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The second Trump administration has begun a concerted effort to reorganize the labor force of the entire United States. As federal workers are fired and higher education workers face funding cuts, the government is leaning into the bipartisan trend of using tariffs and subsidies to create jobs in sectors that serve a public purpose. Called “industrial policy,” the intervention of the federal government in private markets has spiked in popularity over the past decade. Bucking a longstanding tradition of laissez-faire capitalism and free trade, the executive and Congress have shown a willingness to put a visible hand on the market by subsidizing some sectors and taxing others. These interventions can easily backfire, as economists have warned, due to mistakes in the selection of subsidized sectors, high costs from tariffs, and ultimately slowed growth. Less discussed is the key role played by workers, whose unwillingness or inability to mobilize as directed by industrial policy could have dire consequences.

This Essay describes the barriers that may prevent American workers from participating in modern industrial policy, thereby undermining the success of the economy as a whole. The United States is already facing a labor shortage and employment rates are high, meaning there is little excess capacity for workers to move into domestic manufacturing or other jobs subsidized by industrial policy. Markets for services and goods that support workers, such as healthcare, housing, and childcare, have major gaps that further decrease labor supply. Instead of filling these gaps, however, industrial policy has chosen to target more esoteric markets. Workers then choose not to participate in the labor force, making it even more difficult to achieve the aims of industrial policy.

To support this thesis, we introduce novel empirical analysis on a key example of labor infrastructure—childcare. We build the most comprehensive existing dataset of childcare facilities in California and use it to document that more than sixty-five percent of children live in cities with no childcare, labeled “deserts,” or in cities with an inadequate supply of childcare. Labor supply is lower in deserts and underserved cities, even when controlling for other city characteristics, suggesting that there may be scope for interventions to increase childcare availability and increase labor supply.

The Essay then lays out a policy agenda that would give industrial policy a better chance for success. The first sectors to target should be domestic industries that support labor productivity. These policies are the least likely to have unintended negative consequences and will enable the success of other reforms. Then, industrial policy can target missing labor markets already prioritized by the Biden and Trump administrations—manufacturing, construction, and new technologies. By prioritizing workers over artificial intelligence and other forms of non-human capital, industrial policy is more likely to create long-term value for the American economy.