Labor Shortage Threatens $52 Billion Chip-Making Plan In America

In Licking County, Ohio, head to the intersection of Clover Valley Road and Miller Road to see what Joe Biden calls his "field of dreams." You can see the construction area through a chain-link fence and around grassy berms, which looks like a sea of mud on a recent gray winter morning. There was more interest in the feed that the cows in the nearby barn had than the economic revolution taking place next door.

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It won't be long before those handful of workers turn into thousands, assembling the world's most advanced semiconductor fabrication plant that the president touted in his State of the Union address recently. It is the fruit of a bipartisan federal effort that Intel Corporation is investing $20 billion in that farm field. As well as countering China's drive to displace the US as the world's tech superpower, the program aims to revive domestic chip production to ease its dependence on Asian imports.

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Intel plans to build at least 10 fabs over the next decade or more in its Ohio complex, its first major stateside project in 40 years. There will be 3,000 workers employed by the first pair when it is completed by 2025. As per the company's projections, putting up those buildings will require even more bodies: about 7,000.

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Intel's Ohio outpost is starting to show signs of one big hurdle that has been largely overlooked, but will become evident as America's biggest industrial policy project since World War II takes shape. As a result of immigration and slavery, the US has prospered historically thanks to plentiful labor pools. It has come to the point where America's economic ambition is thwarted by its demographics.

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Even though Intel's lead contractor has been scrambling to find workers for six months, it has only been a little over six months since the groundbreaking ceremony. It is estimated that the project will require more electricians and pipefitters than the local labor supply, according to Catherine Hunt Ryan, Bechtel Corp.'s president of manufacturing and technology. Approximately 40% of the employees will be imported from outside the Columbus area, including other states, Bechtel expects. In addition, 30% of the workers will be apprentices going through union programs.

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In addition to Intel, there are other companies as well. It is difficult to find enough cooks, assembly line workers, nurses, teachers, truck drivers, police officers, firefighters, welders, etc. in the US at this time. The number of job openings is close to an all-time high, while unemployment is at its lowest in more than half a century. 5.1 million more positions were available than there were workers to fill them in January, St. Louis Federal Reserve researchers report.

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Often, ultratight labor markets are viewed as aberrations caused by pandemics. Although it’s debatable whether it is the result of Covid-19, it could be the result of demographic trends that predated. The Chips and Science Act of 2022 is intended to reverse this trend of offshoring by addressing America's worker deficit. But experts say without such efforts, the deficit will become a tax on growth and trigger offshoring again.

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Deficits in the labor force

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As baby boomer retirements increased and fewer young people joined the labor force in 2018, the US working-age population shrank for the first time since 1960. A bounceback in international immigration has only caused a small increase in the cohort, which covers those 15 to 64. Travel restrictions were eased at the height of the pandemic, contributing heavily to the jump.

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US Population Changes in Working Age

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In 2000-05, the US working-age population grew by 11.9 million people, but from 2017 to 2022 it has grown by just 1.7 million people.

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From small business owners to policymakers at the Federal Reserve, small-business owners and officials are becoming increasingly concerned about what was once just the domain of demographers and actuaries. A widening worker shortage is being attributed to a combination of factors, including pandemic deaths, a rise in retirements, and an overall drop in the number of workers joining the workforce from a few years ago. There has been a major gap in wage growth that has led to wage growth running well above historical trends, which in turn has complicated the Fed's efforts to stem inflation, he noted.

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It's not the worst problem to have too many jobs for an economy. It was Intel and other projects, like a new Honda Motor Co. electric vehicle plant and an expansion of a Facebook data center, that fueled a once-in-a-lifetime boom in demand for union members' skills. According to Ohio State Building & Construction Trades Council Executive Director Mike Knisley, it's like a tsunami. The challenge ahead is still apparent to him, however. It is estimated that one in five of his members will retire in the next five years. Their retirement comes after a pandemic wave of retirees already taking place around them.

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Dorsey Hager regularly visits middle schools to recruit replacements, where he tries to inspire preteens to imagine lucrative careers in electrical and plumbing trades. As well as talking to the children, Hager also discusses this with the teachers. The principals are being talked to. Counselors are being consulted. In five years he could promise the parents that after a four-year apprenticeship, he would be able to provide family support for six to nine months. Currently, Hager cannot assure this. The situation of the labor market is now very promising for the next 22 to 25 years, based on what I know and what I have seen.

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In such strategic industries as semiconductors, a worldwide war for talent is already being fuelled by an increasingly contentious rivalry between the US and China, which is particularly focused on technological innovation. There is an intense battle for bodies going on in Hager's home, a battle that experts say will only continue to intensify. For decades, the primary goal of state and municipal competition has been luring investors and factories, but now the focus has shifted to talent availability. JobOhio, the state's economic development agency, is headed by Nauseef.

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Competitors can get snarky in this competition. A declining population and an aging workforce are particularly problematic when you live in an aging state. JobsOhio advertised in major US cities during the pandemic, promising jobs and affordable middle-class lifestyles to anyone brave enough to leave. In New York, a billboard read, "Work from home instead of overpriced studio apartments." In Austin, a billboard read, "Keep Austin weird." A similar advertisement in the Texas capital proclaimed, "Keep Austin weird."

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It is predicted that Maddix Curliss will graduate with an associate of engineering technology in electrical engineering technology from Central Ohio Technical College in May. A job is not a concern for the 20-year-old. According to him, he feels overwhelmed by the amount of opportunities available, adding that the robotics company where he currently interns has already contacted him regarding a job.

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There is a farm field in Licking County where Intel's plant is going to be built, and Curliss and many of his classmates have their eyes on it. Curliss, who grew up in nearby Newark, says that it's not common for a company like that to land in Ohio. This type of company usually goes overseas.

