Cities' incomes rise faster with more college-educated workers

Metropolitan regions with highly educated workforces fare significantly better in income growth than do regions with fewer educated workers, and the gap between the two is growing wider, according to a new study from Case Western Reserve University.

The Center for Regional Economic Issues (REI) at CWRU's Weatherhead School of Management compares income and productivity growth between 1980 and 1998 between those metropolitan areas with the highest proportion of college graduates and those with the lowest proportion. It found that the 10 regions with the most college graduates had per-capita income growth of 1.8 percent annually during those years, while the 10 with the fewest college graduates had annual income growth of 0.8 percent.

Authors of the study are Paul Gottlieb, REI associate director, and Michael Fogarty, professor of economics at CWRU. The study used data from the U.S. Census Bureau to rank the 75 largest American metropolitan areas by the proportion of adults holding at least a bachelor's degree or higher in 1980 and 1998.

The impact of the growth differential is evident in the widening gap in per-capita income between the two groups of regions. In 1980, the average per-capita income in the most-educated metropolitan areas was 12 percent above the U.S. average, while average per-capita income in the least-educated regions was 3 percent below the national average.

In 1998, by contrast, the most-educated regions had average income 20 percent above the national average, and average income in the least-educated regions had fallen to 12 percent below the national average. Similarly, the most-educated regions enjoyed productivity growth of 0.5 percent per year, compared with growth of 0.1 percent for the least-educated cities.

These findings have important implications for elected officials and other policy-makers at the state and local level. "Education level is one of the most important drivers of economic welfare in metropolitan areas today," say the report's authors. "Since American cities can no longer compete on a low-skill, low-costs basis, global competition is all about new ideas, new markets, and productivity growth. None of these competitive advantages would be possible without more educated workers, whether in the boardroom or on the assembly line."

Why do some regions have more workers with college degrees than others? Many of the better-educated cities got that way not by sending more of their high school graduates to college, but by attracting workers who already have advanced degrees. One way to achieve this is through having many colleges and universities in the area and graduates who are happy to stay there, such as with Boston or Austin.

In addition, some metropolitan regions -- such as Washington, D.C. -- have economies that demand a college-educated workforce. Some cities may boom because of entrepreneurial activity and become a magnet to highly mobile professionals, thereby improving the region's educational level. Seattle and Atlanta are two examples of this type of region.

The report's good news for policymakers is that regions can and do improve their overall educational level. Between 1980 and 1998, several metro areas improved both in their absolute numbers of college graduates and their position relative to other areas. Downward movements also took place.

The report notes that there is some "chicken and egg" relationship between growth and educational levels, but leaders still cannot ignore efforts to enhance a region's "human capital."

"If you have to pick a single 'egg' to create the 'chicken' of fast per-capita growth, you could do no better than to focus on your region's education level," it concludes.

METROPOLITAN EDUCATION ATTAINMENT LEVELS, 1980 AND 1998 *

1980

Top 10 metro areas: Albuquerque, NM; Austin-San Marcos, TX; Boston-Lawrence-Worcester-Lowell-Brockton, MA; Denver-Boulder-Greeley, CO; Honolulu, HI; Minneapolis, St. Paul, MN; Raleigh-Durham, Chapel Hill, NC; San Francisco-Oakland-San Jose, CA; Seattle-Tacoma-Bremerton, WA; Washington, D.C.-Baltimore, MD

Bottom 10 metro areas: Allentown-Bethlehem-Easton, PA; Bakersfield, CA; Jacksonville, FL; Las Vegas, NV; Little Rock, AR; Mobile, AL; Stockton-Lodi, CA; Tampa-St. Petersburg-Clearwater, FL; Toledo, OH; and Youngstown-Warren, OH

1998

Top 10 metro areas: Austin, TX; Boston-Lawrence-Worcester-Lowell-Brockton, MA; Denver-Boulder-Greely, CO; Minneapolis-St. Paul, MN; Nashville, TN; Raleigh-Durham, NC; Portland-Salem, OR; San Francisco-Oakland-San Jose, CA; Seattle-Tacoma-Bremerton, WA; Washington, D.C.-Baltimore, MD

Bottom 10 metro areas: Bakersfield, CA; El Paso, TX; Fresno, CA; Las Vegas, NV; San Antonio, TX; Stockton, CA; Tampa-St. Petersburg, FL; Toledo, OH; Tucson, AZ; Youngstown, OH

* More detailed ranking not possible due to statistical margin of error