America’s $52 bn plan to make chips faces labor shortage

If you want to see what Joe Biden has called his “field of dreams,” head to the intersection of Clover Valley Road and Miller Road in Licking County, Ohio. Once you get there, you peer through a chain-link fence and around grassy berms at what on a recent gray winter morning looked like a sea of mud with a few bulldozers and some construction workers in hard hats and high-visibility vests. The cows in the nearby barn seemed more interested in their feed than the economic revolution unfolding next door.

Within a few months, those few dozen workers will grow into thousands, all assembling what the US president in his most recent State of the Union address promoted as one the most advanced semiconductor fabrication plants on the planet. The $20 billion Intel Corp. is pouring into that farm field is the fruit of a bipartisan federal effort. It aims to revive domestic chip production to ease what’s become a dependence on Asian imports and also to counter China’s drive to displace the US as the world’s tech superpower.

Plans for Intel’s complex in Ohio, its first major stateside project in 40 years, call for as many as 10 fabs to be built over a decade or more. An initial pair, due to be completed by 2025, will employ 3,000 workers. Putting up those buildings will require even more bodies: 7,000, give or take, according to company projections.

America’s biggest foray into industrial policy since World War II faces one big hurdle that hasn’t gotten much attention but is becoming apparent at Intel’s Ohio outpost. Historically, the US has thrived because it’s had ample pools of labor—for reasons good (immigration) and bad (slavery). But the time has arrived when America’s demographics are conspiring against its economic ambitions.

It’s been only six months since the groundbreaking ceremony, but Intel’s lead contractor is already scrambling to find workers. Catherine Hunt Ryan, president of manufacturing and technology at Bechtel Corp., says the project’s need for electricians and pipe fitters “is significantly outstripping the supply of labor in the local area.” Bechtel expects to import at least 40% of the workers it needs from outside the Columbus area, including other states. An additional 30% will be apprentices working their way through union programs.

Intel isn’t alone. Right now the US doesn’t have enough cooks, assembly line workers, nurses, teachers, truck drivers, police officers, firemen, welders—the list goes on. Unemployment is the lowest it’s been in more than half a century, while the number of job openings is near an all-time high. The upshot: In January there were 5.1 million more positions available than people to fill them, according to researchers at the St. Louis Fed.

The ultratight labor market is often treated as a pandemic-driven aberration. But there’s a strong case to be made that it’s really the product of demographic trends that predated, and accelerated with, Covid-19. Experts say that without meaningful government intervention, America’s worker deficit could become a tax on growth and trigger a new wave of offshoring, like the one the Chips and Science Act of 2022 is trying to reverse.

The US working-age population shrank in 2018 for the first time since at least 1960, as baby boomer retirements picked up and fewer young people entered the labor force. The cohort, which covers those aged 15 to 64, also contracted in the two years that followed and has edged up since only because of a bounceback in international immigration. (The jump was largely a product of the easing of travel restrictions instituted at the height of the pandemic.)

Add it all up, and the results are striking: From 2017 to 2022 the US working-age population grew by just 1.7 million people, versus 11.9 million in 2000-05.

What was once a preoccupation for a narrow group of demographers and actuaries is now a concern for everyone from small-business owners to policymakers at the Federal Reserve. In a November speech, Fed Chair Jerome Powell cited pandemic deaths, a pickup in retirements and a drop in labor participation as key forces behind a widening worker shortfall. Because of the gap, wage growth has been running well above historical trends, complicating the Fed’s task of bringing inflation to heel, he noted.

Of course, too many jobs isn’t the worst problem for an economy to have. Talk to union chiefs in Ohio, and they speak in awe of a once-in-a-lifetime boom in demand for members’ skills, thanks to Intel and other projects, such as a new Honda Motor Co. electric vehicle plant and an expansion of a Facebook data center. “It’s like a tsunami of work,” says Mike Knisley, who leads the Ohio State Building & Construction Trades Council. Yet he acknowledges the challenge ahead. One in five of his members is a baby boomer hitting retirement age in the next five years—and doing so after what was already a pandemic wave of retirements by their peers.

To recruit replacements, Dorsey Hager, head of the Central Ohio Building Trades Council, is now a regular visitor to middle schools, where he tries to get preteens to envision lucrative careers as electricians and plumbers. “We’re not only talking to the kids, but we’re also talking to the teachers,” Hager says. “We’re talking to the principals. We’re talking to the guidance counselors. We’re talking to the moms and dads.” Five years ago he could promise them six to nine months of steady work at the end of a four-year apprenticeship, Hager says. Now, “I can honestly tell you that the work outlook is good for the next 22 to 25 years.”

An increasingly contentious rivalry between US and China focused largely on technological innovation is already fueling a global war for talent in such strategic industries as semiconductors. Hager is engaging in the domestic version of that battle for bodies, which experts say will only get more intense in the coming years. A competition between states and municipalities that for decades has been about luring investors and factories has been “shifting in a significant way to availability of talent,” says J.P. Nauseef, president and chief executive officer of JobsOhio, the state’s economic development body.

It’s a competition that can get snarky. Especially when you’re a state with an aging workforce and a declining population. During the pandemic, JobsOhio launched an ad campaign targeting major US cities, promising a job and an affordable middle-class lifestyle to anyone courageous enough to move. “Work from ‘home,’ not ‘overpriced studio apartment,’ ” read one billboard in New York. “Keep Austin weird. Like very high cost of living weird,” blared another in the Texas capital.

