shortages and higher costs, a strike could inflict serious damage. Also, at a time when consumers are facing higher interest rates when getting car loans, higher prices would be rough. No matter how one looks at it, this isn’t going to help the automobile industry in its green-energy transition.

Holtz Eakin summarizes the issue well:

This pattern of policy schizophrenia has become familiar as the administration’s union masters demand their pork at the expense of public policy goals for the environment, high-value manufacturing, and transportation.

The AP has a list of all the strikes, here. A few weeks ago, Isabella Hindley had a piece at AAF making the case that while the Biden administration has been very supportive of unions, “its support of unions has not led to reciprocal support from the unions in making the president’s job easier.”