Approximately 14,000 students are enrolled in fall semester classes at the University of Montana, and Missoula would be a very different place without them here.

According to Larry Swanson, an economist and director of the O’Connor Center for the Rocky Mountain West, the impact of the university on the city’s economy cannot be overstated.

“Having the university makes Missoula a center of education, with areas of economic specialization in education that translate into specialization and growth in other sectors, like health care, professional and technical services, financial services, and trade,” he explained. “Centers of higher education also tend to have younger overall populations because they are able to attract and retain young adults to a higher degree than non-university towns. This is particularly important because the U.S. population as a whole is aging, as are the populations of all Missoula's peer places and Missoula itself.”

Swanson conducted a peer analysis of 50 other communities in the U.S. that are of comparable size to Missoula, including several cities with universities.

“When you look at university towns versus similar-sized cities without universities, you can sort of see differences,” he said. “You find populations in university towns have higher education attainment, and that’s a carry-over from having educational entities in your town. People will take classes, whether it’s at the Missoula College or the Lifelong Learning Center, that they wouldn’t if those entities weren’t here. In a city without that education infrastructure, you just might not have as much education.”

The demographics of Missoula would also be vastly different without UM in the mix.

“The other thing that plays out is (students) come here for school and stick,” Swanson said. “University towns have a larger proportion of young adults. It makes a big difference. There is a steady replenishment of your young adult population that you have in university towns. If you have young adults, you are replenishing your labor supply, and that’s particularly important as more and more people are retiring. You also have family formation so young children are going to schools.”

Young adults are the segment of the population that is more likely to be buying houses, and therefore driving the real estate market.

“Whereas your older population might be downsizing,” Swanson said. “If you are a university town of this size, that’s a big deal. In Missoula if you go around and talk to people who own real estate, and they have rental housing, take the University out of the equation and that’s a pretty big factor. It plays out in all of these different ways. It translates into consumption patterns, retail sales, clothing, food, all of that kind of stuff. As you put together a list of all these things it makes for a big difference. It’s a multi-faceted thing.”

Swanson found that Missoula ranks 30th in per capita income among the 50 peer cities he studied.

“Our per-capita incomes should be higher, but Montana universities’ faculty pay levels are among the lowest in the U.S.,” he explained. “Same with some other university towns in the Mountain West region.”

The research shows that Missoula ranks 11th among the 50 cities as a “financial center,” or what percentage of personal income was generated by the finance and insurance sector. Swanson said this is important because financial services will do well in the national economy going forward.

“Not all university towns rank high in this, so Missoula can be seen as a relatively well-diversified regional center economy and being a center of higher education adds to this diversity and areas of specialization quite a bit,” he said. “Being a center of education is very complementary with attracting young adults, having a good healthcare sector and having strong sectors in trade, professional and technical services, etc.”

***

A report by Partrick Barkey and Jennifer Hepp of the University of Montana’s Bureau of Business and Economic Research found that the presence of UM contributes to 9,700 jobs, more than $1 billion in after-tax income and almost $200 million in state tax revenues in Montana. Nearly $352 million in annual investment spending can be attributed to UM, and the University increases the average wage of all Montana jobs by $1,346, even taking into account all the tax support and tuition dollars the University receives from Montana residents.

Missoula also gets a huge amount of visitors because of UM. Barkey and Hepp found that the 3,496 nonresident students at UM in 2008 generated about 9,600 visits by friends and relatives from out of state, with each visitor staying in Montana an average of about 2.5 days. They estimated that these trips generated $5.2 million of spending within the state, with the majority of expenditures going to accommodations, travel and food services.

“Were it not for the presence of the University, these visits – as well as the spending and the jobs that spending supports – would not exist,” Barkey and Hepp wrote.

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