DOCUMENT RESUME ED 476 832 JC 030 300 How Virginia's Community Colleges Contribute to Virginia's TITLE Economic Future. Virginia Community Coll. System, Richmond. INSTITUTION 2003-01-00 PUB DATE 33p.; "A study commissioned by the Virginia Community College NOTE System." Prepared by A. Fletcher Mangum Consulting. Reports Descriptive (141) PUB TYPE EDRS Price MF01/PCO2 Plus Postage. EDRS PRICE Access to Education; At Risk Persons; Community Colleges; DESCRIPTORS Economic Change; *Economic Impact; *Economically Disadvantaged; High Risk Students; *Job Training; Labor Education; Labor Force; Minority Groups; *Outcomes of Two Year Colleges Education ; *Virginia Community College System IDENTIFIERS ABSTRACT The Virginia. Community College System (VCCS) operates 23 colleges on 40 campuses throughout Virginia. VCCS educated 63% of all Virginians enrolled as undergraduates in any public college or university in the Commonwealth in fall 2002. VCCS is the major provider of higher education services in economically struggling regions of the state, and educated 75% of all undergraduate students 25 or older and 55% of all undergraduate ethnic minorities. The traditional rationale for public subsidization of education is that education generates externalities, or spillover effects, including increased economic productivity. This report aims to measure the effect VCCS' educational services have on economic productivity. The paper uses the Black and Lynch (1997) model for determining the empirical relationship between educational attainment and productivity. The study suggests that the present value of a VCCS Associate's degree is $106,487 for males, and $85,512 for females. For those who attend community college to enhance skills, the increase in average annual income for a single credit hour at VCCS is calculated at $137 for males and $119 for females. The paper also analyzes VCCS' benefits for economically struggling regions, and state savings in general fund dollars for education. Perkins Core Performance Measures for 2001-02 are appended. (NB) Reproductions supplied by EDRS are the best that can be made from the original document N 00 t) N 121 How Virginia's Community Colleges Contribute to Virginia's Economic Future OF EDUCATION U.S. DEPARTMENT Research and Improvement Office of Educational INFORMATION EDUCATIONAL RESOURCES CENTER (ERIC) been reproduced as CO This document has or organization received from the person originating it. PERMISSION TO REPRODUCE AND to been made DISSEMINATE THIS MATERIAL HAS Minor changes have quality. BEEN GRANTED BY improve reproduction stated in this Points of view or opinions necessarily represent document do not policy. official OERI position or TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) 1 January, 2003 A Study Commissioned by the Virginia Community College System 0 0 M 0 A. FLETCHER MAIGUM CONSULTING BEST COPY MAMMA How Virginia's Community Colleges Contribute to Virginia's Economic Future Executive Summary The mission of the Virginia Community College System (VCCS) is to provide higher education and workforce programs that are geographically and financially accessible, and that meet the needs of students, businesses, and communities. In achieving this mission, VCCS has grown to be the largest provider of higher education services in the Commonwealth. In fall 2002, VCCS educated 63 percent of all Virginians enrolled as undergraduates in any public college or university in the Commonwealth. VCCS also is the largest provider of higher education services to those Virginians most at risk of being left behind as the Commonwealth transitions from the industrial base of the "old economy" to the knowledge base of the "new economy." For these reasons, VCCS plays a significant role in ensuring Virginia's economic future. Specifically: VCCS enhances the productivity of Virginia's workforce. The dollar value of the increased workforce productivity generated by VCCS' 2000-2001 educational services was approximately $395 million per year. The present value of the future stream of benefits generated by that increase is approximately $3.7 billion. A comparison of benefits and costs indicates the benefits to that the benefit-cost ratio for VCCS' services is 2.2 Virginia's economy are more than twice as great as the costs