Distressed Counties Main Recipients of Advanced Tech Funding

Since 2021, money – both Federal and private – for advanced technology investments has been pouring into rural and micropolitan counties identified as “economically distressed” by Federal agencies, according to a new study by Brookings Institution and MIT economists.

Three laws enacted under the Biden administration – the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act – have helped spur the flow through valuable incentives like bonus tax credits, $3 billion in funding for eligible environmental projects, and Department of Energy loan guarantees. The legislation was also designed to stimulate investment in strategic sectors like clean energy, semiconductors and electronics, biomanufacturing and other advanced industries. It seems to have worked.

“Since 2021, private investors have announced $525 billion in private funding in strategic sector investments,” the report concluded. “We find that economically distressed counties are receiving a disproportionate share of private sector investment in these strategic sectors relative to their economic output and population. When compared to private investment writ large, these investments are more likely to go to distressed communities.”

Counties are classified as distressed if the gap between the national and local population aged 25-54 that is currently employed over a five-year period is more than 5%, and if median household income is below $75,000.

Counties that fit the bill have benefited disproportionately from strategic sector investments, according to the report.

“As of 2022, the nation’s 1,071 employment-distressed counties represented 8% of national GDP and 13% of the U.S. population. Since 2021, these counties received nearly $82 billion (or 16%) of announced strategic sector investments—double that of their GDP share and 1.2 times their population share,” the report stated. “Strategic sector investments are flowing to employment-distressed counties at levels 2.1 and 1.7 times that of total non-residential PFI (private fixed investment) and PFI in structures, respectively.”

Seventy counties in 27 states – especially those in the South — have reaped the rewards through over 100 projects. One example is a $4 billion green hydrogen plant in Wilbarger County, TX to be built jointly by AES and Air Products that will create 115 permanent jobs and over 1,300 construction jobs. The report also cites Albemarle’s $1.3 billion lithium processing plant to be built in Chester County, SC.

According to the report, actual investment in clean tech in employment-distressed communities was even larger than announced investments, and more than double the counties’ GDP and population levels. One in four of the $26.6 billion invested in clean tech since 2021 was directed to these communities, for a total of $6.6 billion.

At the same time, there are 250 counties that qualify as employment distressed and that have at least 7.5% employment in advanced industries that have not received any strategic sector investments. It estimated that an additional 24% of such counties might be attractive to such investors.

Strategic sector investors are also focusing on micropolitan statistical areas – those with a population between 10,000 and 50,000. They represent about one-quarter of all employment-distressed counties – but 50% of all strategic investment in such counties. From a site-selection perspective, they may offer the available land required and in many cases access to a workforce drawn from nearby metros.

These findings lead the report’s authors to advocate a national industrial strategy that would benefit local communities as well as the national economy.

“After decades of economic divergence, strategic sector investment patterns are including more places that have historically been left out of economic growth. And the map is not yet finished: There are hundreds of distressed counties with assets similar to those that have attracted investment and have not yet been targeted,” the report stated.