Resource Roundup

It can seem as though new data centers are announced daily, as tech companies invest hundreds of billions of dollars to build the computing capacity needed for rapid AI development. The largest of these are known as “hyperscale” data centers and can cover thousands of acres and use enough electricity to power a city.  

The rapid growth of data centers is in the national interest, backers say. They promise that good jobs will be created and claim that the centers are needed to power an increasingly AI-driven economy. But polling has found that most Americans don’t want data centers in their communities. Critics are wary of the massive quantities of water that the centers consume for cooling. Expensive tax subsidies and a proliferation of secret deals have also stoked the ire of residents and watchdog groups. Ratepayers fear that the centers’ enormous energy use will raise electricity bills for everyone. 

However, building trades unions, like the International Brotherhood of Electrical Workers, have largely seen data centers as a boon and are fierce supporters — so long as companies follow strict labor standards. Some locals have seen apprentice class sizes swell. Others have reported that data center projects make up half the hours their members work. (For its part, the Associated Builders and Contractors, an industry group, reported that one in six of its member firms are building data centers. Firms with data center contracts had more months of work in the pipeline, while those without had fewer months of work ahead and were cutting their workforces.)

Critics point out that data center construction jobs are temporary and often filled by out-of-town crews. Indeed, data centers employ so few permanent workers that the tax subsidies they receive can amount over a million dollars per job created. But supporters in labor have countered that steady construction employment comes from lining up a series of “temporary” projects.

In short, from a workforce perspective, data centers are complicated. This edition of Resource Roundup takes a look at some of the workforce considerations accompanying their rise. Learn about data centers’ effects on local employment, read a note of caution from a retired leader of a building trades union, and find out how communities can secure benefits from data center developers.

Brookings

New evidence on data center employment effects 

Data center announcements often tout rosy figures for the number of permanent jobs that will be created. But the reality is more mixed, according to research by economists Dany Bahar and Greg Wright, published in Brookings. 

Between 100 and 200 local jobs in telecommunications and data processing are created when a county sees its first data center built. However, only hyperscale data centers are associated with telecommunications job growth, due to their greater need for connections between nodes, unlike colocation centers, which are effectively large warehouses that lease space for servers to tenants. 

The construction of a data center has no effect on workers’ wages, the authors conclude. And the public incentives offered to hyperscalers likely make little impact on site selection, given the magnitude of private investment and the preexisting infrastructure needed for a data center to be feasible.

Phenomenal World

Construction’s Data Center Gamble

Construction is in a slump, but data centers have offered hope, especially for members of building trades unions, whose ranks have declined for decades. It’s a boom-and-bust business. When there are no projects, there’s no pay. For the moment, data centers appear to offer a steady stream of work.

But unions shouldn’t let the data center rush distract from the long-term strategizing needed to rebuild labor strength in the building trades, cautions Mark Erlich, former head of the carpenters union in New England.  

Megaprojects, like data centers, can siphon union firms away from the smaller jobs, like schools and office buildings, that make up most construction work. Nonunion firms might gain a hold over those projects in union workers’ absence. History shows that once that happens, it’s difficult for organized labor to regain its position in the construction industry. 

The building trades must protect and expand their foothold in traditional projects and continue outreach to nonunionized workers in order to grow sustainably, Erlich argues.

Urban Institute

Most Americans Do Not Want a Data Center in Their Area. How Can Policymakers Better Balance Economic Growth and Community Concerns?

While relationships between data center developers and communities can be contentious, there is room for negotiation. Policymakers and local residents can negotiate with developers so that projects deliver local benefits, including for workers.  

Development, project labor, community workforce, and community benefits agreements are the main tools communities can wield, according to the Urban Institute. Local policymakers can update their zoning and permitting processes to ensure that residents’ concerns are given due consideration and that, if approved, data center developers must take meaningful action to address them. When it comes to job quality, provisions can include standards for pay, working conditions, and local hiring. 

Data centers and the backlash against them are relatively new. As more communities act, the best practices that emerge can serve as a guide for others.