Making an Impact: Today and Tomorrow

By Pascarella, E. T.; Terenzini, Patrick T. | Business Perspectives, September 1996 | Go to article overview

Making an Impact: Today and Tomorrow


Pascarella, E. T., Terenzini, Patrick T., Business Perspectives


The University of Memphis contributes almost three-quarters of a billion dollars to the economy each year through direct and indirect expenditures, a study by the Bureau of Business and Economic Research reveals. But, the University's most valuable contribution to the economy may be its role in enhancing the lifetime earning potential of University of Memphis graduates.

While it is correct and appropriate to think first of The University of Memphis as an educational institution, the University is also a business. The primary business of the University is education, and in that role the University spends millions of dollars each year on faculty and staff salaries and on goods and services. These dollars play an important role in the regional economy.

In addition, students at The University of Memphis earn significant incomes from full-time and part-time employment, and students spend a large portion of their earnings locally. And, visitors to the University and University events bring along dollars that they leave behind to enrich the area economy.

To assess the impact of expenditures by The University of Memphis, the University community, and visitors, the Bureau of Business and Economic Research of The University of Memphis conducted an economic impact study. The primary data for the study were collected through three surveys: one of the faculty and staff of the University, one of University students, and one of University alumni. More than 1,400 people participated in the surveys. The University provided data on its expenditures.

The direct impact of the University was measured by summing the estimates of the local expenditures of the individuals associated with the University - the employees and the students - and the local expenditures of the institution and visitors.

Indirect economic impacts are created when money spent is re-spent by businesses and organizations throughout the economy. Expenditures are assumed to "turn over" in the economy, generating a multiplier effect. The estimated value of this multiplier for colleges, universities, and professional schools in Tennessee is 2.2707.(1)

Direct Impact

The direct impact of the University can be broken down into four components: University expenditures, faculty and staff incomes, student incomes, and visitor expenditures.

The University's largest local expenditure is the salaries and wages paid to employees. In 1995, faculty and staff incomes totaled $111 million. In addition, the University spent $42 million in 1995 for the purchase of goods and services. A large portion of these products were purchased from firms in the region.

Students at the University work for numerous businesses in the local area. Based on responses to the Bureau survey, students are estimated to earn approximately $175 million annually. Finally, people who visit University employees and students are estimated to spend $13 million annually on goods and services in the Memphis economy. The direct impact of these expenditures and incomes was $341 million.

Indirect Impact

The expenditures and income that The University of Memphis creates through payments to businesses and individuals enhances the entire economy. Each individual who receives income from the University spends that income for housing, transportation, food and entertainment, clothing, and other necessities and pleasures of life. In turn, the funds are re-spent by other members of the Memphis community.

Employing the 2.2707 multiplier that is commonly used for colleges, universities, and professional schools in Tennessee, the indirect impact of the University is $433 million. The total economic impact of The University of Memphis is almost three-quarters of a billion dollars - $774 million in direct and indirect impacts. Table 1 summarizes each component of the University's economic contribution to the economy.

Table 1

Annual Economic Impact Of The University of Memphis, 1995

Category Economic Impact

Direct impact:

University expenditures               $42 million
Faculty and staff incomes            $111 million
Student incomes                      $175 million
Visitor expenditures                  $13 million
Total direct impact                  $341 million

Indirect impact                      $433 million

1 Regional Multipliers: A User Handbook for the Regional Input/Output Modeling System (Washington: U. …

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