Since completing our first Economic Impact Study (EIS) in the UK back in 2010, we have gone on to conduct almost 100 studies for colleges and universities throughout the country. To make these studies even more valuable for our clients, we have recently added three exciting new features, which we want to tell you about. We have set out the details of each of these innovations below, together with possible applications, but first here’s a reminder of what is already contained within our studies.
Our EIS is comprised of two parts: an Impact Analysis and an Investment Analysis. The Impact Analysis measures how much impact a university or college has on its region. This takes into account the money spent by the institution, the amount of new money injected into the region’s economy by students coming from outside the area to learn, and the increased productivity arising as a result of former learners still active in the local or regional economy. We then go on to capture the effect of this spending on other industries within the regional economy by applying a multiplier effect to provide a total gross impact. Finally, we apply counterfactuals — for example, how money spent by the colleges might have otherwise been spent in the region — to arrive at a net impact: that is, the amount of additional income generated in a regional economy that exists because the college exists.
In addition to this direct impact, there are also a number of long-term benefits to a variety of stakeholders, including learners, society and taxpayers, which we measure via an Investment Analysis. These figures are benefit‑cost ratios, whereby we first calculate the benefits the institution has on a stakeholder — for instance, average higher wages earned over a lifetime as a result of the education or training received — before subtracting costs — for example, direct costs such as fees, equipment and books, and indirect or “opportunity costs”, such as the money the learner could be earning had they entered the workforce. What we end up with is a ratio — say 5:1 — which basically means that for every £1 a student invests in going to the university or college, they will earn on average £5.00 in higher wages throughout their working life.
In addition to these existing figures, we have now included three new features.
Apprenticeships are of course a huge thing right now, with the Government pledged to create 3 million by 2020. In addition to those mentioned in the Investment Analysis above, apprenticeships bring in two new stakeholders: the businesses that offer them and the students that do them. Based on the current body scholarly literature, as well as our own modelling expertise, we are now able to feed into our EIS model a combination of data from external sources and data found in the institution’s Individualised Learner Record (ILR), to produce a return on investment figure for both businesses and students.
What this means is that our EIS now provides a specific answer as to how both these stakeholders benefit from apprenticeship programmes. Businesses can know what type of return to expect from bringing on an apprentice, whilst prospective apprentices will be able to see the return they can expect from doing an apprenticeship. This gives some great opportunities for institutions to market their apprenticeships to both stakeholders.
Impacts by Industry
We are now including a new figure in our studies measuring “impacts by industry”. This essentially takes each of the institution’s impacts, then shows which industries the impacts flow to and calculates what these impacts are. For example, a university or college must spend money on electricity to operate, which means that there will be an impact on the electricity, gas, steam and air conditioning supply industry. Another example would be that of former learners who take their new skills into local/regional industries, leading to increased output in the sectors they work in.
There are a number of possible uses for these figures that a university or college might consider. For instance, the figure for a particular industry could be used to show leaders in that particular industry the impact the institution has on their sector. Another example would be a university or college making use of the figure for a particular industry when applying for a grant in that sector.
Having conducted nearly 100 studies in the UK, we now have a bank of results that can be used to create a benchmark figure for each individual university or college against the collective results. This allows us to rank the institution’s return on investment for learners, taxpayer, and society, in terms of whether it falls within the 20th, 50th or 90th percentile. All of our new studies now include a two-page document containing these details.
Although this information is clearly useful, it comes with the caveat that the return on investment results do not take into account factors outside of institutional control, such as regional differences in job and industry composition and employment rates. For example, colleges in affluent areas can tend to have a better return on investment for learners than colleges in more economically deprived areas, but a direct comparison would not necessarily be a good barometer of how effective both institutions are. However, as a figure for internal use, helping institutions to see which areas they can concentrate on improving operationally to generate greater returns for stakeholders, the new benchmark figure is highly valuable.
These new innovations are now included in all our studies. To find out more about how they can help your institution articulate its economic impact, contact us at firstname.lastname@example.org. Click here to download a copy of our factsheet.