By Timothy Aeppel

(Reuters) – A surge in factory construction fueled by the Biden administration’s investments in “strategic sectors” such as clean energy and semiconductors has so far flowed disproportionately to U.S. counties with relatively struggling economies and, in In particular, it has not followed “democratic geography.”

As of 2021, a group of counties with relatively low employment rates for prime-age workers and low median household incomes, while accounting for only about 8% of the national GDP, took 16% of the $525 billion in announced investments, according to a data analysis. by the Brookings Institution and the Massachusetts Institute of Technology.

The study highlights how the adoption of a more forceful industrial policy under Democratic President Joe Biden could extend investments to regions left behind by decades of offshoring.

Industrial policy was long anathema to many American economists and politicians who viewed it as unfairly favoring some industries and regions over others. But the strategy has won support from a wide swath of the political spectrum, including Republicans, many of them from regions that are now benefiting from the latest push to boost key businesses.

Mark Muro, principal investigator of Brookings’ Metro program and one of the study’s authors, said the data shows that these federal programs are geared “toward smaller city areas that are less prosperous.”

To the extent that the new push toward industrial policy is a factor in some of these investments, the data suggests that “that policy has not simply followed democratic geography,” he said.

In fact, a disproportionate share of the places are Republican strongholds that, regardless of Biden’s largesse, are leaning heavily toward former President Donald Trump in the run-up to the Nov. 5 election, which is shaping up to be a rematch between the two. men. In polls, Biden consistently gets low marks for his handling of the economy despite historically low unemployment, persistently strong job growth and above-average wage increases, especially for lower-income workers.

‘SIGNIFICANT EXIT’

The report credits three major federal laws enacted under Biden — the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act — for driving the investment boom. These laws, passed in 2021 and 2022, finance a series of subsidies and tax incentives that encourage companies to place projects in disadvantaged regions. For example, the Inflation Reduction Act has tax credits that include bonuses of at least 10% when an investment is made in a low-income community.

The researchers defined counties as distressed when they have a median household income of less than $75,000 and a prime-age employment gap of more than 5%. The employment gap is a widely used indicator of economic health that measures the difference between the five-year national average in the unemployment rate for prime-age workers and the average for those workers in a particular county or region.

In 2022, there were 1,071 U.S. counties that fell into this category, together representing 13% of the U.S. population. The study found that those counties have received nearly $82 billion in announced investments, the double its share in the gross domestic product and 1.2 times its share in the population.

These investments are concentrated in the southern United States, but extend to other regions, reaching 27 states, according to the report.

The researchers also compared the recent wave of investments to overall private investments from 2010 to 2020 and found that the latest wave is much more likely to target distressed counties, “suggesting a significant departure from previous geographic investment patterns.” “, according to the report.

Even among these poorer counties, some appear to have an advantage over others when it comes to attracting new factories. The analysis found that the 70 distressed counties among the 1,071 that have gotten investment are those that already had relatively high shares of employment in so-called advanced industries, such as auto manufacturing and clean energy.

“In general, places closer to labor sources, closer to suppliers, seem to benefit,” Muro said.

(Reporting by Timothy Aeppel; Editing by Paul Simao)

By Sam