By Kjell Christophersen, EMSI Co-Founder and Senior Economist
For the past 12 years EMSI’s Economic Impact Study (EIS) has estimated the impact of colleges and universities in terms of job and income formation, higher earnings captured by students, returns to taxpayers, and a broad collection of social benefits and avoided costs.
We’ve come a long way with the Economic Impact Study for higher education institutions since we unveiled the first version of the model for seven pilot community colleges back in 2000. The Association of Community College Trustees (ACCT) initially funded the effort after having sought someone within academia and economic think tanks to undertake the effort for more than 10 years. Finding no takers for a variety of reasons (chief among them probably the small amount available for this effort), Dr. Hank Robison and I agreed to undertake the effort—which set in motion the founding of EMSI.
Six months later, we had built the first version of the model and applied it for the pilot colleges. The results were presented at the ACCT annual convention venue in Nashville, Tennessee before an audience of about 600 college presidents and trustees. Little did we know the kind of response this would generate. It was like a tremendous pent-up demand among the nation’s community colleges for which all of sudden there was an outlet. That’s how EMSI got its start and the rest is history, as they say. To date we have completed or are underway with nearly 1,150 comprehensive impact studies for community colleges and universities in the US, Canada, UK, and Australia.
So what have we learned over these years and what are some of the next steps? Many colleges have now refreshed their studies several times to be able to tell the stories to their legislators and local stakeholders with fresh data. For them and for us at EMSI, this turned out to be a valuable road of discovery. Many of the higher education impact studies that preceded EMSI were designed as advocacy and as such had very inflated results that did not conform to typical economic standards. EMSI had to revise the deep-rooted perception that bigger numbers were always better. Debunking the apocryphal multipliers and associated impact figures was not an easy task. It required a great deal of educating politicians, local citizens, and even many college administrators who were used to dealing with exaggerated numbers. This uphill battle continues.
In the beginning, the visionary colleges were few in number, but as they met with success others soon followed. Many of our repeat impact study clients now have become very sophisticated in serving their communities. The higher education sector that has gotten the hang of viewing their impacts from a truly economic perspective now wants to move beyond simply knowing their role. Many colleges and universities have purchased Analyst, EMSI’s labor market research tool, to start effectively enhancing their local labor markets and improving economic vitality. Stories of such improvements are spread in op-ed pieces, on television, in the newspapers, in chamber of commerce meetings, in economic development councils, and such (see examples here). These colleges no longer hold just one press conference to announce the results and then call it good, they continually spread the message in innovative ways always seeking to generate the kind of regional goodwill that is priceless in any economy.
Data-Driven Information That Colleges Can Use
Our main lesson learned from working closely with the colleges was that they are, without exception, hungry for credible data-driven information they can use. EMSI’s impact model has provided an independent, third-party economic audit in much the same way a financial firm would conduct an audit of a business’s financial statements. The strength of the educational investment is often reflected by the data. EMSI has, on occasion, analyzed institutions that operate at unfeasible levels and would recommend cutbacks on public support since overinvestment on the part of taxpayers is often the cause of returns that fall below threshold levels.
EMSI’s objective is to generate data-driven results that are anchored in solid theory and the most up-to-date literature. As such, EMSI’s business model and reputation are built on accuracy, not advocacy.”
EMSI’s objective is to generate data-driven results that are anchored in solid theory and the most up-to-date literature. As such, EMSI’s business model and reputation are built on accuracy, not advocacy. Our main concern is to always pass peer reviews with flying colors. An important part of this is to invoke counterfactuals—always adjusting for monies withdrawn from the economy in support of the college—which is often not done by other analysts. This means we only count the direct and indirect (ripple effect) impacts associated with the money coming to the college from outside the region, not the money the college spends that had been raised inside the region.
Once the colleges are comfortable with our approach, that the results have not been overstated but are still strong, they often become emboldened in using the study results for advocacy purposes.
The vast majority of EMSI’s studies have shown colleges to be the best of economic neighbors—the taxpayers are better off, as are the students and the business community. Both the quality and quantity of the regional workforce has increased because of the presence of the college, and this in turn, becomes a powerful attractant for new industry to settle in the region.
A Note on Benchmarking
In the past colleges have attempted to use their year-over-year impact reports to demonstrate improved performance. We have always discouraged this as impact and investment metrics are not built from the assumptions that lead to benchmarking. Many dynamic factors, outside the control of a college, come into play when calculating impacts. The need to compare year-over-year performance has been pervasive, as was the need for impact reports over a decade ago. EMSI is once again preparing to take on the task of filling this need by generating a benchmarking framework that will allow colleges to demonstrate their improvement in productivity and efficiency gains over time, regardless of the changing industry modeling standards or economic conditions.
We welcome your feedback and thoughts on EMSI’s economic impact study, whether your institution has taken part or not. Contact Rob Sentz (email@example.com) or call us at (208) 883-3500. And click here for answers to frequently asked questions about the economic impact study.
About the Author
Dr. Christophersen is co-founder and a senior economist at EMSI with over 35 years of long- and short-term international experience as an economic analyst and modeler in Africa, Asia, the Near East, Europe, the Caribbean, and the U.S. His list of clients includes USAID, The World Bank, African Development Bank, Asian Development Bank, FAO, and several private clients in the US. For these clients, he has served as team leader on many assignments to carry out activities such as economic modeling, project appraisal, assessments, planning, design and evaluation, feasibility and recurrent cost studies, and training in economic and financial analysis. Dr. Christophersen has produced modeling and economic analysis for higher education institutions in the US since EMSI was founded in 2000. He earned his PhD in Agricultural and Natural Resource Economics in 1974 at Washington State University.