IU delivers $9.9 billion impact on state, high return on investment for students and taxpayers
For Immediate Release
Oct 1, 2020
BLOOMINGTON, Ind. – Indiana University added $9.9 billion in income to Indiana’s economy in FY 2018-19 through its investments in the educational success of its students, research and innovation, and engagement in the economic development, health and well-being of Hoosier communities across the state.
Expressed in terms of employment, IU’s impact supported 151,015 jobs, according to the results of a new economic impact study released today during a meeting of the IU Board of Trustees. The “Economic Value of Indiana University” study also indicated that:
One out of every 26 jobs in Indiana is supported by IU and the activities of its students.
For every $10,000 students invest in their education at IU, they will receive $35,000 in higher future earnings.
For every $10,000 in tax dollars spent educating IU students, taxpayers will receive an average of $24,000 in return over the course of the students’ working lives.
For every $10,000 that society invests in IU, Indiana will see $48,000 in benefits over the students’ working lives.
The study was commissioned by the university and conducted by Emsi, a leading provider of economic impact studies and labor market data to educational institutions in the U.S. and internationally. Applying a conservative methodology and using only the most recognized indicators of economic impact and investment effectiveness, the study examined the economic impacts of IU’s spending across the state’s major industries and the costs associated with IU educational activities from the perspective of students, taxpayers and society at large.
It was produced in conjunction with IU’s Bicentennial Strategic Plan, which was just successfully completed, and IU’s Bicentennial Year, which the university commemorated between July 1, 2019, and June 30, 2020. As such, the results of the study underscore the university’s vital role in contributing to the economic life and well-being of the state as it begins its third century of operations.
“The results of this study demonstrate the enormous impact IU continues to have in contributing to a prosperous, productive and innovative Indiana economy,” IU President Michael A. McRobbie said. “Through our core missions to ensure student achievement, conduct world-class research and innovation, and engage our expertise and resources in the communities we serve, IU is helping to drive the state’s talent strategy, support high-quality jobs, generate major revenue, and contribute to a pervasive entrepreneurial culture throughout the university and our state.
“Importantly, IU students are seeing a high rate of return for their investment in IU, as indicated by higher future earnings that will continue to grow throughout their working lives, happier and healthier lifestyles, and highly active involvement in their local communities. All of this translates into a wide range of economic and societal benefits in our state, including increased consumer spending, lower reliance on income assistance and national health care services, and high levels of volunteer work, community leadership and philanthropic giving.”
The $9.9 billion in income that IU delivered to the state’s economy in FY 2018-19 is equal to the sum of the university’s operations, research and construction spending impacts; the impact of its startup and spinoff companies; visitor and student spending impacts; and IU alumni impact.
For context, the study determined that IU’s impact was equal to approximately 2.7 percent of the total gross state product of Indiana. The contribution that the university provided on its own is larger than the entire accommodation and food services industry in the state.
Generating major economic impact in Indiana
On an annual basis, IU adds economic value to Indiana as a leading employer of state residents and a large-scale buyer of goods and services.
According to the Emsi study, the education and training that IU provides for Indiana residents have, by far, the greatest impact on generating revenue for the Hoosier economy. Hundreds of thousands of IU alumni are employed in Indiana. As a result of their IU educations, students receive higher earnings and increase the productivity of the businesses that employ them. In FY 2018-19, IU alumni generated $7 billion in added income for the state economy, which is equivalent to supporting 92,655 jobs.
In FY 2018-19, IU employed 43,825 full-time and part-time faculty and staff, 98 percent of whom lived in Indiana. IU also incurred expenses related to facilities, supplies and professional services. IU’s operations spending alone added $1.9 billion in income to the state in FY 2018-19, which is equivalent to supporting 39,374 jobs in the state.
IU’s research activities, which span hundreds of research centers, institutes and museums across its campuses statewide, are addressing the Grand Challenges and other issues facing Indiana’s and the nation’s economy. In FY 2018-19, IU spent $261.5 million on payroll to support research activities. This, along with $470.9 million in other research spending, created a net total of $464.7 million in added income for the state economy, equivalent to supporting 8,777 jobs.