If all goes according to plan, Maddix Curliss will graduate from Central Ohio Technical College with a two-year associate degree in electrical engineering technology this May. The 20-year old isn’t worried about landing a job. “I feel just overwhelmed by how many opportunities” there are, he says, adding that the robotics company where he now interns part time is already trying to recruit him.

Curliss and many of his classmates have their eyes on that Licking County farm field where Intel’s plant is going up. “Not very often does a company like that land in Ohio, especially in what’s basically my backyard,” says Curliss, who grew up in nearby Newark. “Normally, companies like that, they go overseas.”

The promise of $52 billion in subsidies offered in the Chips Act has already led to at least 40 projects and some $200 billion in private-sector investment, according to the semiconductor industry. To staff those plants, Secretary of Commerce Gina Raimondo says the industry will need 100,000 new technicians on top of the 277,000 it already employs. “It’s such a different moment in history compared to the last 20, 40 or 50 years,” says Gabriela Cruz Thompson, the Intel executive who has a $50 million budget to fund training programs at universities and technical colleges in Ohio. “We’ve never had so many companies building so much.”

Incentives created by last year’s Inflation Reduction Act are also motivating investment: New electric vehicle and battery plants are being announced almost weekly. The $1.2 trillion Congress approved for infrastructure in 2021 is also boosting demand for workers. Celebrating a Baltimore tunnel project in late January, Biden hailed the 20,000 jobs it would bring. The next day he was in New York City touting the Hudson Tunnel project and promising 72,000 “good jobs you can raise a family on” for “laborers, electricians, carpenters, cement masons, ironworkers, operating engineers and more.”

The Biden administration argues that the overarching objective of all these pieces of legislation is to shore up America’s competitiveness, but it’s never been coy about the employment creation component. The president’s advisers see the tight labor market as a tool for bringing those left behind by forces like globalization back into well-paid work and ensuring a brighter future for communities that missed out on past booms.

Todd Tucker, director of industrial policy and trade at the Roosevelt Institute, a think tank, argues that many of the current worker shortages in industries such as manufacturing are the result of the very deindustrialization that these policies are trying to undo. “Once you lose capacity in certain industries or in certain geographies, it’s hard to build that back,” he says.

Anirban Basu, chief economist for Associated Builders & Contractors, a trade group, argues that the shortage of construction workers, which he says is the worst in more than 20 years, is a liability for the economy. “Imagine two countries, one with a significant construction workforce and one without,” Basu says. “They’re alike in all other facets. Except for that one has a body of workers available to engage in construction, whether it relates to infrastructure or the commercial real estate market or building homes, and one doesn’t. Which nation is going to grow faster? Which nation’s going to be more dynamic? Which nation is going to offer a better-built environment and therefore a higher quality of life? Obviously the one with construction workers.”

Cruz Thompson, the Intel executive in charge of finding the workforce the chipmaker needs, says some of the solutions to America’s demographic problem will inevitably come from technology and automation. Programs Intel is funding now at universities in Ohio should produce 9,000 students in the next few years, she says. Equally comforting for Intel, though, is that “a fab has less people today than it did 20 years ago.”

But robots get you only so far. Sujai Shivakumar, a senior fellow at the Center for Strategic and International Studies, says the US needs a national human resources strategy. In his view, the labor shortages Intel and other chipmakers face are just a preview of a crunch facing the broader economy. “In many ways the semiconductor industry is the first major industry to be pushed through that challenge,” says Shivakumar, who until 2018 directed the innovation forum at the National Academies of Sciences, Engineering & Medicine.

One idea policy wonks embrace is revamping US immigration policy so it’s geared more toward plugging workforce deficits, as it is in Canada and Australia. That could mean offering an expedited path to citizenship to those in specific occupations and those getting graduate degrees from US universities in such subjects as engineering.

Another possible fix would be to keep people in the workforce longer, by raising the age at which workers can begin collecting Social Security or tapping into their pensions or 401(k)s. Yet Harry Holzer, a former US Department of Labor chief economist now at Georgetown University, says that neither feels politically feasible right now. Immigration has been a toxic issue in American politics for years, and Social Security has long been an untouchable entitlement. “None of that is doable,” Holzer says, which means “our labor force growth is going to continue to be modest.”

To boost US women’s labor force participation closer to levels in European countries, Washington and local governments could enact more policies that expand the availability of child care. Under rules announced at the end of February, for example, companies that receive $150 million or more in grants under the Chips Act will be required to make affordable care available to employees.

Businesses may also need to work with universities and technical programs to ensure they’re graduating students with the right set of skills. At Central Ohio Technical College, which is one of a coalition of community colleges that Intel is collaborating with, administrators are ramping up the technology program. It now has only about 150 students, and most are part-time.

John Berry, the college’s president, says his institution should be able to provide 400 to 500 of the 2,300 technicians Intel will need to open its Ohio plant. But he’s looking at an economy that also wants more nurses, radiology technicians and emergency medical technicians at a time when the population of college-age Americans is declining.

If anything, the problem is going to get worse. In 2021, 3.6 million babies were born in the US, the second-lowest number since the mid-1980s, after 2020. It was also 500,000 fewer babies than were born in 2005, when those turning 18 this year came into the world. Which means 500,000 fewer people entering the workforce or going to college 18 years from now.

Like Hager, the union boss, Berry is doing outreach at middle schools. He and his staff are also recruiting in rural Appalachia and courting refugee populations. But Berry knows that when you can make $18 to $20 an hour at the local Starbucks or driving for Uber, it’s hard to get high school grads to commit to spending a few more years in a classroom. “Today’s world order is just bizarre,” he says. “There is just no other way to describe it.”