UA Cossatot Promotes Economic Prosperity
November 24, 2015
For many years, economists have shown the correlation between people who complete a college degree and the tendency for them to earn more than people who have not attended any college. Yet, the individual benefits are not the only considerations.
According to a study conducted by Jonathan Rothwell, the college earnings advantage also leads to greater economic activity, fueling prosperity at the regional and national levels. Rothwell is a fellow at the Metropolitan Policy Program at Brookings. His research focuses on labor market economics, social mobility, access to education, and the sources of economic growth. With these earnings benefits in mind, he concluded the following:
The average bachelor’s degree holder contributes $278,000 more to local economies than the average high school graduate through direct spending over the course of his or her lifetime; an associate degree holder contributes $81,000 more than a high school graduate.
The quality of colleges greatly affects the size of these benefits. High value-added four-year colleges contribute $265,000 more per student to local economies than low-value added four-year colleges. The contribution is $184,000 for high value-added two-year colleges.
Sixty-eight percent of alumni from two-year colleges remain in the area of their college after attending, compared to 42 percent of alumni from four-year colleges.
UA Cossatot has awarded 3,349 degrees and certificates since joining the University of Arkansas system in 2001. UA Cossatot is the only college in Arkansas that is partially supported by four separate sales taxes and in turn, UAC endeavors to support not just the educational needs of the region, but community needs as well. According to the results from Rothwell’s study, state and local governments, as well as their taxpayers, have a very strong incentive to boost college attendance and completion.
“I have held a long-term belief that the things we do, not just at UA Cossatot, but at community colleges across the nation, make a huge impact on the economy,” said Dr. Steve Cole, Chancellor for UA Cossatot. “Of course we pride ourselves on student success. But it’s also rewarding to be an economic engine for our region, as well.”
An associate degree holder will spend $81,000 more on average over his or her lifetime, including an additional $9,000 in state and local taxes. The state and local tax estimates here should be regarded as incomplete for a number of reasons. These estimates do not consider the reduction in government spending as a result of education (e.g. lower health bills, welfare, or crime costs); more broadly, the estimates do not account for multiplier effects that for every additional dollar spent, some fraction will be spent again by the next person. For these reasons, it is very likely that a policy that resulted in one extra associate degree holder at an upfront cost of more than $9,000 to state and local taxpayers would still pay for itself in the long run. The City University of New York has experimented with one such policy, which was able to double graduation rates while spending an additional $5,000 per student per year. After including some of these other considerations, scholars at Columbia University determined that the CUNY ASAP program generates $146,000 in lifetime benefits to taxpayers.
Even in more rural areas such as the area that UA Cossatot serves, the estimates of state and local benefits are also affected by whether or not alumni remain in the area. To the extent that the area is a net loser in the migration of college attendees, local and state benefits will dissipate accordingly and be captured by the areas where the alumni relocate. Using data from LinkedIn alumni profiles, the author and a colleague Sid Kulkarni was able to calculate the percentage of alumni from roughly 1700 colleges who work in the same area as their college. Overall, 68 percent of two-year attendees remain in the same area after graduating, compared to 42 percent of four-year attendees.
Rothwell claims his student is not a comprehensive assessment of the public benefits to the economy of education. There was no attempt at considering how education affects government savings, through channels such as criminal behavior or health. Nor was an attempt made for estimating the role of education in entrepreneurship and innovation, which is likely very large and valuable. Nonetheless, these estimates provide some sense of a minimum benchmark for how education affects a local economy.