The $52.7 billion CHIPS and Science Act of August 2022 directly and indirectly created between 42,465 and 54,385 jobs (more than many expected) and increased wages in 149 counties with semiconductor manufacturing facilities, according to a paper to be discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 25.
“Our findings suggest that industrial policies can deliver measurable employment benefits in targeted strategic sectors, even in the short run,” write the authors, Bilge Erten of Northeastern University and Joseph E. Stiglitz and Eric Verhoogen of Columbia University.
To distinguish the employment effects of the CHIPS act from other large spending commitments, such as those in the Inflation Reduction Act signed into law a week later, the authors use a “differences-in-differences” approach. They compare quarterly employment and wage data from the Bureau of Labor Statistics and U.S. Census Bureau through the end of 2024 in counties with pre-existing semiconductor production facilities to counties with other pre-existing high-tech employment but no semiconductor producers.
“The idea of differences-in-differences is that their trends would be similar in the absence of the CHIPS act. So, we looked at deviations of the semiconductor counties from the trend in high-tech non-semiconductor counties,” Verhoogen said in an interview with the Brookings Institution.
Their estimates suggest a direct increase of between 14,900 and 20,860 jobs in semiconductor production and related equipment and materials manufacturing. They also found indirect employment gains of between 27,565 and 33,525 jobs in upstream input sectors (such as specialized electronics used in fabrication) and non-residential construction. The direct job gains amount to an increase of 100 to 140 jobs, or 10% to 14%, per affected county. And they estimate an average weekly wage increase in inflation-adjusted dollars of $206 to $232 in semiconductor jobs, an increase of 25% to 28% over a baseline of $823.
Importantly, the authors note anticipation effects: Employment and wages started increasing a year before the CHIPS act was signed, with the June 2021 Senate passage of pre-cursor legislation, the United States Innovation and Competition Act (USICA). That convinced semiconductor executives that legislation would eventually be approved.
“It turns out that those beliefs and expectations can move labor markets much earlier than funding approval,” Erten said in an interview with the Brookings Institution.
The authors write that a natural question is whether the sum of the direct and indirect jobs gains they estimated should be considered large or small.
“Given the amounts of money slated to be spent under the act … this effect seems modest,” they write. But, they add, “one should not have expected enormous employment effects” because “the sector is among the most capital-intensive in U.S. manufacturing … [and] relies heavily on extremely sophisticated machinery, clean-room facilities, and advanced automation.”
“From this perspective, the employment gains seem larger than many expected,” they write.
The authors also noted that the long-term employment effects of the CHIPS act may be very different from the short-term effects they evaluated.
“CHIPS-funded programs remain active and continue to influence private investment decisions, even as the political environment evolves and debates over the scope of industrial policy continue,” they write.
CITATION
Erten, Bilge, Joseph E. Stiglitz, and Eric Verhoogen. 2025. “Employment Impacts of the CHIPS Act.” BPEA Conference Draft, Fall.