So far in this series we have looked at how we conduct an investment analysis for learners, society and taxpayers. In addition to this, our Economic Impact Study (EIS) also includes an impact or growth analysis; that is, the economic impact on the local economy brought about by the fact of a college or university’s existence.
Staff and Institution Spending
All educational institutions spend money on things like wages, goods and supplies, and this is money that will, for the most part, enter the local economy. When we say “for the most part”, we mean that of course not all spending will end up in the local economy. For instance, staff might spend some or even all of their wages further afield, and some suppliers will be located outside the area. EMSI’s EIS takes these factors into account when calculating the impact of colleges and universities on their local economy.
The money that does enter the local economy then flows through that economy. In order to calculate what effect this will have, we apply “multipliers” across all sectors of the local economy. It is important to note that since local economies are often very different to one another, so the money flow through those economies will be very different too. Therefore, we are not just “multiplying” the money through the economy on a crude “catch all” basis; rather, unlike many other studies, we calculate and use different “multipliers” based on the nuances of the particular area we are looking at.
What we end up with is a gross impact figure. We then take into account “alternative uses of funds” – how would the money be spent if the college or university didn’t exist – and subtract it from the gross figure to leave us with a net impact which can in effect be treated as the annual impact (unless of course the institution suddenly started to spend a massive amount more or less each year, and unless the local economy were to change dramatically).
The spending of the college or university itself, however, is not the only expenditure that will impact the local economy. There is also the effect of learner spending; that is, spending by learners which wouldn’t exist if the institution didn’t exist. In calculating this, we only include those students who come to study from outside the normal travel area. The reason for this is that the money they spend, unlike the money spent by those living within the area, is money that wouldn’t necessarily have entered the local economy of if the college or university didn’t exist. Local learners, on the other hand, would be spending their money locally anyway and so we exclude them from our impact calculation.
As with the impact of the spending of the institution, we then apply our multipliers to end up with a figure that shows the net impact on economic growth (again this can be treated as an annual figure, unless the amount of non-local learners was to change massively).
In the next piece, we will look at Added Workforce Skills; that is, the increased economic growth that past and present learning at the college or university is producing each year.
If you would like to discuss how our EIS can help your college or university articulate its economic value, contact Andy Durman at email@example.com