required to generate those benefits. VCCS' students experience significantly increased incomes. The average annual increase in income for VCCS students who graduate with an Associate's degree is $8,190 for males and $7,164 for females. The average annual increase in income associated with a "typical" year at VCCS is $1,518 for males and $1,337 for females. VCCS is the largest provider of higher education services to "economically at risk" Virginians. VCCS is the major provider of higher education services in economically struggling regions such as the Southern Piedmont and the Southwest. VCCS educated 75 percent of all Virginians, 25 years of age or older, who sought to upgrade their skills through higher education in fall 2002. VCCS also educated 55 percent of all Virginians of African, Asian, Hispanic, or Native-American decent enrolled as undergraduates in i How Virginia's Community Colleges Contribute to Virginia's Economic Future any public or private non-profit college or university in the Commonwealth in fall 2002. VCCS provides an efficient, low-cost alternative for delivering quality educational programs. Compared to public four-year colleges and universities, VCCS saved the Commonwealth $4,732 in tax dollars per FTE student in 2001-2002. ii 4 How Virginia's Community Colleges Contribute to Virginia's Economic Future Introduction The mission of the Virginia Community College System (VCCS) is to provide higher education and workforce programs that are geographically and financially accessible, and that meet the needs of students, businesses, and communities. In achieving this mission, VCCS has grown to be the largest provider of higher education services in the Commonwealth. VCCS operates 23 colleges on 40 campuses throughout Virginia. Because of this broad geographical coverage, only a handful of Virginia localities are more than a 30-minute drive from a VCCS college.' VCCS educated 63 percent of all Virginians enrolled as undergraduates in any public college or university in the Commonwealth in fall 2002 (the most recent year for which data are available). By comparison, in combination Virginia's three largest universities (George Mason University, Virginia Commonwealth University, and Virginia Tech) educated only 16 percent.2 Importantly, VCCS is also the largest provider of higher education services to those Virginians most at risk of being left behind as the Commonwealth transitions from the industrial base of the "old economy" to the knowledge base of the "new economy." VCCS is the major provider of higher education services in economically struggling regions of the Commonwealth such as the Southern Piedmont and Southwest Virginia.3 VCCS educated 75 percent of all Virginians, 25 years of age or older, enrolled as undergraduates in any public or private non-profit college or university in the Commonwealth in fall 2002.4 VCCS educated 55 percent of all Virginians of African, Asian, Hispanic, or Native-American decent enrolled as undergraduates in any public or private non-profit college or university in the Commonwealth in fall 2002.5 ' See: A. Fletcher Mangum, "System-Wide Needs Assessment for Virginia Education: 2001," Chapter 4 Access, State Council of Higher Education for Virginia, March 28, 2002, p.90 (http://www.schev.edu/Reportstats/SystemwideNeedsAssessment032802.pdf). 2 Source: State Council of Higher Education for Virginia, unduplicated headcounts for 2001-02 for Virginia public institutions. 3 Ibid. 4 Ibid. 5 Ibid. 1 How Virginia's Community Colleges Contribute to Virginia's Economic Future To gain a better understanding of the contribution that these services make to Virginia's economic future, the Virginia Community College System commissioned this study of the economic benefits generated by VCCS. Economic Impact As with any economic enterprise, one contribution the Community Colleges make to Virginia's economy comes through their expenditures on salaries, supplies, equipment, and construction. As with any educational enterprise, however, by far the most significant contribution the Community Colleges make to Virginia's their students. It is that economy comes through the human capital they produce contribution which will be the primary focus of this study. Increased Productivity The traditional rational for public