Betony Jones is Founder and Principal of Inclusive Economics
The Biden-Harris Transition Plan prioritizes addressing climate change while creating good union jobs. This commitment builds on mounting evidence demonstrating that climate change and economic inequities can be addressed with well-tested solutions. A recent UC Berkeley Labor Center report  commissioned by the California Legislature provides such sector-by-sector solutions.
Despite growing commitment to policy solutions that ensure more equitable climate solutions, many industry players vehemently oppose such solutions, arguing that we can either respond to the urgency of saving the planet or we can create quality jobs and ensure economic equity… but not both. This argument is advanced by both the clean and fossil energy industries, the former claiming to save the planet and the latter claiming to save the working class. In reality, both arguments obscure the goal common across industries—to retain the power of capital over labor.
One example of this rhetoric shows up in the solar industry in debates around prevailing wage. Prevailing wage standards specify hourly wage rates for workers, including apprentices, in different skilled construction trades. Prevailing wage laws also require contributions to workers’ benefits such as healthcare, paid time off, retirement funds, and apprenticeship training. Prevailing wage is good for workers and the local economy, but the solar industry argues that prevailing wage standards will make projects too expensive and halt solar development. The logic of this argument gains an easy foothold, but it’s simply not true.
Evidence shows that higher wages due to prevailing wage do not slow solar demand. Why not? First, labor costs don’t increase much with higher wages and benefits. Installation labor (to which prevailing wage would apply) represents only 6–11%of total project costs, so even large increases in worker compensation don’t lead to large increases in total costs. In other words, a 50% increase in labor costs would increase total costs by only 3–5%. Second, improvements in worker productivity that come with a skilled workforce typically offset any wage increases. If a skilled worker provides 50% more value via productivity than an unskilled worker while earning only 25% more pay, higher compensation is a sound investment. Third, prevailing wages vary, and there is wide flexibility in the use of prevailing wage standards. Use of apprentices, for example, lowers labor costs while providing other equity benefits. And finally, developers can choose to reduce costs across other categories. Sales and marketing, overhead, and profit cost allocations are three to five times greater than the cost of installation labor. Thus, any marginal increase in providing a living wage can be absorbed by other cost categories without increasing total project costs. These points are further explained in the sections below
In sum, the solar industry could prioritize worker needs and pay prevailing wages while maintaining steady growth. In the event that costs incrementally rise to pay middle class wages, projects can absorb such increases through reductions in other costs categories including overhead, marketing, and developer or investor banking profits.