Higher Ed Spending Is No Panacea

Published September 1, 2006

One policy being championed by prominent state officials to help spur Michigan’s economy is to spend more on higher education.

Over the spring and summer of this year there was a consistent call by officials of different stripes for increasing higher education funding in the name of economic development. None has presented empirical evidence that such a tack would work, however.

Among the advocates of higher spending is Doug Rothwell, former CEO of the Michigan Jobs Commission, the state agency in charge of economic and workforce development. In May he argued in a Detroit Free Press commentary that legislators may want to look to states “with a long history of positioning higher education as a cornerstone of their economic development strategy as a guide to getting Michigan’s economy moving.” Rothwell added, “Michigan universities are our best way of retaining and attracting the educated workforce we need to transform our economy.”

During this summer’s state budget debate, state Rep. John Stewart (R-Plymouth) argued, “Higher education is the essence of our recovery.”

Experts Question Higher Spending

But Prof. Richard Vedder of Ohio University contends economic growth is adversely affected by higher education spending.

In Going Broke by Degree: Why College Costs Too Much, Vedder reports on statistical analyses he performed on the relationship between spending on higher education and the economic growth enjoyed by states. He found a negative correlation: The more a state spends on universities, the slower the rate of economic growth.

Vedder also found a small negative correlation between state higher education spending and migration. In other words, contrary to Rothwell’s claims, the more Michigan spends on higher education the greater the likelihood people may leave the state, according to Vedder’s analysis.

Michael LaFaive