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How the CSU Impacts California’s Economy

A university education changes the trajectory of people’s lives. It helps them fulfill their aspirations to become artists, engineers, teachers, health care professionals and more. Its recipients are better prepared to succeed in, adapt to, and appreciate the rapidly changing world around them. In addition, a university education is widely recognized as an investment that pays a lifetime of dividends in the form of better jobs and higher incomes.

What is less well understood, however, is that the investment in higher education is also a strong investment for states. When states invest in their public university systems, the state as a whole receives a lifetime earnings boost. The average household income is systemically greater in states where a higher percentage of the population has an undergraduate university degree. Even a relatively modest increase of 5% in the bachelor’s degree percentage yields about an $8,000 increase in household median income statewide.

Median Household income statistically correlates positively with Education Level

Figure 1 is a clear indicator of how investment in public education benefits all people. As knowledge-based services and high-technology production have transformed the U.S. economy, a well-educated workforce has become a more valuable asset to a state than ever before. Workers in regions with fast-growing, high-paying industries benefit from higher wages and greater economic opportunity. In turn, they are able to fund a greater level of public services that benefit all of a state’s citizens.

Conventional economic impact assessments focus on estimating the direct and indirect expenditures of the organization being studied—the so-called “multiplier effect” created by the multiple rounds of spending triggered by new income into a region. As in those traditional economic impact assessments, the direct spending by the CSU—spending that is funded by both state and non-state sources—and the multiplier effect of this direct spending is a major part of the university’s overall economic impact on the state. However, the value of the CSU is much more than just the total impact of its direct, indirect, and induced spending because of what the CSU does. Specifically, the CSU’s 23 campuses provide tens of thousands of job-ready graduates each year who contribute significantly to California and its economy.

The CSU’s primary mission is to provide access to baccalaureate, post-baccalaureate, master’s level and applied doctorate education. The success of the university in fulfilling this responsibility has been decisive in providing California’s advanced industries with the skills they need. In academic year 2006-07, the most recent year comparative data is available, the CSU conferred almost 71,000 bachelor’s degrees, nearly half of all the bachelor’s degrees awarded by all of the universities, public and private, in the entire state. In that same year, the CSU conferred roughly 18,000 master’s degrees, or almost one-third of all the master’s degrees awarded in that year in California. In addition, in partnership with other institutions (most notably the University of California), the CSU offers joint doctorate programs.

While producing university graduates has been the most visible way that the CSU supports the state’s knowledge-based economy, it is not the only way. The CSU’s applied research helps California’s industries remain innovative and competitive, and the university provides an array of services and facilities to assist entrepreneurial start-ups.

The CSU’s cultural and recreational programs and its focus on environmental sustainability help make California’s communities more livable and contribute to their overall quality-of-life. This encourages creative and talented people to move into and remain in the state, which is a major advantage in an increasingly mobile society.

California’s economic future is largely tied to the competitiveness of its knowledge-based industries. Consequently, all Californians share a common interest in the foundations that make these industries strong. There is no element of that foundation that is more important than the state’s public university systems. Because the California State University provides more well-educated, job-ready graduates to California’s knowledge-based industries than any other institution of higher education in the state, it has a strategic role at the absolute center of California’s economy.