The Cleveland Federal Reserve has released a new report suggesting that the Inflation Reduction Act (IRA) and the CHIPS and Science Act, both passed in August 2022, could potentially narrow the education earnings gap in areas where new manufacturing plants are being built. This potential outcome is based on observations from the US shale boom.
According to the report, these legislative acts are injecting billions into constructing new manufacturing facilities. The resulting investments could increase demand for non-college-educated labor in regions near these plants, often characterized by small labor markets.
While it remains too early to definitively assess the impact of these bills, data from the shale boom provides some insight. In counties where horizontally drilled shale wells doubled over approximately four years, employment for non-college workers increased by 11.2%, with earnings growing by 5.9%. For college-educated workers in those same areas, employment grew by 8.6%, and earnings rose by 3.8%.
The Cleveland Fed is one of twelve regional Reserve Banks forming part of the Federal Reserve System along with the Board of Governors in Washington DC. The institution plays a role in formulating national monetary policy, supervising banking organizations, providing payment services to financial institutions and the US Treasury, and supporting Federal Reserve operations nationwide.
Additionally, through its branches in Cincinnati and Pittsburgh, the Cleveland Fed serves Ohio, western Pennsylvania, eastern Kentucky, and West Virginia's northern panhandle. It supports community well-being across this region through various research initiatives, outreach programs, and educational activities.
For further information or inquiries:
Chuck Soder
chuck.soder@clev.frb.org
216.672.2798
