Tuesday, July 11, 2006
Higher Ed as Economic Savior?
Higher ed makes an awfully dicey economic engine for a city, especially when it’s just a single institution and a fair-sized city. (Boston succeeds with gazillions of colleges and universities, and Ann Arbor does quite well by being not much bigger than the University of Michigan, but those are exceptional cases.) Colleges and universities (other than proprietaries) are tax-exempt, so unlike other employers, they don’t pay property taxes. (In the Northeast especially, that’s a big deal.) They generally don’t grow very fast, when they grow at all. With the increased reliance on adjunct faculty, they don’t pay as many middle-class salaries as they once did, even as total employee headcount increases. Students come and go, generally supporting a few local pizza places, bars, and slumlords, and not much else.
The article lists several cities all trying to adopt essentially the same strategy: establish public-private partnerships to encourage biotech spinoffs from the local university that will take root in the local community. (Rochester is using optics, rather than biotech, but the rest is essentially the same.) The idea is that cutting-edge university research will lead to commercially-viable breakthroughs that will generate massive local employment, bringing prosperity in its wake.
The strategy is good, as far as it goes, but it goes only so far.
For one thing, much university research isn’t geared towards immediate commercial applicability. Pretty much everything in the humanities and social sciences falls off the radar, and that’s the core of higher education. Business schools produce research, but the research itself, as far as I know, rarely leads directly to start-ups. Even in the favored ‘techie’ areas, it’s impossible to know in advance what’s going to be ‘hot’ in five years. At my previous college, many of the companies that served on our industry advisory boards and (quite arrogantly) told us what to do in 1999 were bankrupt by 2002. Any research of a level good enough to result in breakthroughs is years in the making, so jumping on the biotech bandwagon now is a riskier move than it may first appear.
I’m a big believer in higher education (which is why I criticize it so much – I want it to be better. The same applies to my government). It’s a good thing in itself, and I think it has very beneficial long-term economic and political effects on the country as a whole. That’s different from saying that SUNY-Buffalo will save Buffalo.
There’s nothing unusual in students taking the education they got in Grad School City and moving elsewhere. It’s normal, natural, to be expected, and not bad. Yes, it would be nice for Grad School City if more grads stuck around and started the next Dell Computers there, but you can’t guarantee that.
There’s also an inherent tension between the universalist/cosmopolitan aspirations of higher education, and the parochial boosterism of public-private partnerships. There’s nothing unusual about research universities going across the country (or into other countries) to raid superstars; it’s simply how the game is played. At the upper echelons of higher ed, place-loyalty is considered quaint, at best. A little is nice, but too much would get in the way of the pursuit of the cutting edge. Resources spent on town/gown events are resources not spent on labs.
The economic-development approach to thinking about higher ed carries other dangers. Community colleges can justify ourselves as low-cost feeders and workforce developers. Research universities can justify themselves as grant engines and incubators. How do mid-level four year colleges justify themselves? Even if SUNY-Buffalo carries some economic charge, does SUNY-Oneonta? Fredonia? Potsdam?
(Answer: they weren’t designed for that.)
I don’t blame these cities for trying. I can imagine a hypothetical conversation with the mayor of Northern Town:
Me: You know, higher ed is a dicey choice for an economic engine.
Mayor: As opposed to…?
Well, yeah. If every other major employer in your area is either dead or dying, and the local university is holding its own or growing, what else are you going to do? It may not be what GM or Kodak or U.S. Steel was back in the day, but it’s the best of the currently available options. Universities don’t usually pack up and move, they bring cultural events and educated people to the community, and once in a while, they generate strike-it-rich breakthroughs.
(A quick aside on behalf of my libertarian/conservative readers: the tax exemptions that make colleges and universities less desirable economic engines also make them less likely to be driven out of town by high taxes. If I don’t pay taxes anyway, do I really give a rip about the rate I’m not paying? Other employers might flee a city as its taxes rise, but colleges generally won’t, in part because they don’t have to. To a city in death spiral of raising rates on a declining tax base, this is not a minor consideration. A quick ‘thank you’ to my libertarian/conservative readers for pointing this out. Some universities pay PILOTs – payments in lieu of taxes – to the towns in which they’re located, but there are natural limits to that. PILOTs are voluntary, and easy for a university to forego when times get tough.)
To indulge in a little prognostication, I foresee some public favor for research universities and community colleges, but rough sailing ahead for the nondescript four-year colleges. CC’s are cheaper than everyone else, and open to everybody. Research universities can sell the prospect of generating the next Dell. The local nothing-special former teacher’s college can, um, uh…
Of the cities mentioned, Rochester looks to have the most hope. Its big-three private employers – Kodak, Xerox, and Bausch & Lomb – all do a lot of work with optics, so both RIT and the U of Rochester have developed specializations in optics, and have already generated a few spinoffs. That’s something, at least. At least in that case, the specialization grew out of local conditions, rather than being imposed upon them (biotech in Bethlehem? Really?).
Even there, though, I can’t imagine higher ed saving the city. A good university or two (or three) can be a valuable supporting player in a city, but it can’t be the lead. The lead has to come from the taxpaying sector. That’s not a criticism of the universities; it’s just a recognition that economic development is an ancillary benefit of a university, while profit is the primary function of a company. Goodwill is a fine thing, but priorities matter.