In Part 1 of this series, we showed how we conduct an investment analysis of students attending college or university. However, the benefits of education are not just confined to the individuals who graduate from the institutions; there are also knock-on effects on the rest of society which we calculate as part of our Economic Impact Study (EIS).
Just as in the calculations for learners, there are both costs and benefits to society which must both be established before they can be offset against one another. The costs fall into the following categories:
1. The money that society invests in college or university
2. The loss of money/output that could be being generated if each of the students were actually working instead of attending college or university
As for the benefits, these also fall into two broad categories:
1. Added income produced by a more skilled local population/workforce (i.e. higher wages, higher local spending, more spending on local housing, increased prices, increased business profits etc)
2. Social savings, such as lower levels of ill health, lower levels of crime, lower requirement of state benefits, which are all corollaries of higher levels of education
As with the investment analysis of learners, we do not just come up with catch-all figures, but rather we take into account the differences within the student body (i.e. age of students, level of course, achievement etc).
In addition to calculating these benefits to society, our EIS also looks more specifically at the benefits to taxpayers. This involves firstly looking at the amount of UK government funding that the college or university receives in the year of our analysis, in order to find out the cost to the taxpayer. We then separate out those benefits to society that go specifically towards taxpayers, which are:
(a) An increased tax base from more highly skilled workers (as they earn more, they pay more tax)
(b) avoided social costs directly attributable to the taxpayer (i.e those that the taxpayer would otherwise have to pay for such as for police, unemployment programmes, etc.)
Again, just as we did with learners, we can look at this as a benefit cost ratio (£1 investment gives a return of £X amount) and also as an annual % rate of return. What this does is to give clear and strong evidence that taxpayer investment in the Further and Higher Education sectors gives a strong rate of return.
In the third part of this series, we will move on from looking at investment analysis, and turn our attention to the impact analysis, or economic growth analysis, looking at the impact colleges and universities themselves have on their local economy.
If you would like to discuss how our EIS can help your college or university articulate its economic value, contact Andy Durman at firstname.lastname@example.org