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 Washington University ranks 20th among all U.S. research universities. |
THE ECONOMIC IMPACT OF THE
COLLEGES & UNIVERSITIES
IN THE ST. LOUIS REGION
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By Bryan Bezold
The universities, colleges, community colleges, and technical colleges of Greater St. Louis are an important part of the regional economy. They collectively employ approximately 31,200 people in
the St. Louis region—collectively larger than the region’s largest employer (BJC at 21,500). Some of these institutions also draw talented students, faculty, and researchers to St. Louis. Others, most notably the region’s four research institutions, draw hundreds of millions of research dollars from around the
country to St. Louis. And the international nature of several of the region’s universities helps to make greater St. Louis a more globally connected region.
THE BUSINESS OF HIGHER EDUCATION
Through their operations, these region’s post-secondary educational institutions generate economic activity. In order to carry out
their educational mission, they rely on services and labor from businesses around the region in a number of industries, including but not limited to construction, maintenance services, telecommunications services, financial and insurance services, legal services, and accounting services. All together, the business activity of St. Louis’ post-secondary education institutions supports another 6,900 jobs at other businesses throughout the region.
The 31,200 employees at those educational institutions earn an estimated $1.17 billion per year, for an average of $37,500 per worker. Their household spending in St. Louis supports another 12,700 jobs at retail, dining, and other business establishments around the region.
Combining the jobs supported by the institutions’ operations with the jobs supported by their employee’s household spending, the 31,200 higher education jobs support another 19,600 jobs in St. Louis, for a total regional employment impact of 50,800 jobs. In dollar terms, the total annual direct and indirect impact of post secondary education in the
St. Louis region is estimated at $3.9 billion.
IMPORTING PEOPLE & MONEY
These region’s post-secondary educational institutions also contribute to the region’s economy by importing people—students
who bring tuition dollars with them and faculty that bring their skills with them, and research dollars.
| SIU-Edwardsville is one of four research universities in the region. |
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Many of the region’s colleges primarily serve local residents—which is an important service to the region. Others, however, not only serve locals, but also attract students from elsewhere in the nation and world. These in-migrants, undergraduates and graduate students in fields ranging from economics to medicine to business and law, add to the diversity and vibrancy of St. Louis, even if they only stay a few years. Some, however, find the combination of affordability and quality of life assets, and civic amenities enticing enough to put down roots here in St. Louis.
Washington University, for example, notes that 60 percent of its undergraduate students come from more than 500 miles away. That’s not surprising for a university with an outstanding national reputation. Saint Louis University’s 11,000 graduate and undergraduate students come to St. Louis from all 50 states and almost 80 foreign countries.
The region’s higher education institutions also attract faculty to St. Louis, to teach in disciplines ranging from literature to engineering. Some of these experts are locally produced, but many are not. By importing such a diverse group of highly educated people, educational institutions further add to the richness of St. Louis’ cultural life.
A more concrete economic benefit, however, flows from the research funding that the region’s four research universities attract. According to the National Science Foundation, Saint Louis University, SIU-Edwardsville, UM-St. Louis, and Washington University spent a total of $477.8 million on science and engineering research in 2002. Washington University was responsible for the lion’s (or bear’s, as the case may be) share of these expenditures, at $416.9 million, and ranks 20th among all U.S. research universities. A majority of those research expenditures, just over 70 percent, were federally financed. That means that during 2002 the four research universities attracted and spent $340.7 million that,
without their presence, would not have otherwise been spent in St. Louis. That’s a huge boost to the region’s economy.
A LONG-TERM PAYOFF
There are other types of grants and research besides science and engineering, of course. But
the scientific and engineering research is worth some consideration here. That’s because while the operations of the universities—research, teaching, managing facilities, etc. all create jobs and income in
St. Louis right now, the research expenditures are what will drive economic growth in the long term, locally and nationally.
| The National Corn-to-Ethanol Research Center (NCERC) at SIU-Edwardsville is a teaching center for renewable fuels research. |
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There are real examples of the economic payoff associated with university based scientific and engineering research in St. Louis today. A professor at Washington University’s medical school, for example started Tripos.
