February 18, 2014 by Joshua Wright
Over the last 14 years, EMSI has completed more than 1,200 economic impact studies in four countries, 1,090 of them for U.S. educational institutions. The results of our comprehensive and rigorous studies have consistently shown that community colleges make a big difference in their regional economies — both in the total added income that’s due to a college’s presence in its local area and in the increased productivity of students who are part of the local workforce.
Now for the first time, we’ve calculated that same impact, on a national scale, for all community colleges in the United States.
EMSI’s nationwide economic impact study, released this week by the American Association of Community Colleges, shows the net total impact of community colleges on the U.S. economy was $809 billion in 2012. That’s equal to 5.4% of the nation’s gross domestic product. Put another way, the added income created in the U.S. through increased student productivity and the spending of international students supported the equivalent of 15.5 million jobs in 2012.
How do colleges contribute so much added income? Think of it this way. Anyone who has studied at a community college enters or re-enters the workforce with new skills. Millions of these students are working across the country today, and when they apply those skills, they’re rewarded with higher incomes than they would have otherwise (e.g., a home health aide who becomes a licensed practical nurse). They also raise business profits through their increased productivity. Together, these higher incomes and increased profits create even more income as they are spent in the U.S. economy.
This is what makes EMSI’s study unique. Only EMSI’s economic impact study provides a credible, data-driven measure of the significant economic value from students’ increased productivity. Our study measures the economic impact associated with education, not just how much colleges spend.
The study is based on several sources, including the latest academic and financial reports from IPEDS, industry and employment data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau, outputs of EMSI’s Social Accounting Matrix (SAM) model, and a variety of studies and surveys relating education to social behavior.
As we noted in our recent white paper on the rights and wrongs of economic impact studies, EMSI looks at the narrowest measure of economic impact activity in our studies — the new economic activity solely attributable to each institution that would otherwise not exist. It’s important to emphasize these impacts are net measures.
The study looked at the value of community colleges for students, taxpayers, and society. In 2012, American community colleges received $44.9 billion in funding from the public sector. But community colleges generated $304.9 billion in taxpayer benefits — 6.8 times more money than their public funding. This means that for every $1 of public investment, taxpayers reap a cumulative value of $6.80 over the course of students’ working lives.
For students, the gains in higher future income equal a return of $4.80 for every $1 that they invest in their education. The study showed that the average associate’s degree graduate will make $10,700 more each year than someone with a high school degree or equivalent — $41,900 compared to $31,200.
In addition to students and taxpayers, society as a whole benefits from community colleges. The study found that total benefits to society in present-value added income — which again results in higher lifetime earnings for students and increases in business output — equals $1.1 trillion. In addition, social savings related to reduced crime, lower unemployment, and increased health and well-being across the U.S. amounts to $46.4 billion.
AACC’s release of the national economic impact study was covered in the Chronicle of Higher Education, which described the report as seeking “to quantify what happens when community colleges provide employers with skilled workers, the economy with consumers, and graduates with jobs along with better health and well-being.”
Links to the various versions of EMSI’s study are below: