Why higher education in Massachusetts has a significant economic impact

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Whyhigher education in Massachusetts has a significant economic impact

Highereducation in Massachusetts has been evolving, therefore its effectand role in the society has also been growing. Currently, highereducation impacts the contemporary society in multiple ways.Institutions of higher learning have both direct and indirect impactsin the society. Direct economic impact result from the role played bythese institutions (such as direct employment of staff) whileindirect effects refer to their effect on other industries (Leah25-26). The higher education in this context refers to post secondaryeducation that is college or university education. Although highereducation has multiple impacts in the society, the intrinsic value ofthe American system of education was largely brought about bypragmatic economic motives. This is based on the fact that economicgrowth requires a skilled workforce that can be obtained from thehigher education sector. This paper will address the economic impactof higher education in the state of Massachusetts.

Statisticsfor higher education in Massachusetts

Thetotal number of students receiving enrolling in colleges anduniversities in the state of Massachusetts has been increasing withtime. The total number of students in credit courses only in theprevious academic year (2012-2013) was 296,724, where 139,483 of themstudies in community colleges, 72,556 in the state universities,while 84,685 studied in the University of Massachusetts(Massachusetts Department of Higher Education 1). Another study hasshown that the state of Massachusetts has the highest number ofstudents in independent colleges (274,695) accounting for 54 % whilethe rest attain their higher education from community colleges (20%)public colleges (24 %) and for-profit colleges (2 %) (AICUM 3). It isprojected that the number of degrees and certificates to be awardedin the academic year 2013-2014 will increase following an increase inthe rate of enrollment in the state colleges and universities. In theacademic year 2008-2009 a total of 33,114 degrees and certificateswere awarded. Similarly, the number of international students seekingfor scholarships in the institutions of higher learning in the stateof Massachusetts has been increasing. Currently, the state ofMassachusetts ranks fifth in hosting the international students inthe United States. The number of international students hosted inMassachusetts increases by 10 % compared to the national average of 5% (Institute of International Education 1). This implies thatMassachusetts has become a destiny for higher education, not only forthe students from the United States, but also from other countries.

Economicimpacts of higher education

Theattainment of higher education is associated with the direct growthof the local and global economy. This is because it increasesknowledge and skills of students, which in turn enhances theirproductivity, increase job opportunities, and contribution in theeconomic affairs of the society. The attainment of higher educationin the state of Massachusetts has contributed towards economic growthin four major ways, including direct creation of job opportunities,an increase in tax revenue for the local government as well as thefederal government, reduction in government expenditure in otherareas, and contribution of graduates in societal economic programs.

Immediatecreation of job opportunities

Theattainment of higher education in Massachusetts has increased thenumber of job opportunities through direct and indirect employment.Direct employment occurs when institutions of higher education employmembers of staff, both teaching and non-teaching, while indirectemployment occurs in various ways, such as construction and supply ofgoods and services to institutions of higher learning. In addition,the supply of goods and services that are manufactured and processedin the Massachusetts results in induced employment of producers andsuppliers of such goods and services. It is estimated that the highereducation sector of Massachusetts has employed over 100,000 peoplewhere 50,000 of them are employed by eight major universities andinstitutions of research (Leah 23). The high level of employment inthe higher education sector represents about $ 4 billion annualactivities in major institutions and $ 20 billion in Massachusettscolleges. A similar study shows that the higher education sectorcreates approximately 11,766 new job openings every year, where 7,252are direct job opportunities (such as lecturers and institutionalmanagement staff), 1,471 indirect (suppliers), and 3,032 inducedemployment opportunities (Ash 14). Although the large number of newjobs created by the institutions of higher learning increase publicspending, the economic effect of employment created by the higherlearning exceeds the opportunity cost. This means that the decisionto expand higher education using public resources is reasonable.

Highereducation improves the skills and knowledge of graduates, whichenhances their employability compared to people who do not attainhigher education. According to Leah (25) higher education hasprovided an educated, knowledge, innovation, and trained workforcethat has facilitated the creation of new industries in Massachusetts.This implies that apart from proving employment for fresh graduates,an increase in the attainment of higher education in Massachusettsopens up new job opportunities for state’s labor force. Therefore,strengthening the higher education sector is one of the major waysthrough which the government of Massachusetts has adopted to dealwith the economic issue of unemployment. In addition, the state ofMassachusetts has been on the move to align the courses andeducational programs offered in the institutions of higher learningwith the needs of the society. This is a contribution to the nationalstrategy to resolve the issue of about 40 % of the college graduateswho have no necessary skills required by employers in thecontemporary business environment (Alssid 7). Matching the coursecontent with the needs of the society as well as employerrequirements will shape job growth by 2016, which will beaccomplished through the change and an increase in the content ofskills in different occupations.

Increasein tax revenue

Anincrease in the attainment of higher education has increased taxrevenue in the state of Massachusetts. An investment in highereducation improves the competence of human capital (includingknow-how, health, and the general productivity of the population),relationships, and networks that exponentially increase productivityof the any given population (Dobelle 3). In the long run, highereducation contributes towards fiscal, social, and economic dividends.This is based on the notion that people with higher education havehigher chances of accumulating more wealth, getting well paying jobs,and pay higher income and revenue taxes as shown in Table 1.

Table1: Average annual earnings and tax revenue for the state ofMassachusetts

High School graduate

College graduate

Associate degree graduate

Bachelors degree


$ 26,029

$ 31,162

$ 39,546

$ 55,509

Degree premium

$ 5,133

$ 13,517

$ 29,480

State income tax

$ 1,063

$ 1,630

$ 1,960

$ 2,961

SIT Premium

$ 567

$ 897

$ 1,899

SIT and property tax


$ 3,561

$ 3,928

$ 5,309

SIT and property tax premium

$ 922

$ 1,289

$ 2,670

Source:Ash (9)

FromTable 1, a slight decrease in the attainment of higher educationwould result in a significant reduction in tax revenue. On the otherhand, an increase in the rate of attainment of higher education wouldresult in higher revenue collection. This implies that a collegegraduate pays about $ 42,511 income tax in the course of career,while a university graduate pays approximately $ 118,451 income tax.This implies that the higher the level of education, the higher thetax revenue the government collects annually and in the course ofcareer. The tax collected from individuals with higher educationbenefits the state of Massachusetts, the country, and the globaleconomy.

Reductionin public expenditure

Althoughit is widely believed that higher education contributes towardseconomic growth through the increase in tax revenues, it is evidentthat educated people require less in terms public expenditure.Educated people require less transfer payments (unemploymentcompensation, welfare, Medicaid, and workers compensation) since theyexperience less poverty and unemployment. In addition, people withhigher education are less likely to be incarcerated, which impliesthat the government’s expenditure on corrections is reduced by theincrease in the attainment of higher education. There are six ways(including a reduction in welfare, Medicaid, unemploymentcompensation, workers compensation, corrections, and public healthcare) in which an increase in the attainment of higher educationleads to savings in the government expenditure in Massachusetts asshown in Table 2.

Table2: Lifetime public expenditure in different education categories inMassachusetts

High school

Associate’s degree

Bachelor’s degree


$ 3,003

$ 761

$ 255


$ 22,450

$ 11,624

$ 6,833

Unemployment compensation



$ 20,198

Workers compensation

$ 4,102

$ 2,542

$ 802


$ 34,744

$ 9,590

$ 4,008

Public health care

$ 3,198

$ 2,345

$ 1,973

Source:Ash 21

Table1 show that an increase in the level of higher education leads to adecrease in the lifetime public expenditure in all categories. Thisimplies that public funds saved for people with higher education canbe used to finance other government projects (such as theconstruction of infrastructure), which will increase economicefficiency at local, national, and global levels.

Othereconomic benefits

Theattainment of higher education increases job satisfaction, which inturn increases employee productivity. This means that a universitygraduate is more likely to get a satisfying job than a collegegraduate. The two categories of graduates will demonstrate varyinglevels of productivity in their respective positions because theyperceive different levels of job satisfaction. Moreover, theprovision of higher education to first-in-family attendees overcomesthe challenges multi-generational barriers to social and economicmotilities (Jennie 273). However, the government has a role of givingthe poor families an equal opportunity for access to highereducation.


Theattainment of higher education has a direct impact on the local,national, and global economy. The higher education sector inMassachusetts has been improving to an extent that the localinstitutions of higher learning attract both local and internationalstudents. The increase in the attainment of higher has benefittedMassachusetts in three different ways. First, it has increasedgovernment revenue through a collection of more property and incometax from people who have attained higher education. Secondly, it hasresulted in a decrease in public expenditure on items like Medicaid.Third, it has increased employment opportunities directly andindirectly. Although these economic benefits are perceived to belocal (within Massachusetts), they contribute towards the nationaland the global economy.


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Ash,M. Economicimpact of investment in public higher education in Massachusetts.Amherst, MA: University of Massachusetts Amherst, 2012. Print.

Associationof Independent Colleges and Universities in Massachusetts.Massachusettsin the global economy: The role of higher education.Boston: Association of Independent Colleges and Universities inMassachusetts, 2014.

Dobelle,E. Assessingthe economic impact of higher education institutions in New England.Boston: New England Public Policy Center.

Instituteof International Education. Open door 2011: International studentenrollment increase by 5 percent in 2010 /11. Instituteof International Education.2014. Web. 26 June 2014.

Jennie,E. and Xie, Y. “Who Benefits Most from College? Evidence forNegative Selection in Heterogeneous Economic Returns to HigherEducation”. AmericanSocial Review,75 (2011): 273.

Leah,T. Theimpact of for-profit privatization on higher education in the stateof Massachusetts.Ann Arbor, MI: ProQuest, 2008. Print.

MassachusettsDepartment of Higher Education. Facts and statistics: Public highereducation system. MassachusettsDepartment of Higher Education.2014. Web. 26 June 2014.