[co-author: Maribeth Meluch]
Central Ohio will soon welcome further growth in the tech market. Intel recently announced plans to begin construction in late 2022 and chip production in 2025 at the world’s largest chip-making complex in New Albany that will provide many benefits, but some downsides, to Central Ohio’s economy.
Intel’s initial investment will be $20 billion – with plans to eventually build more fabrication plants over the next decade – which could grow that amount to over $100 billion. This plan, dubbed “IDM 2.0,” is projected to create 3,000 permanent jobs at Intel with an average salary of $135,000 in addition to 7,000 temporary construction jobs.
LABOR MARKET IMPACT: LOTS OF NEW JOBS, BUT WAGE PRESSURE WILL MOUNT
The biggest impact of the monumental Intel chip factory project will be the impact on Central Ohio’s labor market.
On the heels of Intel’s announcement, other companies in the chip manufacturing sector – like Air Products, Applied Materials and Ultra Clean Technology – announced plans to shift part of their operations into Central Ohio to provide the significant resources that Intel will need to operate its plants.
In total, some estimate the number of new, high-paying Central Ohio permanent jobs to be in the tens of thousands. To increase the pool of needed talented workers for all of this tech growth, Intel also announced an additional $100 million pledged toward partnerships with Ohio’s higher education institutions.
But unemployment in Central Ohio is already low, standing at less than 3% in December 2021. On top of that and even before Intel’s announcement, the Central Ohio Jobs Outlook was predicting 5.2% growth by 2028, more than doubling the next fastest growing region of the state.
So, regardless of the millions pledged to partner with higher education, the more intangible and less controllable downside of Intel’s new facility is the immense wage pressure that will be put on the Central Ohio labor market. The question will be whether Central Ohio’s other employers can keep up with this wage growth to retain their own workers.
HOUSING MARKET IMPACT: DEMAND AND VALUES (AND TAXES) TO RISE, EVEN MORE
These countless new and lucrative jobs will naturally increase demand and values in Central Ohio’s already red-hot housing market. Indeed, in its Annual Report, the Columbus Relators stated that the median price of a single family home in Central Ohio rose by 12.6% in 2021. Adding Intel’s new facility will only add fuel to that fire. Unsurprisingly, homebuilders will have their hands full keeping up with the expected demand for new homes in a housing market already challenged due to a lack of labor and hampered by supply chain delays. This will inevitably bring one downside to current and future residents but a boon to local governments: higher property taxes, which were already not insignificant.
EXPERIENCES OF OTHER REGIONS WITH NEW LARGE EMPLOYERS
Beyond Central Ohio, some regions have struggled with disappointing impacts on their local economies arising from large employers relocating to their region. For instance, a 2018 study by the Economic Policy Institute found only nominal increases or unchanged levels of overall intra-county employment from newly-sited Amazon fulfilment centers. Meanwhile, McKinsey, as recently as March 2021, points out that significant large corporate players have, at least on average, material and substantial impacts (direct and indirect) on both the broader economy and directly to households through a range of factors, including monetary flows from labor income, capital income, taxes, investment in capital assets and payments to suppliers. Labor income is generally the largest direct impact, with wages and benefits accounting for $0.25 of each revenue dollar flowing to households, and just over half of every revenue dollar going to suppliers. These factors, coupled with the substantially positive potential for both talent attraction and new talent creation within the workforce presented by a technologically sophisticated manufacturer like Intel, should be cause for significant optimism for the Ohio economy.
We will continue to monitor developments and provide updates as they happen.
