Education shapes Duluth’s economy

Education expands horizons. It nurtures the spirit and changes lives.

And it amounts to a mountain of economic activity, especially in Duluth, where two four-year colleges snd a host of post-secondary institutions combine with a robust public and private K-12 system to turn out thousands of graduates each year.

Education provides good jobs for teachers, support staff and administrators, and it educates students so they can become more creative, effective employees and entrepreneurs. But it’s more than that.

Educational institutions hire scholars who, besides teaching, fight disease, discover more efficient mining techniques and lift our souls with artistic expression. But it’s more than that.

Nearly every step of the educational process – from buying books to constructing buildings to cutting tuition checks – has a financial angle.

It all takes money.

The Duluth school district spent $124 million last year. The College of St. Scholastica spent $56 million and the University of Minnesota Duluth spent $142.3 million.

 Follow the Dollars

And, it turns out, where the money comes from matters in the way it affects the local economy. Money that arrives from outside the area – from students who live out of town or out of state – multiplies more than money that’s already here.

Tony Barrett, an economist at the College of St. Scholastica, cites an oft-used factor to figure the impact. “Usually the regional economic multiplier for a new dollar coming in is 2.5,” he said.

In other words, if a tourist or student from Chicago spends $100 in Duluth, it will ripple through the economy to the tune of $250. Apply that to St. Scholastica’s $56 million budget, times the proportion of out-of-town students who attend St. Scholastica (83 percent) and you get – a big impact.

Although it has a greater proportion of local students, UMD, at 11,500 students, has three times the enrollment of St. Scholastica and has a proportional economic impact. John King, interim vice chancellor, offered some numbers from 2007 to illustrate the point. UMD has about 1,700 employees, making it one of the region’s biggest employers. Faculty, staff and students paid $42.5 million in property, income and sales taxes. UMD students, visitors and employees spent an estimated $127 million that year.

Add to that $100 million in construction projects at UMD over the past six years, which has been a boon to local architects, contractors and tradespeople alike.

Mike Dosan, senior project manager at Kraus-Anderson’s Duluth office, says the Twin Cities-based contractor is just wrapping up a $6 million renovation at UMD’s Malosky Stadium. A few years ago it finished a $9 million expansion for sports and health programs at UMD. In fact, education construction is K-A’s market niche.

“We know how to build schools,” Dosan said of the company, which had $1.4 billion in contracts last year and historically lands more than 60 percent of school building business in Minnesota.

Its Duluth office employs more than 20 and has 35 employees in the field. It generally does carpentry and demolition work on its projects and hires out engineering and skilled trades.

A single statistic can’t sum it all up, but overall “It’s a pretty big number,” King said.

It’s Not All About Money

Of course, it’s not all about the money. Some benefits of educational institutions are harder to quantify. “We also like to talk about

the intellectual, cultural and social impact of UMD,” King said. From its

theater programs and Weber Music Hall to its athletics and teacher training programs, “they all have important economic and social impact,” he said.

Those can be attractive to people already living here. And, as a growing number of baby boomers are set to retire, they can be attractive to empty nesters considering where to live out their golden years. “You hear one consistent thread, and that’s that people are moving to college towns,” he said.

The growth of summer senior housing programs on college campuses is a harbinger of things to come. And anecdotal evidence backs it up.

It’s no surprise that Barrett and his wife, both college professors, enjoy being around young people. They’ll look for a college town when they’re ready to retire. “The sports, culture, theater, concerts and all the services that cater to college students – the coffee houses and restaurants – are all things that we’re going to enjoy,” he said.

 

It’s something futurists and planners call “vibrancy” – art galleries, a healthy music scene and recreational activities – whether club-hopping or climbing cliffs at Ely’s Peak – are the product of youthful energy in Duluth. And they’re also magnets to a creative class of people that can help energize a town’s economy.

Three-Way Boost

Higher education boosts the economy in three ways, according to Drew Digby, a regional labor market analyst with the state Department of Employment and Economic Development.

The first way is the effect of innovation and research and development performed by scholars and scientists. (Remember, the taconite mining process was perfected by a University of Minnesota scientist.)

The second way is as an employer – make that “a really good employer,” Digby said. According to an informal study Digby did of employment trends from 2000 to 2006, the number of higher education jobs in northeastern Minnesota increased by 11.1 percent and salaries paid to those employees grew by 35 percent.

Looking at all industries in the region, the number of jobs grew by only 1.3 percent and salaries grew by only 17.2 percent. “Education jobs are well-paying jobs for the region,” he said.

The third way is by bringing higher education consumers(students) to the local economy from outside the area. “We get a net boost of money,” he said. Digby looked at enrollment trends at area colleges in 2006. He looked at the number of local high school graduates that left the area for college. “Our net import of college students was slightly over 2,500,” he said. “They’re bringing a lot of dollars into the region.”

Building a base

As important as manufacturing is, it’s also important to look at the knowledge industries, including education, health care and professional and technical services, Digby said. One example: UMD’s new civil engineering program, which is building on Duluth’s growing base of architects and engineers.

And it’s not all about the four-year colleges, says Pat Henderson, director of the Arrowhead Regional Development Commission. Don’t get her wrong. She’s a Golden Gopher herself (master’s degree) and values advanced scholarship. But she said the Minnesota State Colleges and Universities (MnSCU) system also plays a key role in responding quickly to changes in the local economy.

“They’re also training young graduates who now don’t have to leave the area to find jobs,” she said. “They are doing great work focusing on the immediate needs in the area.”

(Note: This article first appeared in The Duluthian.)