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At least 40 projects and $200 billion in private-sector investment have already been initiated as a result of $52 billion in subsidies offered in the Chips Act. In addition to the 277,000 technicians the industry already employs, Gina Raimondo says 100,000 more will be needed for those plants. A $50 million fund is to be allocated to universities and technical colleges in the state to fund training programs. "This is such a different moment in history," says Intel executive Gabriela Cruz Thompson. There have never been so many companies building so much at once."

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Electric vehicle and battery plants are being announced almost weekly as a result of incentives created by last year's Inflation Reduction Act. As a result of Congress's approval of $1.2 trillion in infrastructure spending for 2021, there is also a growing demand for workers. The vice president hailed 20,000 jobs that would be created by a Baltimore tunnel project in late January. He was in New York City the next day promoting the Hudson Tunnel project and promising 72,000 "good jobs" that could make it possible to raise a family for workers such as electricians, carpenters, cement masons, ironworkers, operating engineers, etc.

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Efforts to strengthen America's competitiveness are the overarching objective of all these pieces of legislation, according to the Biden administration, but the administration has never been shy about its commitment to creating jobs as a side benefit. It is believed that the tight labor market plans to provide the president's advisers with an opportunity to put those who have been left behind by forces such as globalization back into well-paid work and ensure a brighter future for communities that may have missed out on previous boom periods.

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A think tank called the Roosevelt Institute, which is directed by Todd Tucker, in his current study argues that one of the main reasons for the current shortage of workers in industries such as manufacturing is precisely the deindustrialization that these policies are trying to undo in the first place. As a result, he explains, "Once you lose capacity in a certain industry, or in a certain geography, it's tough to regain that capacity."

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It is a liability for the economy that the shortage of construction workers, which according to Anirban Basu, chief economist of Associated Builders & Contractors, a trade group, is at the highest in more than 20 years, and it is a problem for construction. Basu says to imagine two countries, one that has an extensive workforce of construction workers and one that doesn't," he says. As far as all other aspects are concerned, they are the same. There is, however, one difference between the two, namely that one has a body of workers available to engage in construction, whether that is related to infrastructure or to commercial real estate or to homebuilding, while the other does not. What is the fastest growing nation in the world? It will be interesting to see which nation will have the most dynamic future. Wouldn't it be great if we could find out which nation offers a better quality of life and therefore a better built environment? It is obvious that the one with workers from the construction industry is the best."

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There is a labour shortage in the country, which affects America's $52 billion plan to manufacture chips at home.

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Cruz Thompson, the Intel executive in charge of recruiting the labor the chipmaker need, predicts that technology and automation will unavoidably play a role in some of the solutions to America's demographic challenges. According to her, 9,000 students should be produced by the programs Intel is now financing at universities in Ohio over the next few years. Nonetheless, the fact that "a fab has less people now than it did 20 years ago" is also consoling for Intel.

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Yet robots can only take you so far. The United States needs a national human resources plan, according to Sujai Shivakumar, a senior scholar at the Center for Strategic and International Studies. According to him, the labor bottleneck that Intel as well as other chipmakers are currently experiencing is merely a prelude to a larger economic problem. According to Shivakumar, who until 2018 oversaw the innovation council at the National Academies of Sciences, Engineering, and Medicine, the semiconductor sector is in many respects the first significant industry to be pushed through that challenge.

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Restructuring US immigration law to make it more focused on filling worker gaps, like it is in Canada and Australia, is one concept that policy wonks support. That would entail providing a quicker route to citizenship for people in certain professions and those pursuing graduate degrees in engineering from American universities.

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The US's net immigration

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Raising the age during which workers can start receiving Social Security benefits, as well as the age at which they can access their pensions and 401(k)s, is another potential solution. Yet according to Harry Holzer, a former head economist for the US Department of Labor who is now a professor at Georgetown University, neither seems politically realistic at the moment. In American politics, immigration has long been a divisive topic, and Social Security has traditionally been seen as an entitlement. None of that is feasible, according to Holzer, thus our labor force growth will remain moderate.

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US fertility rate overall

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Washington and local governments might implement additional policies that increase the availability of child care in order to raise US women's labor force participation nearer to levels in European nations. Companies that get subsidies under the Chips Act of $150 million or more are obligated to offer employees access to affordable care, according to regulations unveiled at the end of February.

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To guarantee that students graduate from technical programs and colleges with the appropriate set of skills, businesses might additionally require collaborate with these institutions. Administrators are expanding the technology program at Central Ohio Technical College, one of a coalition of community institutions with which Intel is working. There are roughly 150 students left, and the majority are part-time.

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Of the 2,300 technicians needed by Intel to open its Ohio operation, 400 to 500 should be available from John Berry's college, according to Berry. Nevertheless, he must consider an economy that is in need of more nurses, radiology technicians, and medical professionals at a time when fewer People are entering college.

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The situation is only going to worsen. After 2020, in 2021 there were 3.6 million births in the US, the lowest number since the middle of the 1980s. Moreover, there were 500,000 fewer kids born in 2015 than in 2005, the year those turning 18 were born. In other words, in 18 years, there will be 500,000 fewer people starting their careers or enrolling in college.

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Berry works with middle schools, just like Hager, the union boss. Along with courting immigrant populations, he and his team also are recruiting in rural Appalachia. Berry is aware that getting recent high school graduates to commit to spending an another few years in a classroom is challenging when they can make $18 to $20 per hour working at the neighborhood Starbucks or driving for Uber. He declares, "The current world order is absolutely crazy. There is simply no other way to put it.