Raising the Labor Force Share of College Graduates Economic Minute January 2016

Development Community Considerable Interest in setting goals for increasing the share of college degreed Arizonans Where is this coming from and why? President Klein ABOR President Crow Rich Nickel College Success AZ Business Community GPL Chamber Development Community ACA GPEC Cities What is the Value Proposition? 11/23/2018

Degreed people have Positive Social Outcomes Fewer Behavior Health Issues Health and Longevity Social and Civic Engagement Family Stability, Marriage and positive Inter-generational outcomes Lower Divorce Rate Less Incidence of Crime All lead to lower fiscal burdens But private value of these outcomes could be huge 11/23/2018

Degreed people have Positive Private Monetary Outcomes Worth over a million over a lifetime Several 100k in net PV 12% IRR to investing in a degree College Success Reports suggest big fiscal impact and faster economic growth 11/23/2018

So attracting and retaining degreed people is good for the economy Summing up big private returns Avoiding Social Costs Means big numbers 2012 data suggest that ¼ of all BA degreed workers in AZ were ASU alumni In 2016 that’s some 14 billion In wages just from ASU grads 11/23/2018

Studying hundreds of metro-regional economies over decades, Social Monetary Returns not just private returns.. So How Do we measure them. There are several ways Studying hundreds of metro-regional economies over decades, Professor Enrico Moretti of UC Berkeley found that in economies with higher shares of college grads in the workforce, the wages of ALL workers were higher. Indeed higher shares of college grads boosted wages of both non-degreed and partial degreed workers. So why does this happen? 11/23/2018

What yields Social Monetary Returns Both their degreed and non-degreed workers reap higher wages due to these productivity enhancements.   Other businesses in the area compete for talent at all levels and overall wages rise as does the standard of living in the region.   So a rising tide does lift all boats!! Businesses in search of skilled productive workers expand in regions that have high levels of educational attainment.  These businesses operate at high margins, retain productive workforces and pay excellent wages and salaries.   11/23/2018

So How Big might these Social Returns be for Arizona? Simulation tool Focus on the labor Force Allow for changes over time in in realistic scenarios Apply Moretti methodology to AZ specific data 11/23/2018

Findings Simulation tool Focus on the labor Force Allow for changes over time in in realistic scenarios Apply Moretti methodology to AZ specific data 11/23/2018

Aspirational Policy Scenarios Aspirational AZ Trend Aspirational AZ Trend Current US and AZ Trends 11/23/2018

So What happens if we go from yellow to red By 2025 cumulatively over 20 billion In additional wages will accrue to AZ workers generating nearly a billion in new GF revenue over the period In 31 years, annual earnings in Arizona would be $22.6 billion higher, in today’s dollars Annual State government GF revenues would be $1.1 billion higher 11/23/2018

So What happens if we go from yellow to red 8% of the new wages will go to workers without a HS degree About 20% of the new wages will be earned by workers with a terminal HS degree Over 30% of new wages will be earned by workers with some college credits So more than 50% of the new wages accrue to people without a BA!! And these numbers do not include fiscal cost savings from the positive societal impacts 11/23/2018

Much easier to set the goal than to attain it Results are based on college degreed people in the workforce, not just in the population We need to increase production and in-migration of college degreed workers We need to attract and retain those employers who are looking to hire college degreed workers 11/23/2018

But as we have seen The Benefits of attaining the goal are huge The Benefits accrue across the entire workforce including both degreed and non-degreed workers So this is a goal we should all embrace. For alternative scenarios experiment on your own at https://economist.asu.edu/simulation-tool Dennis.hoffman@asu.edu Enjoy your lunch 11/23/2018