The Economic and Social Impact of Washington State University

See a news release on the Economic Impact Report at
http://wsunews.wsu.edu/detail.asp?storyID=2415.

News and Information Services
446 French Administration Building
Pullman, WA 99164-1040
(509) 335-3581

March 1998

CONTRIBUTING AUTHORS
Dr. Carolyn Clark, Associate Professor of Economics
Licheng Feng, Ph.D. Candidate in Economics
Dr. Ernst Stromsdorfer, Professor of Economics
Data and Technical Support provided by Institutional Research

Editorial Support provided by News and Information Services

Introduction
Washington State University is a major contributor to the social and economic progress of the people of Washington. It provides broad-based education and training to citizens throughout the state. It trains our youth for the jobs of tomorrow. It helps people retrain to meet new job challenges. It aids in the transfer of technology from pure research to applied research to practical application. It preserves and extends cherished social and cultural values.

Washington State University was established in 1890, following the 1889 granting of statehood to Washington. The state received approximately 200,000 acres of federal land to support the new institution's three-part mission of education, research and public service. The central campus in Pullman is located on 600 acres, with an additional 2,000 adjoining acres used for agricultural, veterinary and natural resources research. Branch campuses were officially established in 1989 in Spokane, Tri-Cities and Vancouver. For fall semester 1997, total undergraduate enrollment was some 17,500, while graduate enrollment in the system was 2,500 students.

WSU has Cooperative Extension offices, dedicated to serving the public, located in each of the state's 39 counties. WSU has major regional research and extension units sited throughout the state, a new network of learning centers that exploits new technologies to provide education at a distance and a significant role in the new statewide K-20 high-tech teaching network.

For more than 100 years, WSU has influenced the growth of Washington's economy through its graduates, its basic and applied research, and through outreach education that directly benefits the state's businesses. Central to WSU's role has been expanding access to higher education, benefiting both the individual and the state's economic and social fabric. The university continues to respond to the state's needs, growing to provide increased access to this dynamic public resource for citizens throughout the state and around the world.

In fulfilling its land-grant mission and heritage, Washington State University makes a difference for Washington State.

Purpose of the Economic and Social Impact Analysis
This report sets forth the economic and social impacts of Washington State University on the lives and economic fortunes of the citizens of our state. Both qualitative and quantitative impacts are described with the qualitative impacts adding context and substance to the quantitative impacts.

Charts and text illustrate the impact of our educated workforce, the return on investment for WSU graduates, and the research and service impact on economic development. The report also shows how state tax dollars are leveraged to produce a much larger economic impact on the economic commerce and production in the state.

The analysis describes the sources of funds received by WSU and how they are dispersed in the form of services to students and citizens.

It defines the economic impact of these funds on human capital development, economic development, direct and indirect effects of expenditures, and sets out qualitative dimensions of these economic impacts -- their social and personal effects on people.

Executive Summary
Introduction
Washington State University is a major contributor to the social and economic progress of the people of Washington.

• It provides broad-based education and training to citizens throughout the state.

• It trains our youth for the jobs of tomorrow.

• It helps people retrain to meet new job challenges.

• It aids in the transfer of technology from pure research to applied research to practical applications.
• It preserves and extends cherished social and cultural values.

• The actual process of providing education, research, and private and public service, which has a dramatic fiscal and employment impact.
  
  
• The process of working directly and indirectly with business and government in the creation of economic and social goods.
  
  
• The creation of human capital which impacts directly on the economic growth of the state.
  

These benefits are discussed in turn.

The Fiscal and Employment Impact from the Direct Provision of Education, Research and Service

• In fiscal year 1996, the university leveraged $226.2 million of state funding into a total budget of $515.5 million.
  
  

• Direct state taxpayer support of the university represents only 44 percent of the university's total operating budget.
  
  

• Via the well-known multiplier effect, total expenditure of $521.4 million expanded to a total of about $730 million.
  

  The economic activity of the university translates into more than 10,000 jobs statewide.