subsidization of education is that education generates externalities, or spillover effects, that exceed the private benefits to individuals. As a result, it is in the interest of the community at large to encourage higher levels of educational attainment. Some of these spillover effects take the form of greater civic responsibility, improved health, and reduced crime. From a purely economic perspective though, the largest spillover effect has to do with increased economic productivity. As individuals increase their human capital through higher levels of educational attainment, not only do they become more productive, they also increase the productivity of the resources around them. A good example of this would be the difference between what can be accomplished by placing a computer in the hands of an experienced user, and what can be accomplished when the computer is same resource, very different result. placed in the hands of an inexperienced user Moreover, this difference in results has significant economic implications in the aggregate. Greater productivity translates into increased economic activity and higher incomes. In addition, whereas the old economy favored locations with abundant industrial resources (raw materials, transportation infrastructure, cheap and readily available power), the new economy favors locations with abundant knowledge resources (a skilled workforce and R&D). Put simply, regional 2 How Virginia's Community Colleges Contribute to Virginia's Economic Future differences in educational attainment have a big effect on regional differences in economic prosperity.6 To measure the effect that VCCS' educational services have on economic productivity and, therefore, on Virginia's economy, we must first know the empirical relationship between educational attainment and productivity. Fortunately, a recent and widely cited study by Sandra Black and Lisa Lynch provides that information.? Black and Lynch use new data from the National Center on the Educational Quality of the Workforce to estimate the impact of on productivity. What they find is that a human-capital investments education 10 percent increase in educational attainment level leads to a 4.9 to 8.5 percent increase in the dollar value of manufacturing output, and a 5.9 to 12.7 percent increase in the dollar value of non-manufacturing output. Using these empirical estimates, along with other data, it is possible to estimate the impact VCCS' educational services have on Virginia's economy.8 The first step in this process is to estimate a baseline level of educational attainment for Virginia's workforce. Tables lA through 1C detail that calculation. Using 2000 Census data, Tables 1A and 1B show the number of years of education embodied in the male and female components of Virginia's workforce. In each of these tables, the second column from the left (A) denotes Virginia population, by educational attainment.9 The third column from the left (B) denotes labor force participation, by educational attainment.10 The fifth column from the left is average years of education." By multiplying these three columns, we see, as shown in Table 1C, that in 2000 the human capital "stock" embodied in Virginia's workforce consisted of 47,452,436 years of education. 6 For an excellent empirical demonstration of the importance of education as a determinant of regional economic growth see R. DeVol, America's High-Tech Economy: Growth, Development, and Risks for Metropolitan Areas," Milken Institute, 1999. Sandra E. Black and Lisa M. Lynch, "Human-Capital Investments and Productivity," AEA Papers and Proceedings, vol.86, no.2, May 1996, pp.263-67. 8 The method used here to assess the value of the enhanced workforce productivity generated by VCCS' educational services is similar to an one recently employed by the state of Texas to measure the impact of higher education on its economy. See "The Impact of the State Higher Education System on the Texas Economy," Texas Comptroller of Public Accounts, December 2000. 9 Source: "Sex by Age by Educational Attainment for the Population 18 and Over," Census 2000, Summary File 3, Table PCT25, U.S. Census Bureau. I° Source: "Sex by Age by Employment Status for the Population 16 Years and Over," Census 2000, Summary File 3, Table PCT35, U.S. Census Bureau. Years of education for the less than 9th grade, 9th to 126 grade, and graduate or professional categories were derived as weighted averages, using national data from the Current Population Survey, P20 Series, U.S. Census Bureau, 1998. 