What does REMI say? sm The Economic Impact of a Higher Education System on a State Economy Presented by: Christopher S. Gerlach, Associate Economist April.

what does REMI say? sm

The Economic Impact of a Higher Education System on a State EconomyPresented by: Christopher S. Gerlach, Associate Economist

April 21, 2010

what does REMI say? sm

State of Affairs

Great Recession … Higher tuition …

• Private higher education– Job losses Lower income/wealth – … may limit access (in-state vs. out-of-state) …– … may scale down (2-year vs. 4-year) … – … may postpone/opt out …

• Public higher education– Lower output/employment Lower revenues – … limits tuition assistance loans, grants, etc. … – … reduction in service and/or increase in tuition …

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Policy Interface

• Inform state and local tax reform/budget shortfall decisions ... potholes or professors? …

• Investigate the availability of loans, grants, etc. to make higher education more accessible, comprehensive and affordable …

• Explore immigration reform measures as they relate to higher education as an export industry …

• Examine other impacts of public policy decisions … primary and secondary education implications … socio-economic, racial equity considerations …

• Justify and/or quantify the economic impact of higher education at the national, state or local level …

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REMI & Higher Ed

• Past studies utilizing REMI’s dynamic structural economic impact model:– Northwestern University, Illinois (1996)– University of North Carolina (system) (2001)– University of California (system) (2003)– Florida postsecondary centers and institutions (2003)– Washington hypothetical expansion of public higher education (2004)– University of Connecticut (2005)– Michigan, Grand Rapids and Kalamazoo hypothetical expansion of public

higher education (2007)– Virginia public higher education and a hypothetical expansion (2009)

• This analysis revisits a 2008 study conducted by REMI for the Oklahoma State Regents for Higher Education (OSRHE) to measure the total economic impacts of the higher education system for the state of Oklahoma

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Oklahoma Higher Education• Oklahoma has 59 postsecondary institutions

– Number of Public: 29 ~49%– Number of Private: 30 ~51%– Number of 4-year: 39 ~66%– Number of 2-year: 20 ~34%– Enrollment: ~205,000*– Location: ~40% in Oklahoma City and Tulsa areasSource: National Center for Education Statistics (NCES) – Integrated Postsecondary Educational

Data System (IPEDS). (2006-2007) (2007-2008).

• Largest institutions– Oklahoma State University (5 campuses ~30,000 students)– University of Oklahoma (3 campuses ~30,000 students)

• Data for 2008 study provided by Oklahoma State Regents for Higher Education (OSRHE)– employment; graduate numbers; retention rates; construction and

capital spending; student and visitor spending; etc.

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Model Specifications

2.48%0.03%

Destination of Production of Forestry and logging; Fishing, hunting, and trapping for Tulsa MSA Counties - 2008

16%0.32%

Destination of Production of Forestry and logging; Fishing, hunting, and trapping for Oklahoma City MSA Counties - 2008

10.01%0.56%

Destination of Production of Forestry and logging; Fishing, hunting, and trapping for Rest of Oklahoma Counties - 2008

Tulsa MSA Counties

Tulsa MSA Counties

• Creek• Okmulgee• Osage• Pawnee• Rogers• Tulsa• Wagoner

• Creek• Okmulgee• Osage• Pawnee• Rogers• Tulsa• Wagoner

Oklahoma City MSA CountiesOklahoma City MSA Counties

• Canadian• Cleveland• Grady• Lincoln• Logan• McClain• Oklahoma

• Canadian• Cleveland• Grady• Lincoln• Logan• McClain• Oklahoma

… 70-Sector

3-Region …

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Basic Methodology• Direct jobs, student and visitor spending, and capital

expenditures

• Productivity gains* Graduate earnings Competitiveness of Oklahoma industries*Utilizes a given level of graduate retention

• Additional benefits (outside scope of this analysis)– Better health– Reduced crime– Increased volunteerism– Increased innovation/entrepreneurship– Etc.

