Discussions concerning the value of earning a bachelor's degree often center on the return on investment for the degree-holder. However, a recent article from Chicago Fed Insights illustrates that degree-holders, specifically their density in a community, also impacts whether or not their region will thrive in the coming decades.
The authors, Ila Gupta and Thomas Walstrum, show that places with a higher share of bachelor-degree holders have greater employment growth fifty years later. They plotted the share of population that had a bachelor’s degree in 1970 against average annual employment growth rates from 1970 through 2023 in selected metro and micro areas and in U.S. states. They found that places with more of their population possessing bachelor’s degree in 1970 tended to grow faster over the subsequent 53 years.
They also illustrate a causal relationship between higher education levels and growth. They consider the possibility of factors other than density of bachelor's degree-holders as predictors of future employment growth. For example, if an area with nicer weather drew a disproportionately high number of highly educated people to it, the true reason for faster employment growth would be nice weather, not the education levels of its residents. However, they cite a 2023 National Bureau of Economic Research (NBER) working paper by Luisa Gagliardi, Enrico Moretti, and Michel Serafinelli that provides evidence that education level of the residents alone can be a predictor of future employment growth.
Manufacturing hubs, according to the Bureau of Labor Statistics, enjoyed steady, cyclical growth beginning in 1939 and peaking in 1979. As manufacturing hubs declined during the 1980s, most experienced sharp declines in employment. However, Gagliardi et. al. found that 34% of manufacturing hubs grew faster than the others. These fast-growing hubs had populations in the 1970s that were a mixture of people with bachelor’s degrees and those who had not attained that level of education. Manufacturing was important to these regions, but not exclusively. Further, they found that, from 1959 to 1979, the regions with a mixture that included college level residents had about the same rate of employment. But after 1979, the employment rates diverged: regions with significant numbers of college-educated workers recovered and even grew, while regions without college-educated workers declined. Gagliardi et. al. suggest that the regions that survived or grew relied on human capital-intensive services, which offset the loss of manufacturing jobs.
The U.S. cities that demonstrate this phenomenon include Pittsburgh. Gagliardi et. al. suggest that this city rebounded because it is anchored by Carnegie Mellon University and the University of Pittsburgh. These universities attracted employers in human capital-intensive sectors, such as life sciences research, high technology, and education.
Based on their findings, Gagliardi et. al. recommend that former manufacturing hubs should invest in local colleges and the development of human capital to help economic recovery rather than relying on investments in physical capital. However, based on their research of concentrations of people with bachelor’s degrees in given areas between 1970 and 1923, Gupta and Walstrum show that the concentration level has not changed dramatically over time. They conclude that “it would be difficult for a local government in a slow growth place to make the size of investment needed to significantly raise its bachelor’s degree share and potentially transform it into a fast growth place.”