Universities As Economic Powerhouses for Communities

The nation’s attitudes toward higher education have grown complicated in recent years. Increasingly, many Americans have become skeptical of the importance of a bachelor’s degree, particularly Americans who lean Republican in their politics.

And the Trump administration has largely elevated that skepticism, cutting or revoking already-issued federal grants in a variety of areas, including medical research to the tune of more than $160 billion. At the same time, the administration is threatening deeper cuts and criticizing diversity, equity, and inclusion programs at institutions.

But the nation’s college and universities are more than just educational hubs for the next generation, they are economic drivers in small towns and big urban centers around the country. And an analysis from the American Communities Project and the Economic Innovation Group, a bipartisan public policy organization, finds two points are generally true:

• Communities with a college or a university tend to have higher per capita GDPs than neighboring communities.
• Communities with big, “tier 1” research universities that receive big government grants, generally do even better with their per capita GDP than similar communities.

The data suggest that the spin-off commerce created by the schools has an outsized impact on their communities, big and small, all over the country. And cutting funds to the nation’s institutions of higher education is likely to have larger impacts that will be felt on and off campuses in the months and years ahead.

What Is a College Town?

Colleges and universities don’t exist as islands; communities grow up around them to serve them. Some of these communities are considered College Towns in the ACP — places where the college or university, or sometimes more than one, defines the locale.

There is a range of College Towns in the ACP rubric. Some are populous counties where one big university dominates, such as Boulder County, Colorado, home of the University of Colorado. Some are smaller counties where a smaller school has a disproportionate impact, such as Buncombe County, North Carolina, home of UNC Ashville. And some house several smaller campuses, such as Dauphin County, Pennsylvania, home of Harrisburg University, Penn State-Harrisburg and a satellite campus for Temple.

But overall, the data shows a clear story. The College Towns in the American Communities Project have a higher per capita GDP than the counties around them. And the effects are even larger for “tier 1” research schools, the 187 institutions that are classified as having “very high research spending and doctorate production” in the Carnegie Classification of Institutions of Higher Education.

In College Towns without “tier 1” schools (communities with smaller schools or collections of small schools), the per capita GDP was more than $7,000 higher than it was in surrounding non-College Town counties.

And in College Towns that are home to a big research schools, the impacts are much bigger. The per capita GDP in those counties is $16,000 higher than the surrounding non-College Town counties

Regardless, the takeaways from the data are hard to ignore: College Towns tend to be economic drivers for their broader regions. Some of this business serves students — restaurants, bars, stores — but part of it is the impact of the institutions themselves. Colleges and universities hire a lot more than professors. There are student support staff, maintenance staff, HR staff, and other university workers.

When the federal government cuts money to those institutions, all those employees take a hit. Less scholarship money and grants may also lead to fewer students, which means local businesses suffer.

“Tier 1” Research Schools

And, of course, there are colleges and universities that exist outside the ACP’s College Towns category. There are colleges in Big Cities, big dense Urban Suburbs, and urban fringe Exurbs.

To understand the impact of the nation’s big research universities (the schools facing bigger cuts from the Trump administration), the ACP and EIG looked at per capita GDP in communities with and without “tier 1” research schools across the ACP types.

Again, the data are largely clear.

Those high-research schools are in nine of the ACP’s 15 types, and in most cases communities with such an institution do much better than their non-college counterparts.

• The “tier 1” difference in per capita GDP in the Exurbs is +$17,000.
• In the Big Cities, the difference is +$29,000.
• The difference in the African American South is close to +$40,000.
• The two outliers here are Middle Suburbs and Hispanic Centers, which both have a negative “tier 1” difference (-$6,000 and -$33,000, respectively). However, those numbers are drawn from very small samples, three total schools in those two types.

To be clear, in a lot of these communities, the universities are smaller parts of a much bigger story. The fact that these communities were not labeled College Towns is an indication that the schools are not their dominant trait.

Still, the fact that those with big research schools tend to do much better suggests that having a big research school in your backyard pays dividends or at least is part of having a vibrant economic community.

Going Forward

These data may not change how a lot of people feel about the state of higher education in America. The great battles over “woke-ism” and whether college is “worth it” will continue. Like many other issues in the nation right now, much is being driven by cultural divides — what people on different sides of the political spectrum think they are supposed to believe.

And, it should be noted, these latest political headwinds for colleges and universities are coming at a time when many smaller, mid-tier schools are struggling with enrollment declines as a demographic cliff looms for the U.S. college-age population. Those drops may be lessening the potency of mid-tier colleges as economic drivers.

But the numbers here indicate that colleges and universities and College Towns still play a significant economic role in the nation beyond their part in educating the next generation. They are economic drivers in local economies scattered across the country, and cuts to them will have likely have unforeseen impacts that will be felt all over.