The Economic Value of WTAMU Main Report

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students attending WTAMU, broken out by educational achievement. In total, students completed 225,982 CHEs during the analysis year, excluding personal enrichment students. We map each of these CHEs to the education ladder depending on the students’ education level and the average number of CHEs they completed during the year. For example, bachelor’s degree graduates are allocated to the stage between the associate degree and the bachelor’s degree, and the average number of CHEs they completed informs the shape of the distribution curve used to spread out their total CHE production within that stage of the progression. The sum product of the CHEs earned at each step within the education ladder and their corresponding value yields the students’ aggregate annual increase in income (∆E), as shown in the following equation: and n is the number of steps in the education ladder, e i is the marginal earnings gain at step i, and h i is the number of CHEs completed at step i. Table A6.1 displays the result for the students’ aggregate annual increase in income (∆E), a total of $42.2 million. By dividing this value by the students’ total production of 225,982 CHEs during the analysis year, we derive an overall value of $187 per CHE. TABLE A6.1: AGGREGATE ANNUAL INCREASE IN INCOME OF STUDENTS AND VALUE PER CHE Aggregate annual increase in income $42,218,228 Total credit hour equivalents (CHEs) in FY 2017-18* 225,982 Value per CHE $187 * Excludes the CHE production of personal enrichment students. Source: Emsi impact model. Mincer Function The $187 value per CHE in Table A6.1 only tells part of the story, however. Human capital theory holds that earnings levels do not remain constant; rather, they start relatively low and gradually increase as the worker gains more experience. Research also shows that the earnings increment between educated and noneducated workers grows through time. These basic patterns in earnings over time were originally identified by Jacob Mincer, who viewed the lifecycle earnings distribution as a function with the key elements being earnings, years of education, and work experience, with age serving as a proxy for experience. 49 While some have criticized Mincer’s earnings function, it is still upheld in recent data and has served as the foundation for a variety of research pertaining to labor 49 See Mincer (1958 and 1974). Appendix 6: Value per Credit Hour Equivalent and the Mincer Function 94
economics. Those critical of the Mincer function point to several unobserved factors such as ability, socioeconomic status, and family background that also help explain higher earnings. Failure to account for these factors results in what is known as an “ability bias.” Research by Card (1999 and 2001) suggests that the benefits estimated using Mincer’s function are biased upwards by 10% or less. As such, we reduce the estimated benefits by 10%. We use state-specific and education level-specific Mincer coefficients. Figure A6.1 illustrates several important points about the Mincer function. First, as demonstrated by the shape of the curves, an individual’s earnings initially increase at an increasing rate, then increase at a decreasing rate, reach a maximum somewhere well after the midpoint of the working career, and then decline in later years. Second, individuals with higher levels of education reach their maximum earnings at an older age compared to individuals with lower levels of education (recall that age serves as a proxy for years of experience). And third, the benefits of education, as measured by the difference in earnings between education levels, increase with age. FIGURE A6.1: LIFECYCLE CHANGE IN EARNINGS 12 years of education 14 years of education 16 years of education Earnings Age In calculating the alumni impact in Chapter 2, we use the slope of the curve in Mincer’s earnings function to condition the $187 value per CHE to the students’ age and work experience. To the students just starting their career during the analysis year, we apply a lower value per CHE; to the students in the latter half or approaching the end of their careers we apply a higher value per CHE. The original $187 value per CHE applies only to the CHE production of students precisely at the midpoint of their careers during the analysis year. In Chapter 3 we again apply the Mincer function, this time to project the benefits stream of the FY 2017-18 student population into the future. Here too the value per CHE is lower for students at the start of their career and higher near the end of it, in accordance with the scalars derived from the slope of the Mincer curve illustrated in Figure A6.1. Appendix 6: Value per Credit Hour Equivalent and the Mincer Function 95
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AUGUST 2019 The Economic Value of W
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Executive Summary This report asses
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created by WTAMU is equal to approx
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Investment Analysis Investment anal
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Introduction West Texas A&M Univers
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CHAPTER 1: Profile of West Texas A&
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WTAMU employee and finance data TAB
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When using the Alumni Outcomes data
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The Texas Panhandle economy WTAMU s
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Table 1.4 and Figure 1.5 present th
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IN this chapter, we estimate the fo
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Operations spending impact Faculty
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the next four rows under the sectio
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non-labor income. This sums togethe
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ing impacts. Again, since construct
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of employees reported for each comp
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Calculating the increase in income
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the retained students, we estimate
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Alumni impact In this section, we e
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income is the difference between th
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Once these allocations are complete
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Page 45 and 46: Student perspective To enroll in po
Page 47 and 48: their full earning potential that t
Page 49 and 50: Linking education to earnings Havin
Page 51 and 52: As shown in Table 3.2, the $44.6 mi
Page 53 and 54: Price Index), the corresponding nom
Page 55 and 56: We apply another reduction factor t
Page 57 and 58: TABLE 3.3: PRESENT VALUE OF ADDED T
Page 59 and 60: Social perspective Texas benefits f
Page 61 and 62: to income assistance amount to $1.5
Page 63 and 64: money spent on operations of the un
Page 65 and 66: WHILE WTAMU’s value to the Texas
Page 67 and 68: Buss, Christian, Jeffrey Parker, an
Page 69 and 70: Jaeger, David A. and Marianne E. Pa
Page 71 and 72: Ogden, Cynthia L., Molly M. Lamb, M
Page 73 and 74: U.S. Department of Health and Human
Page 75 and 76: Based on this sensitivity analysis,
Page 77 and 78: • Scenario 1: Increasing the perc
Page 79 and 80: Retained student variable The retai
Page 81 and 82: Economics Study of the allocation o
Page 83 and 84: Appendix 3: Frequently Asked Questi
Page 85 and 86: money” is called discounting and
Page 87 and 88: Appendix 5: Emsi MR-SAM Emsi’s MR
Page 89 and 90: Census’ Current Population Survey
Page 91 and 92: The matrices are built utilizing Em
Page 93: Appendix 6: Value per Credit Hour E
Page 97 and 98: Appendix 8: Overview of Investment
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Page 101 and 102: Appendix 9: Shutdown Point The inve
Page 103 and 104: Consider benefits now with referenc
Page 105 and 106: Appendix 10: Social Externalities E
Page 107 and 108: y education, gender, and ethnicity.
Page 109: weighted heavily towards the less t
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