The economic value of community colleges

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When a municipality or state tries to win public support for a company it aims to draw into its area, it typically publicizes the number of jobs and economic benefits, such as higher incomes and larger tax base, that the move would bring. And, typically, it also includes asking the public to cover some of the enticements to attract the company, such as tax breaks or required infrastructure.

But what about public institutions already in the community? What about the economic benefits of community colleges?

A new report commissioned by the American Association of Community Colleges sheds some light on the return of those public investments. For instance, one of every 18 jobs in the U.S. is supported by the activities of former community college students. And for every dollar of public money invested in community colleges, taxpayers receive a cumulative value of $6.80 over the course of students’ working lives. That’s a 12.2% rate of return to taxpayers, which means community colleges generate more in tax revenue than they take, resulting in a “surplus that government can use to fund other programs,” the report says.

It adds: “It is unlikely that other government programs could make such a claim.”

“Community colleges continue to be a sound and profitable investment at many levels, and we hope this data will help policymakers and funders to understand the enormous impact of these colleges,” said AACC President and CEO Walter Bumphus.

According to the report, state governments provide 39% of community colleges’ revenues, with 23% coming from local governments. Another 22% comes from the federal government, and tuition and fees comprise 17%.

The big picture

In fiscal year 2019-20, alumni of U.S. community colleges generated $898.5 billion in added income for the national economy, according to the report. To give some context, that is equal to about 4.1% of the total U.S. gross domestic product, it says.

“This contribution that the colleges provided on their own was nearly as large as the entire construction industry in the nation,” adds the report by Lightcast, which analyzed myriad federal and proprietary data and other sources.

The $898.5 billion impact supports 10.7 million jobs nationally. About 1.9 million of those jobs are in the healthcare and social assistance sector, with 1.2 million in the retail trade and about 1 million in other services, excluding public administration.

(Also, don’t forget that companies mulling a move to another location look for an area with a skilled workforce, often looking at whether the training and education programs provided at local community colleges and other institutions will provide the desired workforce pipeline.)

Personal and social benefits

Students also see an ROI for their time and money. The average annual return for community college students’ investment in their higher education is 16.9%, the report says, comparing it to the 10.6% stock market 30-year average annual return.

In terms of dollars, students with community college associate degrees, on average, earn $43,900 annually, according to the report. That’s $9,600 more than students with just a high school diploma earn ($34,300). Even earning a certificate provides a $4,300 bump in annual pay.

Society, in general, also benefits from the work of community colleges and their alumni. In addition to creating higher tax revenues for governments, education is statistically associated with a variety of lifestyle changes that generate social savings, the report says. More education is linked to better health, lower crime and less reliance on income assistance, such as welfare and unemployment benefits.

About the Author

Matthew Dembicki
Matthew Dembicki edits Community College Daily and serves as associate vice president of communications for the American Association of Community Colleges.