Every 1 percent increase in the number of Ohioans with bachelor’s degrees "means economic activity growing the next year and for each year thereafter (by) $2.5 billion dollars."
Jim Petro on Thursday, August 11th, 2011 in a speech at Ohio State University
Chancellor Jim Petro says boosting bachelor's degrees in Ohio would boost economy
Ohio Board of Regents Chancellor Jim Petro was firing up the troops.
During a speech Aug. 11, 2011, at Ohio State University to announce a new "enterprise university" plan aimed at cutting red tape for public universities, Petro preached to his audience of higher education types why pushing up the college graduation rate in Ohio is so important.
Only 26 percent of Ohioans hold a bachelor’s degree, Petro told his audience. Raising that figure toward the national average of 31 percent would give Ohio’s economy a tremendous boost.
While Petro told the crowd he’s seen various estimates of the economic impact of a rising bachelor’s degree rate, he said he had a "solid" and "good" estimate. Every 1 percent increase in the number of Ohioans with bachelor’s degrees, Petro said, would mean multiple billions a year in sustained economic growth.
"For every percent we move up, it means economic activity growing the next year and for each year thereafter (by) $2.5 billion dollars," he said.
While the correlation between education levels and higher wages for individuals is fairly well-established, we were struck by the specific price tag Petro was able to put on Ohioans getting their sheepskins. So PolitiFact Ohio checked it out.
Spencer Waugh, a policy liaison for the Ohio Board of Regents, sent us three documents to corroborate Petro’s claim. In an e-mail, Waugh said Petro’s estimate of $2.5 billion is "fair and conservative" given that some studies show less and at least one study shows more.
The first document was a memo from Waugh to Petro which claimed that a 1 percent jump in Ohioans with bachelor’s degrees would net an income increase of $1.09 billion. Waugh’s memo multiples the number of new Ohioans with bachelor’s degrees by $19,000 a year — a figure he says represents the annual gain for those going from holding a high school diploma to a bachelor’s degree.
Waugh’s figures were based on a data from the National Center for Education Statistics as well as 2007 census data, according to Kim Norris, Petro’s communications director.
The 2007 census data states that the gap is $20,000 per year for adults. The National Center for Education Statistics data shows the gap at $18,000 for males but only $15,000 for females in the age group of 25-34. So $19,000 is in the ballpark.
Using the $19,000 multiplier assumes that everyone who went back to school and got the bachelor’s degree had only achieved a high school education. Presumably some in that group would be people who already have associate’s degrees or "some college" and didn’t have far to go to get a bachelor’s degree. People who have "some college" or an associate’s degree generally make more than those with just a high school diploma, and that would have an impact on net benefit to Ohio’s economy.
Regardless, the figure is well below Petro’s estimate of $2.5 billion.
The second document is a memo from Board of Regents staffer Patrick Maloney to Petro which outlines a 2008 Arizona State University study which found that a 1 percent jump would add $1.5 billion to that state’s economy.
The ASU study focuses solely on Arizona and relies on a 2004 Journal of Econometrics paper that estimated the effects on the earnings of all working adults from increasing the proportion of the workforce with a university degree. It used data from the 1980 and 1990 census.
However, the paper’s author, Enrico Moretti, didn’t specify how he defined adults nor how he calculated hourly wages. And Moretti finds a "spillover effect" which pushes up wages for all workers on every education level as the share of workers with a bachelor’s degree increases.
Because Moretti’s spillover effect requires different calculations over each level of educational attainment, it’s virtually impossible to compare Arizona to Ohio as the states have different profiles. Additionally, Arizona’s labor market is much smaller than Ohio’s with only 1.82 million workers year-round versus 5.11 million in Ohio — nearly three times as many.
If the gains projected in Arizona would come true in Ohio, then you could probably assume an economic benefit of nearly three times what was projected for Arizona -- about $4 billion a year.
The third study cited by Waugh comes from a CEO for Cities study, which concludes that an improvement of 1 percentage point in each of the 51 largest metropolitan areas in the United State would increase aggregate personal income by $124 billion nationwide.
In the report, the authors explain that each additional percentage point in aggregate adult four-year college attainment was associated with a $763 increase in annual regional per capita income.
Per capita income refers to the income of each man, women and child. If we apply the increase to Ohio’s 11.5 million population, we get an additional $8.8 billion a year in income.
So where does all this leave Petro’s claim?
As chancellor of the Board of Regents, Petro wanted to show the importance of more adults getting their college degrees.
To underscore this point, Petro claimed that a "good and solid" estimate showed that increasing the number of bachelor’s degree holders in Ohio by 1 percent would increase "economic activity" in the state by $2.5 billion a year.
Asked for studies to prove this point, Petro’s staffers muster a pair of memos which assert Ohio’s income would rise by $1.09 billion a year and another which estimates that Arizona’s would rise by $1.5 billion a year. The Arizona estimate would extrapolate to about $4 billion in Ohio given the larger labor market here.
Lastly, they cite a study done on the nation’s biggest urban areas, which if applied to Ohio’s population would mean $8.8 billion in additional income.
The underlying point in Petro’s statement is accurate -- that raising the percentage of Ohioans who have a bachelor’s degree would benefit Ohio’s economy.
What is less clear is how great that benefit would be. Petro’s estimate was $2.5 billion. But the supporting documentation his staff provided shows that estimates very wildly.
Is it $1 billion? $4 billion? $8.8 billion? Something in between?
That’s a point that needs clarification.
On the Truth-O-Meter the claim rates as Mostly True.
Published: Tuesday, August 30th, 2011 at 6:00 a.m.
Ohio Channel, Board of Regents Chancellor Jim Petro remarks at Ohio State University, Aug. 11, 2011. Claim for this item is around the 17 minute mark.
E-mail from Spencer Waugh, Ohio Board of Regents policy liaison on Aug. 16, 2011
E-mail from Kim Norris, director of communications for Ohio Board of Regents on Aug. 25, 2011
National Center for Education, statistics on rising income related to higher education level
About.com, article quoting the 2007 census data concerning income levels and education
Arizona State University, "Quantitative Examples of the Financial and Economic Benefits of Higher Education," by professor Dennis Hoffman, published March 2008
Journal of Econometrics, "Estimating the Social Return to Higher Education: Evidence from Longitudinal and repeated cross-sectional data", by UCLA Department of Economics professor Enrico Moretti, published 2004
CEO for Cities study, "City Dividends: Gains from Improving Metropolitan Performance"
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