Funding levels for the National Institutes of Health (NIH) have come under scrutiny since President Trump took office in January of 2025. Initially, an executive order was issued limiting coverage of overhead expenses associated with funded awards (“indirect costs”) to 15% of the award. Many specific research grants were also terminated, totaling at least $7.5 billion through the end of May. But perhaps the biggest threat to funding of NIH-supported medical research is looming as part of the 2026 budget process. The White House has proposed a reduction in NIH funding from $48 billion this year to $27.5 billion next year, a 43% drop. The outcome of this process remains uncertain, with the Senate’s Committee on Appropriations supporting sustained funding.

The main impact of NIH funding is on human health. The purpose of public funding is to support research that is foundational for future medical innovation. No single firm has the incentive to fund such research because any firm can benefit from it. A cut in funding would reduce such advances, potentially harming our future health.

But the extent of these potential NIH funding cuts may have even broader implications. The innovations that result from this research generate investments that spur economic activity across the country. The economic impact may also be felt at the local level. When individual institutions receive those funds, they hire researchers who may relocate to take these jobs. Spending in the area increases and other local businesses may prosper. Public funding of scientific research may also encourage private investment in the same community, as firms translate scientific discoveries into products for the market. Overall, the broader labor markets in which recipient institutions reside could benefit from NIH funding. Cutting that funding may be detrimental to the community.

In this report, we investigate the extent to which NIH funding affects local labor markets. We categorize major NIH awards by the location of their recipients and track funding per capita in those locations over the past two decades. We examine changes in such funding levels to investigate whether those locations with a larger influx of NIH funding experienced greater employment growth. We also evaluate whether such funding increases lead to an increase in the population share with a college degree. In both cases, our analysis supports such a relationship.

Read the full article about NIH funding and local employment by Phillip Levine and Robin McKnight at Brookings.