3 EST COPY AV/MAMAS 7 How Virginia's Community Colleges Contribute to Virginia's Economic Future Table 1A: Virginia's 2000 Human Capital Stock - Males Total Labor Force Active in Avg. Years of VA population Participation Education Education Labor Force Years (A) Rate (A x B) (C) (AxBxC) (B) 2,579,825 Male: 349,383 18 to 24 years: Less than 41,286 5.6 7,372 66.2% 9th grade 11,145 9th to 12th 498,385 10.6 47,017 grade 71,077 66.2% High school graduate 12.0 75,703 908,441 66.2% 114,442 Some 987,971 75,998 13.0 66.2% 114,887 college Associate 83,210 14.0 66.2% 5,944 degree 8,985 Bachelors 16.0 285,493 26,974 17,843 degree 66.2% Graduate or professional 18.5 22,921 66.2% 1,239 1,873 degree 25 to 34 years: 514,891 Less than 94,552 5.3 87.2% 17,840 9th grade 20,454 9th to 12th 49,189 506,651 87.2% 10.3 56,397 grade High school 12.0 87.2% 122,510 1,470,121 graduate 140,461 Some 97,405 13.0 1,266,261 111,677 87.2% college Associate 334,149 14.0 87.2% 23,868 27,365 degree Bachelor's 1,553,367 16.0 87.2% 97,085 degree 111,311 Graduate or professional 762,025 87.2% 18.5 47,226 41,191 degree 602,953 35 to 44 years: Less than 5.2 100,164 87.9% 21,909 9th grade 19,262 9th to 12th 624,879 10.4 60,085 87.9% 68,340 grade High school 1,749,204 12.0 145,767 graduate 165,795 87.9% Some 1,404,778 13.0 122,907 108,060 college 87.9% Associate 453,702 14.0 32,407 degree 36,860 87.9% Bachelor's 1,553,399 110,427 97,087 16.0 degree 87.9% Graduate or professional 1,261,274 67,448 18.7 76,715 87.9% degree 4 How Virginia's Community Colleges Contribute to Virginia's Economic Future Table 1A: Virginia's 2000 Human Capital Stock Males (cont.) Total Labor Force Avg. Years of Active in Education VA population Participation Labor Force Education Years (A) Rate (A x B) (C) (AxBxC) (B) 790,505 45 to 64 years: Less than 253,003 5.4 46,852 79.2% 9th grade 59,157 9th to 12th 677,552 10.2 79.2% 66,427 grade 83,872 High school 12.0 graduate 79.2% 142,015 1,704,181 179,312 1 Some 13.0 79.2% 117,192 1,523,499 147,970 college Associate 457,690 14.0 32,692 79.2% 41,278 degree Bachelor's 1,732,490 79.2% 16.0 degree 108,281 136,718 Graduate or professional 2,117,271 18.8 79.2% 142,198 degree 112,621 65 years and 322,093 over: Less than 6.0 85,359 70,708 14,226 20.1% 9th grade 9th to 12th 97,137 10.0 48,279 20.1% 9,714 grade High school 172,560 12.0 graduate 14,380 20.1% 71,471 Some 119,894 9,223 45,838 13.0 20.1% college Associate 14.0 19,058 20.1% 6,766 degree 1,361 Bachelor's 130,342 40,489 16.0 20.1% 8,146 degree Graduate or professional 146,563 18.9 20.1% 7,755 degree 38,542 25,198,832 TOTAL 5 How Virginia's Community Colleges Contribute to Virginia's Economic Future Table 1B: Virginia's 2000 Human Capital Stock Females Total Labor Force Active in Avg. Years of Education VA population Participation Education Labor Force Years (A) Rate (A x B) (C) (AxBxC) (B) 2,762,866 Female: 326,734 18 to 24 years: Less than 25,233 6.0 4,206 63.1% 9th grade 6,667 9th to 12th 10.6 338,456 31,930 63.1% grade 50,618 High school 12.0 672,642 56,054 graduate 63.1% 88,861 Some 13.0 1,058,303 81,408 63.1% 129,055 college 8 Associate 14.0 104,826 7,488 63.1% 11,870 degree Bachelors 371,435 16.0 23,215 degree 36,802 63.1% Graduate or professional 32,665 18.1 1,805 63.1% degree 2,861 25 to 34 years: 513,143 Less than 55,429 5.6 76.5% 9,898 9th grade 12,937 9th to 12th 319,634 10.3 31,032 76.5% 40,560 grade High school 1,107,675 12.0 92,306 76.5% graduate 120,646 Some 1,198,410 13.0 92,185 120,488 76.5% college Associate 389,670 14.0 27,834 76.5% degree 36,379 Bachelor's 16.0 1,576,045 98,503 128,745 76.5% degree Graduate or professional 751,588 18.4 40,847 76.5% 53,388 degree 618,262 35 to 44 years: Less than 61,546 5.4 76.1% 11,397 9th grade 14,975 9th to 12th 404,799 10.3 76.1% grade 51,637 39,301 High school 12.0 1,446,041 76.1% graduate 120,503 158,328 1 Some 1,459,399 13.0 76.1% 147,499 college 112,261 Associate 14.0 549,328 76.1% 39,238 degree 51,554 Bachelor's 16.0 1,592,867 76.1% 99,554 130,803 degree Graduate or professional 18.4 888,793 48,304 76.1% 63,466 degree 6 10