Harvard Gazette: Area universities enhance regional economy

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March 13, 2003

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President Summers: 'The strength of Boston's higher education institutions must be recognized as part of the region's strength.' (Staff photo by Justin Ide)

HARVARD GAZETTE ARCHIVES

Area universities enhance regional economy:

Study shows institutions make business, attract business

By Lauren Marshall
Gazette Staff

Harvard and seven other Greater Boston research universities took center stage this week in their role as the area's special economic advantage: magnets for talent and investment that infuse more than $7 billion into the regional economy each year. At a Greater Boston Chamber of Commerce breakfast, leaders from the universities, including President Lawrence H. Summers, President Charles M. Vest of the Massachusetts Institute of Technology, and President Lawrence S. Bacow of Tufts, joined more than 250 leaders in business, community, and local government to mark the release of a new collective economic study and called for a renewed spirit of cooperation for the region and its world-class research institutions.

The report, an unprecedented collaboration among Boston College, Boston University, Brandeis University, Harvard University, Massachusetts Institute of Technology, Northeastern University, Tufts University, and the University of Massachusetts, Boston, chronicles the institutions' economic and social impact in 2000 and 2002.

University's economic and social impact - at a glance

In addition to being a world class research and teaching institution, the University is a talent developer, business incubator, cultural resource, research center, economic magnet, and community partner.

Purchaser
In 2000, the University's revenue was $2,022,634, almost half of which was spent on instruction, research, services, scholarships and fellowships, student services, academic support, and libraries and museums, among others - with a considerable impact on the local economy. In 2001, Harvard purchased more than $1.3 billion in goods and services, of which about $105 million was spent in Cambridge and nearly $340 million in Boston.

Employer
Harvard is one of the largest employers in Massachusetts, ranked 5th in the state by the Boston Business Journal. Harvard employs more than 14,000 people, including some 2,000 faculty. More than 5,900 residents of Cambridge and Boston were employed at Harvard in 2002, at an annual payroll of some $300 million.

Developer of talent
The University trains tomorrow's workforce and retrains today's workers. In 2000, Harvard enrolled 18,918 undergraduate and graduate students, 3,448 of whom came from 130 countries around the globe. The Extension School offers one of the most popular programs of continuing education in the Boston metropolitan area. Harvard students, graduates, and faculty move on to form new companies in the region, such as Tom Stemberg, founder of Staples Inc.

Business incubator
The University's research-based scientific and medical breakthroughs lead to new lifesaving products and technologies that find their way into the marketplace. Just one example is the work of a group of HMS researchers who discovered how bacteria and viruses work together to cause cholera. Based on research, they developed a single-dose oral vaccine, which is undergoing clinical trials.

Community partner and cultural resource
Harvard is an important partner in addressing regional and community needs. Harvard students, faculty, and staff run more than 260 community service programs in the greater Boston area, representing well over a million hours spent teaching, mentoring, and helping area residents in a variety of ways. Harvard's support of affordable housing, including the 20/20/2000 Initiative's commitment of $21 million, has helped create 2,900 new affordable units in both Cambridge and Boston to date. Harvard offers financial aid to Cambridge and Boston residents attending Harvard College, more than $1 million annually. Harvard pays an annual total of about $13 million in real estate taxes, voluntary payments in lieu of taxes, and for municipal services in Cambridge and Boston.

The University attracts important cultural events, performances, and exhibitions - almost all of which are open to the public, and hosts internationally distinguished business, political, and intellectual luminaries for forums and discussions in the area.

- By Lauren Marshall

"While the Midwest may produce cars and steel, and the South may produce textiles, paper, and citrus, we produce brains, new ideas, and new technologies," said Tufts President Bacow, who spoke on behalf of the universities Tuesday morning (March 11).

The report, commissioned by the institutions to help them better understand their role in the regional economy and how to remain viable, shows that the schools not only have a large direct financial impact but more importantly, they form much of the Greater Boston intellectual underpinning of the economy, producing human capital and new technologies that fuel economic growth.

