May 27, 2020 by Remie Verougstraete
Last weekend, the Wall Street Journal ran a sobering article highlighting the economic dimension of town-gown relationships in the coronavirus era. Focusing on Virginia Tech in Blacksburg, VA, the story examines what happens to college towns when the local university is forced online, disrupting not only day-to-day student life but also major community events like commencement.
In their analysis, the WSJ used Emsi’s economic impact model to answer the question: “How would a college town’s economic activity change if the local university did not exist?”
While the article delivers some hard truths about the cost of campus closures, it simultaneously highlights the enormous capacity higher education has for generating prosperity in a regional economy. To better understand this impact, let’s take a deeper look at the impact analysis behind the story.
For the WSJ article, we measured the impact of four universities on their respective college towns during the 2017-18 fiscal year. For each institution, we looked at three distinct categories of impact:
Each institution adds economic value to their community by employing local residents and purchasing goods and services from local vendors as they carry out their day-to-day operations. For example, Cornell University employed 10,989 full-time and part-time faculty and staff in FY 2017-18, the majority of whom (an estimated 78%) lived, shopped, and ate in and around Ithaca, NY. In addition, the university spent $732.2 million on day-to-day expenses related to facilities, supplies, and professional services. All told, Cornell’s payroll and day-to-day operations added $1.8 billion in income to the regional economy (after accounting for multiplier effects and adjusting downward to account for funding from local sources).
This part of an institution’s contribution to the local economy is the least likely to drop off dramatically for the simple reason that many operating expenses are relatively fixed costs that won’t go away unless the college closes entirely. That said, communities may still see some negative impacts as belt-tightening measures lead to layoffs or budget cuts for some institutions.
Thousands of out-of-town visitors flock to college towns each year to attend various events hosted or sponsored by the local institution — and they bring their wallets with them. While in town, these visitors patronize local restaurants, bars, hotels, taxis, and retail shops. For example, in FY 2017-18, visitors to Corvallis, OR for events associated with Oregon State University generated a net impact of $119.9 million in added income for the regional economy.
Unlike an institution’s operations spending impact, this category is likely to see a noticeable decline the longer institutions refrain from hosting classes or events on campus. The consequences of this drop-off will be especially acute in college towns where larger, less frequent events like orientation, graduation, and home football games account for a significant portion of annual business revenue.
From rent and utilities to restaurants and bars, college students spend a lot of money in their communities. In the case of college towns, many of these students come from other areas, bringing economic activity to the region that would not otherwise exist. Furthermore, some local students who stay would have left (taking their spending with them) were it not for the college or university in their town.
And all this spending adds up. For example, in Emsi’s own hometown of Moscow, ID, students at the University of Idaho generated $26.6 million in added income to the regional economy during FY 2017-18; the equivalent of supporting 818 jobs in our little patch of paradise on the Palouse (a.k.a. the Tuscany of America).
Like visitor spending, this economic activity will likely disappear as long as campuses are closed. Encouragingly, some institutions are already exploring creative ways to get students back in town, if not back on campus. By converting dorm rooms to single occupancy or reserving blocks of off-campus apartments, colleges and universities can provide living arrangements that are more conducive to social distancing. Measures like these, informed by the unique risk factors and demographics of each institution’s community, can help mitigate disruptions to both the student experience and economic activity.
This analysis shows the real challenges that campus closures can present for local businesses. At the same time, it also highlights the enormous capacity that colleges and universities have for contributing to economic recovery and resiliency in their communities. In particular, it highlights the role institutions play as good economic neighbors — not only through long-term, indirect effects like higher alumni earnings and a more productive workforce, but also through immediate, direct impacts like the those outlined above. If closures prove costly, it’s all the more reason for communities and educators to continue working together towards a safe reopening.
Learn more about how Emsi’s economic impact model quantifies the impact of higher education on regional economies. For data and insights to help your institution respond to COVID-19, check out Emsi’s Health Risk Index and other resources for higher education.