The firm, which is in the business of bioinformatics, is listed on the NASDAQ, and has seen sales growth of 19.6 percent in the last year. The next Tripos, so to speak, may be born out of research taking place at one of the region’s universities right now.
The economic benefits of scientific and engineering research aren’t limited to medicine and biotechnology, however. The National Corn-to-Ethanol Research Center (NCERC) at SIU-Edwardsville, for example, is a leading center for renewable fuels research. With oil at $62 a barrel; this research looks a lot less like ag-state pork barrel than it does an important part of the nation’s energy future.
PREPARING WORKERS
While the local post-secondary educational institutions design the economy of the future, they also prepare workers for the economy of the present. The breadth and depth of the region’s post secondary educational institutions provides opportunities for education in not just a variety of subjects, but at a variety of levels as well. A biotechnology company, for example, probably needs employees with graduate degrees in chemistry or biology, but might also need lab technicians trained at
St. Louis Community College. Financial businesses in the region can similarly draw
people with graduate; undergraduate and associate level business education to fill openings at varying skill and experience levels. There will always be a need for skilled trades people in construction and manufacturing, so technical colleges also play an important role in the regional economy. The part-time and evening programs offered in the area provide opportunities for full-time workers to continue their education without dropping out of the workforce.
| St. Louis Community College offers training for lab technicians. |
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The region’s educational institutions
are also preparing their students for
the increasingly global nature of the local
and national economy. Webster University,
for example, has campuses in seven count-ries outside the U.S. Saint Louis University has a campus in
Madrid, and other colleges and universities
in the region offer international-oriented curricula and opportunities
to study abroad.
Given the many ways in which post-secondary educational institutions enrich the St. Louis region’s economy, it’s possible that the $3.9 billion annual economic impact in fact understates the benefit
that these institutions have on the region. When we consider educational opportunities,
artistic and cultural enrichment, a migration of talented students and faculty, and
the potential for new technologies, edu-cational institutions in St. Louis provide
an impact that goes well beyond classrooms and labs.
| Research Universities in Greater St. Louis |
| University |
2002 Science & Engineering Research Expenditures |
| Saint Louis University |
$35.4 million |
| Southern Illinois University-Edwardsville |
$14.0 million |
| University of Missouri-St. Louis |
$11.5 million |
| Washington University |
$416.9 million |
| Universities & Four-Year Colleges in St. Louis |
| Fontbonne University |
McKendree College |
| Harris-Stowe State University |
Missouri Baptist University |
| Greenville College |
Principia College |
| Lindenwood University |
University of Phoenix |
| Maryville University |
Webster University |
| Community Colleges in Greater St. Louis |
| East Central College |
St. Louis Community College-Florissant Valley |
| Jefferson College |
St. Louis Community College-Forest Park |
| Kaskaskia College |
St. Louis Community College-Meramec |
| Lewis & Clark Community College |
Southwestern Illinois College |
| St. Charles Community College |
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| Technical Colleges in Greater St. Louis |
| DeVry University |
Sanford-Brown College |
| Missouri College |
Vatterot College |
| Ranken Technical College |
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| Estimated Annual Economic Impact of Post-Secondary Educational Institutions in Greater St. Louis |
| |
Direct |
Indirect |
Total |
| Employment |
31,200 |
19,600 |
50,800 |
| Personal Income |
$1.17 billion |
$580 million |
$1.97 billion |
| Total Output |
$2.0 billion |
$1.97 billion |
$3.97 billion |
Source: RCGA and Minnesota IMPLAN group, INC.
A More Educated Region is a Wealthier Region
By Bryan Bezold
The colleges and universities in greater St. Louis provide a variety of benefits to the region. They employ a large number of people, and provide some cultural and entertainment opportunities to St. Louisans. But through their mission of education, local
colleges and universities are helping to make
St. Louis a richer and more economically
vital community.