• Endogenous ripple and feedback effects

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Direct Jobs and Spending• Faculty and staff employment and compensation

– educational services– professional and technical services– administrative and support services

• Student and visitor spending– publishing, excluding internet (books)– educational services (tuition)– consumption (pizza, beer, hotels, etc)

• Construction, operations and maintenance– commercial and institutional building construction– highway, street, bridge and tunnel construction – computers and furniture

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Labor Productivity Gains

Oklahoma Residents

Oklahoma Businesses

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REMI PI+ Inputs

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Partial Model Demo

Direct Employment Impacts 2008 2009 2010 … 2047 2048 Totals

Educational Services 183 183 183 … 183 183 7,510 Professional and Technical Services 186 186 186 … 186 186 7,638

… … … … … … … …Administrative and Support Services 250 250 250 … 250 250 10,235

Policy Variable: Industry Employment (number)

Abbreviated Model Demonstration

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Change in GSP

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GSP Growth Drivers

100% = $1.361 trillion over 40 years (real)

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Employment and Labor Force Gains

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Employment Growth Drivers

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Summary

• Compounding effects of productivity gains from higher education– 2008: 2008 graduates with lifelong higher productivity– 2009: 2008 & 2009 graduates with lifelong higher productivity– 2048: 40 years of graduates with lifelong higher productivity

• Increased graduate earnings will contribute $8.825 billion annually to state disposable income consumption GSP/employment etc.

• Ripple and feedback effects– Direct employment gains 2008-2048: ~739 jobs annually– Total employment gains 2008-2048: ~6,200 jobs annually

Through these individual and combined effects, investment in higher education builds the foundation of sustained economic growth and ensures a long-term regional competitive advantage.

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Questions/Comments?

District Office: Headquarters:700 12th St. NW, Suite 700 433 West St.Washington, DC 20005Amherst, MA 01002

Ph: 202.904.2490 Ph: [email protected]@remi.comwww.remi.com

Christopher S. GerlachAssociate Economist

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Referenced Studies• Northwestern University

– Felsenstein, Daniel. 1996. The university in the metropolitan arena: impacts and public policy implications. Urban Studies 33, 9: 1565-1580.

• University of North Carolina (system)– Luger, Michael, Jun Koo, Jonathan Perry, and Stephen Billings. 2001. The economic impact of the UNC system on the

State of North Carolina. Chapel Hill, NC: Office of Economic Development, Kenan Institute, University of North Carolina at Chapel Hill.

• University of California (system)– ICF Consulting. 2003. California’s future: it starts here, UC’s contributions to economic growth, health, and culture.

• Florida postsecondary centers and institutions– Harrington, Julie, Tim Lynch, Necati Aydin, and Deokro Lee. 2003. The economic impact of academic centers and

institutions on state-level GRP. The Empirical Economic Letters 2, 6: 229-245.• Washington hypothetical expansion of public higher education

– Washington Research Council. 2004. Education initiative 884: short-term pain for long-term gain. Washington Research Council Special Report.

• University of Connecticut– McMillen, Stan. 2005. The economic impact of research at the University of Connecticut and the University Health

Center. Storrs, CT: Connecticut Center for Economic Analysis, University of Connecticut.• Michigan (Grand Rapids and Kalamazoo) hypothetical expansion of public higher education

– Bartik, Timothy and George Erickcek. 2007. Higher education, the health care industry, and metropolitan regional economic development: what can “eds & meds” do for the economic fortunes of a metro area’s residents? Staff Paper No. 08-140, Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

• Virginia public higher education– Rephann, Terance, John Knapp, and William Shobe. 2009. Study of the Economic Impact of Virginia Public Higher

Education. Charlottesville, VA: Weldon Cooper Center for Public Service, University of Virginia.

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Productivity Manipulation

where,ΔOutputj

t is the change in output of sector j in year t;

Intermediate is the intermediate demand for employment in 2006;Emp is total employment in 2006;Grads is the total number of graduates of all degrees in 2006;ΔEmp is total new employment in 2006;Outputj

t is the baseline output of sector j in year t;

TotalOutputt is the baseline output of the State of Oklahoma in year t;

prodjt is the baseline labor productivity of sector j in year t;

compjt is the baseline average annual compensation of sector j in year t;

DiffInit is the income differential of degree i in year t.

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Structural Model

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Structural Model (cont.)