Universities and hospitals have long been stable sources of income for communities lacking diversified industries or low on jobs and investment. Cities — big ones in particular — have relied on these “eds” and “meds” sectors to stay afloat during tough economic times, especially during the last Recession.
In some places, this has worked out well. Take the Cleveland Clinic, for instance. Its leadership in research, education and health information as well as cardiology and an array of other medical specialties propelled the city to international prominence and helped offset its auto manufacturing losses in the ’60s and ’70s. Pittsburg also propped up its economy with the University of Pittsburgh Medical Center and Carnegie-Mellon University when the steel industry began to decline.
Many cities have tried to follow suit. From life sciences clusters associated with local medical schools and hospitals to tech transfer programs designed to launch startups out of area colleges and universities, health care and higher education play key roles in many economic development strategies. While this approach can be effective at times, relying too much on these entities can be self-defeating, writes Aaron Renn in a NewGeography post.
Why? The nonprofit status of most of health-care systems and higher ed institutions reduces the tax base in the cities that depend on them. Also, their conservative nature can make them less dynamic than more traditional industries. But the biggest issue, according to Renn, is that eds and meds are headed for a slowdown in growth.
This hasn’t happened in quite a while. From 1990 to 2008, employment in health care and education sectors, along with government, grew to account for nearly 50 percent of job growth nationwide, while manufacturing and other industries declined to a smaller share.
But with this job boom came a price. Health-care and tuition costs have also been trending upward, surpassing the rate of inflation and reaching a perilous new high that cannot continue without bursting at some point. As Renn writes:
Some cities with unique strengths, like Boston, with its many specialized biotech firms, or Houston, with the world’s largest medical center, may thrive in this environment, but the vast majority of cities are likely to be very disappointed in where eds and meds growth will take them.
In the higher education realm, colleges and universities can make the most impact on local and regional economies of the future by stimulating entrepreneurial growth, said Wayne Watkins, associate vice president for research at the University of Akron, during a panel discussion at the recent International Economic Development Council conference. More progressive universities are looking for ways to integrate entrepreneurship into all academic programs and incentivize creativity among student researchers, he added.
“We have to create entrepreneurial potential,” said Watkins, who sees “universities embracing the role of being engineers of innovation and acting more strategically.”
From the first advances in space exploration and the Internet to the latest genetic engineering and biotech R&D, universities have a history of pioneering innovation, and a growing number of student-led labs “are taking advances to a successful level,” he said.
Both the University of Akron and Kent State University have a strong record of not only developing research to further innovation for local industries, but also launching their own startups in the Akron area. The University of Akron has so much research coming out of its labs, for example, that it brings angel investors in each quarter to showcase opportunities for investment, Watkins said. It also dispatches retired chemists to meet with CEOs of companies about their needs and find opportunities to partner with them on research and development.
What role do “eds” and “meds” sectors play in your community? Are they a reliable source of economic growth? How can they be maximized to further innovation and investment in communities?