In the year 2000 alone, the study found that the eight universities provided:

A $7.4 billion boost to the regional economy;

Work for 48,750 university employees and 37,000 other workers in the region, who pay millions of dollars in federal, state, and local taxes;

A talent pool of more than 31,900 graduates, many of whom stay in Boston;

Innovative research that resulted in 264 patents, 280 commercial licenses of technology, and 41 start-up companies;

Continuing education for 25,000 non-degree students;

Numerous programs to help local K-12 schools and individual students;

Many community cultural events, such as concerts, plays, and lectures;

Community improvements through construction of housing and infrastructure, and increases in environmental benefits.

Developers of talent

Unmatched in the nation for its concentration of major research centers, the Boston area is a hot spot and a draw for talent. "What is central to the university's mission, developing new knowledge and helping it find application, can also make a great contribution to economic development and to the region's economic strength," said President Summers. "Intellectual activities at universities can help generate hot spots in commercial sectors that in turn strengthen both the university and the region."

According to the report, as jobs become more knowledge-driven, the universities are producing not only the research that can lead to the birth of new industries, but the ability to deliver a workforce educated in these emerging technologies. Research from these institutions has helped define such industries as computing, information technology, medical devices, biotechnology, and genetics, and emerging fields like genomics, protonics, and nanotechnology.

The impact of research and talent on industry in the region is twofold. When compared to other leading technology states, Massachusetts has the highest percentage of scientists and engineers in its workforce. And Boston's talent pool is a magnet for attracting leading corporations, such as Amgen, Cisco, Merck, Novartis, Pfizer, and Sun Microsystems to the region.

Innovators of new industry

Such brain power has another generative impact - fueling ideas for new business. "Entrepreneurship is deeply engrained in our culture," said M.I.T. President Vest. "Our graduates are leading the next round of industries." According to the report, a high percentage of the region's leading start-ups are university-related. Of the 50 start-up companies in the Boston area that attracted the most outside investment in 2001-2002, 23 (including the top 10) had connections to one or more of the universities - either engaged in the commercialization of technology first developed at a university, founded by a graduate, started life in a university incubator, or had a CEO that was a graduate.

Alumni of the institutions have founded major local companies such as Analogic Technologies, EMC, Lycos, Staples, and Teradyne.

Anchors for the Boston economy

The annual economic impact of more than $7 billion on the regional economy is like having the Olympic Games here in Boston every year. Seven billion dollars is what New York City experts estimated as the cumulative economic impact (from 2005 to 2012) of the construction and visitor spending for the 2012 Summer Olympic Games in New York.

Collectively the eight universities spend about $3.9 billion in the Boston area on salaries, wages, and other payments such as the purchase of goods and services from area vendors and local construction projects, which help support more than 37,000 full-time employees. It is estimated that the eight research universities will spend $850 million annually on construction over the next four years, sustaining 5,100 full-time construction jobs each year.

The report also showed that the eight institutions saw a 4 percent growth in employment from 2000 to 2002, during a time when employment in the area fell by nearly 3 percent.

Looking to the future

Despite the good news, Boston's research universities - its special advantage - are still vulnerable to reductions in federal research funding, fluctuations in the financial markets, and competition from other institutions for students and faculty.

"As we look to the future, in order to fulfill our role as a strong economic force in the region, we need three things: First, a strong national commitment to higher education through financial aid and research funds. Second, we need to support the goal of Boston's quality of life, an issue that affects any major industry, by offering strong higher education, addressing congestion, and maintaining first-rate public schools. And finally, we need to make sure our academic institutions can continue to flourish by finding ways to grow, while forging partnerships with our communities. The strength of Boston's higher education institutions must be recognized as part of the region's strength," said Summers.

"Engines of Economic Growth," the 102-page economic impact report by Appleseed, a New York economic research firm, is available online at http://www.harvard.edu, as is its companion, a 12-page report summary.