The shale boom decreased labor earnings inequality; could IRA and CHIPS do the same?
New manufacturing plants being built because of the Inflation Reduction Act and the CHIPS and Science Act could narrow the education earnings gap near where the plants are built, if the US shale boom is any indication.
A new report from the Cleveland Fed says the IRA and the CHIPS Act, both passed in August 2022, are injecting billions into the construction of new manufacturing plants. Like investments sparked by the shale boom, those new plants could increase demand for non-college-educated labor near where they are being built, areas that are often small labor markets.
It’s too early to assess the impact of those bills, but the shale boom could provide an indication: In counties where the number of horizontally drilled shale wells doubled (typically over four years), non-college workers saw employment grow by 11.2% and earnings grow by 5.9%. That compares to 8.6% and 3.8%, respectively, for college-educated workers.
Read the Economic Commentary: Can the IRA and CHIPS Act Reduce Labor Earnings Inequality? Lessons from the US Shale Boom
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Media contact
Chuck Soder, chuck.soder@clev.frb.org, 216.672.2798
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