News Story

Still No Link Between Higher Education Appropriations and Growth

In The Detroit News, Daniel Howes argued that the state needs to spend more money on higher education. That will lead to more state economic growth, he argued.

There have been plenty of other states that have bought this theory and spent more money on higher education. Their results are not encouraging.

In 2007, Richard Vedder and Matt Denhart explored the link between state appropriations to higher education and state economic growth. No matter how he sliced it, there was simply no connection between government subsidies to universities and growing your economy.

In fiscal year 1980, the proportion of personal income spent by Michigan on higher education was around one-third more than the proportion spent by Illinois and 15 percent more than that spent by Ohio. Over the next two decades, Michigan dramatically increased its already above-average commitment to universities. By 2000, it had the sixth highest proportion in the nation and was spending 2.34 percent of its personal income on state government support for higher education. This was nearly double Illinois’ 1.26 percent and well above Ohio’s 1.58 percent.

This additional university spending did not pay off in greater economic growth. In 1980, per capita income in Illinois was 5 percent higher than in Michigan. By 2002 the gap had doubled, and Illinois residents enjoyed income that was 10 percent higher on a per capita basis. In fact, of the three states, Michigan had the largest higher education spending commitment but the lowest growth, while Illinois had the smallest spending commitment but the highest growth. Ohio fell in the middle, also growing faster than Michigan, but not as fast as Illinois.

There are problems with higher education, but it will be up to the schools, their students, their donors, and their students’ future employers to address those issues — not state government. More money won’t work.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.