This most valuable contribution is due to the fact that by building a more educated population, colleges and universities are also building a more skilled and adaptable workforce. More skilled and adaptable workers are better at producing goods and services that are competitive in today’s global economy, and at figuring out how to produce those goods and services in more efficient ways. That makes the firms they work for more competitive, and thus more profitable. Ultimately, this means higher wages for these workers. These higher wage levels in turn support increased household spending, which benefits business and wage earners throughout the economy, even in industries that aren’t technically sophisticated or exporting goods and services outside of
St. Louis.
The numbers bear out this phenomenon. When we compare education and earnings, a pretty strong link emerges. By education, we mean the number of people over age 25 with a four-year degree (that’s not to say a four-year degree is the beginning or the end of someone’s education—just that it’s a good barometer for the education level of a region’s population). To measure earnings, we can use income earned from labor, but not including transfer payments or dividends, divided by the total number of workers. Comparing education and earnings for the 50 largest metropolitan areas in the U.S. demonstrates a positive link between the share of a region’s adult population with a college degree and the level of earnings per worker. Specifically, an increase of one percent in a region’s college attainment share is associated with an increase of $900 in the level of earnings per worker (Note to statistics fans—the positive relationship between education and earnings level is significant at the .01 level.).
In other words, workers in metropolitan areas that are more educated earn more, all other things being equal, than in metropolitan areas that have lower levels of educational attainment. Not surprisingly, there’s also a
positive relationship between the growth in earnings per worker and college attainment (and that relationship is statistically significant, also).
In St. Louis, for example, earnings per worker grew from $35,673 in 1998 to $42,414 in 2003, a change of 18.9 percent. In 2000, 25 percent of St. Louisans over age 25 had a BA or BS degree. That sounds good, but both figures are unfortunately below the mean for the top 50 metropolitan areas. Washington DC, for example, had college attainment of 40 percent and income growth of almost 26 percent between 1998 and 2003.
Based on the average performance of the top 50 metropolitan areas, if St. Louis’ college attainment rate had been 30 percent instead of 25 percent, earnings would have grown by an additional 1.4 percent between 1998 and 2003, putting 2003 earnings at $42,908. That difference—$494—may not sound like a lot. But that’s earnings per worker, and multiplying that by the 1.3 million workers in the
St. Louis region brings the total to an additional $642 million worth of earnings. Since much of that $642 million would be spent at local merchants, it would represent a huge boost to the local economy.
A skeptic, however, could point out that the relationship might be going the other way—that wealthier people, on average, are more likely to go to college, because they are more likely to be able to afford it. Therefore, one might argue, rich metropolitan areas produce more people who can afford college, and thus more college grads, rather than college graduates earning more money making their hometowns wealthier.
That’s an interesting idea, but probably not a correct one. There are a few other relationships that suggest education produces wealth, and not the other way around. One of those relationships is the one between patents, which are a good measure of a region’s capacity for innovation, and education. A comparison of the same 50 metropolitan areas and their patenting activity during the ‘90s reveal a strong relationship between the numbers of patents awarded in a region and the share of the 1990 population with a college degree. In 1990, for example, 20 percent of the population in the 16-county
St. Louis region over the age of 25 had a four-year college degree. Between 1995 and 1999, 3,205 patents were awarded to St. Louis area firms and individuals. San Diego, Calif., on the other hand, had college attainment of 25 percent in 1990, and produced 6,679 patents between 1995 and 1999. Across the 50 largest metro areas in the U.S., the average number of patents awarded during that period increases by about 400 with every one percentage point increase in 1990 college attainment (and again, this is a statistically significant relationship).
We therefore know that more educated regions are more likely to produce innovative products and services, so it’s easier to accept the idea that education leads to wealth, and not the other way around. So by producing college graduates, the region’s universities are helping to make St. Louis a more innovative economy.
One of the pieces of good news in this story is that St. Louis is moving in the right
direction; going from 20 percent of adults over 25 holding a four year degree in 1990
to 25 percent in 2000. This is an important shift for St. Louis, because a generation
or two ago, the path to a successful middle- class lifestyle didn’t necessarily have to go through a university. In the 21st Century, it almost certainly will. |
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