The study also examined the impact of IU students’ daily spending. Whether they relocated to Indiana to attend IU and or are residents who may have left Indiana if not for IU, these students spent money on groceries, accommodation, transportation and other household expenses while attending the university. This spending generated $268.7 million in added income for the state economy in FY 2018-19, which supported 6,583 jobs in Indiana.
Keeping Indiana’s talent pipeline full
The Emsi study noted that IU’s spending impacts are further enhanced by the university’s commitment to produce knowledgeable, creative and entrepreneurial graduates. These graduates enter the state workforce with contemporary skills, such as creativity and leadership, that are in high demand by the state’s leading employers.
IU graduates more than 20,000 students each year – more than any college or university in the state. In FY 2018-19, nearly 7 out of every 10 IU graduates were Indiana residents. IU is also the largest producer of Indiana’s nurses, teachers, dentists, IT professionals, surgeons, lawyers and public safety officers.
IU also continues to work with faculty, staff, students, alumni and external partners – such as business and industry, economic development organizations and individual entrepreneurs – to support and advance new innovations and discoveries. Startup companies that were created to license and commercialize IU technology or knowledge typically have a strong and clearly defined affiliation with IU. They frequently use their university connections to attract prospective investors, facilitate relationships with other high-potential companies, and contribute to a pervasive entrepreneurial culture throughout IU and the state. Spinoff companies are created and fostered through university programs or faculty and alumni.
Over the past four years, IU received 661 invention disclosures, filed 865 new patent applications and produced 175 licenses. In FY 2018-19, IU startup and spinoff companies added $106 million in income to Indiana’s economy.
“The Emsi report underscores the extraordinary work of our innovative and industrious faculty, students and alumni,” said Bill Stephan, IU vice president for government relations and economic engagement. “Working alongside colleagues in technology commercialization and at IU Ventures, their collective efforts provide a particularly significant contribution to strategic sectors of the state’s economy.”
Delivering a high return on investment
The results of the study also demonstrated that IU is a strong investment for its three major stakeholder groups: students, taxpayers and society. IU students receive a substantial return for their investments in an IU education. At the same time, IU generated more in tax revenue than it receives from the state and creates a wide range of social benefits throughout Indiana.
IU served 126,597 students in FY 2018-19, when accounting for dual-credit high school students. Collectively, their total investment in IU in FY 2018-19 amounted to a present value of $2.2 billion.
In return for their investment, students will receive $7.7 billion in increased earnings over their working lives, the study reported. This translates to a return of $3.50 in higher future earnings for every dollar that students invest in their education. Students’ average annual rate of return is 14.4 percent, which surpasses the U.S. stock market’s 30-year average rate of return of 9.9 percent.
The study indicated that total taxpayer benefits amount to $1.5 billion. That is the present value sum of the added taxes and public-sector savings generated by improved lifestyles of IU students, who are less reliant on government programs and services than those without college degrees. Taxpayer costs are $623.3 million, equal to the amount of state and local government funding IU received in FY 2018-19. This means that for every dollar of public money invested in IU in FY 2018-19, taxpayers will receive a cumulative value of $2.40 over the course of the students’ working lives.
IU students also enrich the civic and economic life of their communities, and they contribute more in taxes. In addition, IU provides these communities with sports, culture, arts and music.
The study reported that the societal benefits of IU equal a present value of $22 billion, which includes $20.8 billion in added income through its students’ increased lifetime earnings and increased business output, as well as $1.3 billion in savings related to health, crime and income assistance in Indiana.
Taxpayers in Indiana invested a present value total of $4.6 billion in IU in FY 2018-19. Thus, for every dollar invested in IU, Indiana residents will receive a cumulative value of $4.80 in benefits, which will occur for as long as IU’s FY 2018-19 students remain employed in the state.
About the report
Data and assumptions used in the study were based on several sources, including the FY 2018-19 IU academic and financial reports from IU’s Office of the University Controller and IU University Institutional Research and Reporting; industry and employment data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau; outputs of Emsi’s Multi-Regional Social Accounting Matrix model; and a variety of studies and surveys relating education to social behavior.
Emsi is well known for its conservative methodology, which, for this study, adhered to guidelines of the Association of American Universities and the Association of Public and Land-grant Universities, published in December 2014.
More information about the study, including an executive summary, fact sheet and summaries of reports for each IU-administered campus, is available at impact.iu.edu/2020.