Can the CHIPS Act heal the nation’s economic divides?

Editor's note:

This post was updated on August 10, 2022 to correct a data point.

The CHIPS and Science Act—the sprawling technology package Congress passed last week—has been called many things. 

What started as the Endless Frontier Act became the U.S. Innovation and Competition Act, then the COMPETES Act, the Bipartisan Innovation Act, CHIPS-Plus, and finally, the CHIPS and Science Act. 

Along the way, some senators called the bill a way to “out-compete” China, while others called it a foray into industrial policy. More recently, congressional leaders merged an array of broader innovation items into the bill, centered on $52 billion in subsidies to U.S. semiconductor manufacturers. In short, the bill stands out as a potential landmark in U.S. competitiveness policy. 

Yet for all of its many elements, the CHIPS and Science Act also stands out in a different way: as a milestone for policies to ensure that underrepresented people and places can participate more in the nation’s innovation economy. It affirms social and spatial inclusion as central to American strength. 

The bill’s bipartisan passage forecasts the most significant and necessary government intervention in the industrial economy in decades. Coming now will be sizable infusions of federal money (around $200 billion) into university R&D and technology development, supply chains, and STEM education. 

However, what’s equally significant—but less noticed—are the programs aimed at increasing economically disadvantaged demographic groups and geographic areas’ participation in the innovation economy.  

Addressing the demographic side of the equation are provisions to increase the participation of underrepresented groups and firms in CHIPS-funded projects and diversify STEM participation more broadly. Another provision would create a chief diversity officer at the National Science Foundation. And others would build STEM and research capacity at minority-serving institutions. Such efforts are a start at recognizing and addressing the extreme lack of diversity among those who obtain STEM degrees or receive federal research funding in technology fields. 

NSF award and NIH R01 grant recipients by race and ethnicityAt the same time, the CHIPS and Science Act also contains numerous place-based programs aimed at combating the nation’s uneven economic development. These spatially targeted initiatives seek to promote a more equitable geography of growth across the country.  

Insights and recommendations from Brookings Metro and the Information Technology and Innovation Foundation informed this theme of the legislation by depicting just how stark the geographical divides in the U.S. innovation sector have become. Our research reported that half of all U.S. innovation jobs are concentrated in just 41 counties, underscoring the need to better distribute innovation inputs around the country. 

U.S. counties by share of total innovation sector jobsCentral to the bill’s response to the place problem is the authorization of $10 billion over five years to create 20 geographically distributed regional technology and innovation hubs. Reserved for areas “that are not leading technology centers,” the hubs will focus major investment surges toward up-and-coming tech ecosystems in order to expand U.S. innovation capacity, accelerate technology development, and support job creation. As a group and at scale, the hubs are a serious bid to counter excess concentration and nudge new places onto the U.S. growth map. 

The hubs aren’t the bill’s only push in this direction. It also authorizes the $1 billion RECOMPETE Pilot Program to provide block grants for smart economic development in persistently distressed communities. (This too reflects Brookings Metro’s work—in this case by Tim Bartik of the W.E. Upjohn Institute.) In addition, the bill authorizes a Regional Clean Energy Innovation Program at the Department of Energy to promote economic development in diverse geographic areas through clean energy innovation. Beyond that, the legislation authorizes over $2 billion for the Hollings Manufacturing Extension Partnership to support innovation in the manufacturing sector and calls for more than $800 million to expand the Manufacturing USA network of regional technology institutes. 

In short, these items—mostly unheralded in media coverage—represent a genuine recognition that innovation (and the nation’s competitiveness) are increasingly intertwined with and dependent on social and spatial inclusion. Without those, too much is left aside. 

Of course, the CHIPS and Science Act is only a start. Much work lies ahead to ensure that appropriators provide full funding for all of the bill’s provisions, and the new and expanded programs will require intensive design and implementation work to ensure that the people- and place-based initiatives are well crafted and user-friendly. Fortunately, recent programs such as the Economic Development Administration’s Build Back Better Regional Challenge and the National Science Foundation’s Regional Innovation Engines offer models of solid launches. 

Beyond that, future legislation will need to provide sustained, consistent movement toward the CHIPS and Science Act’s inclusion goals. Only then can the nation truly confront the innovation and inclusion issues that are now only being initially addressed.