Working with Washington Business and Industry

• Cooperative Education brings non-credit practical education to the citizens of every county in the state.
  
  

• The Extended Degree Program brings less expensive education to the job-bound and place-bound, large numbers of whom are lower income individuals.
  
  

• The Small Business Development Center gave assistance to 2,800 small businesses through 24 statewide regional offices.
  
  

• Other technology transfer organizations involving WSU as a leader or partner
  
  

  • The Washington Technology Center
    
    

  • The Spokane Intercollegiate Research and Technology Institute
    
    

  • The WSU Research and Technology Park
    
    

  • The WSU International Marketing Program for Agricultural Commodities and Trade Center
    
    

• Examples of direct benefits through technology transfer
  
  

  • WSU helped introduce hybrid poplar tree farming for wood pulp production. One hundred thousand acres have been planted to date with an economic value ranging up to $270 million.
    
    

  • Mastitis research by the College of Veterinary Medicine has reduced milk production loses in the state by about $20 million, with the possibility of increasing the benefit by another $20 million.
    
    

  • The WSU Weather Network aids Central Washington orchardists in timely decisions on frost prevention and pest control.
    
    

  • WSU Tri-Cities Business LINKS has helped entrepreneurs start 127 new businesses and create 240 new jobs in the Columbia Basin.
    
    

  • WSU Vancouver engineering initiatives have helped bring a $1.2 billion semi-conductor operation into Washington.

The Human Capital Impact on Statewide Economic Growth

• Post-secondary education is an investment in human capital. Human capital, like other economic capital, is the source of economic growth.
  
  
• Investment in this form of capital is as effective a tool to foster economic development and growth as is the investment in physical plant and technology.
  
  
• The rate of return on investment (ROI) for the undergraduate degree at WSU is 6.58 to 13.56 percent for men and 8.49 to 15.16 percent for women, depending upon field of study.
  
  
• The ROI are highest for graduates of the College of Engineering and Architecture, followed very closely by graduates from the College of Business and Economics.
  
  
• The ROI for those receiving the master's degree, or its equivalent, nationwide ranges between 10.7 percent to 12.7 percent.
  
  
• These rates equal or exceed the ROI on comparable investments in physical capital in the state and the nation.
  
  

Total Financial Impact on the State and Regional Economies
As is shown from the charts "Leveraging State Funds" and the university's "Direct Economic Impact," about $226.2 million of state funds were allocated to WSU in 1996. Given the daily operations of the university, this state funding was augmented by an addition of $289.3 million in student tuition, research support, private gifts and more. Thus, the total direct effect of the university on local, state and regional economies in 1996 amounted to about $521.4 million, of which $5.9 million represent expenditures from funds held over in previous years.

The story does not end here, however. The above funds generate a chain reaction of induced economic activity that adds to the total output of the state. This induced indirect effect, measured by what is known as the economic multiplier, is estimated to be an additional $208.6 million, since the multiplier on expenditures has an average value of about 1.4 across our nation's economy.

Thus, the total direct and indirect financial effect of the university on the economies in which it operates is about $730 million each year.

This economic activity translates into jobs for well over 10,000 faculty, staff and students. These individuals create the goods and services to perform the university's functions. They also impact the economies of communities throughout the state.

However, this financial impact with its concomitant job creation, while representing real output of goods and services, is not the fundamental impact of Washington State University. More importantly, among many important social functions, WSU creates the increase in human capital -- through advanced education -- that enables our state economy to grow and be competitive in the national and global marketplace.

Click to see PowerPoint Slide Presentation,  including charts on Leveraging State Funds; Direct Economic Impact; Sources of Fiscal Year 95-95 Funds; Sources of Operating and Capital Funds, Fiscal year 1995-96; Major Non-State Government Revenue Sources; Uses of Fiscal Year 95-96 Funds; Capital Expenditures; Salaries, Wages, and Employee Headcounts; WSU Locations Statewide; and Extended Degree Program Student Locations.

Working with Washington Business and Industry
Washington State University exerts direct impact on Washington's economy through business counseling, research, technology transfer and more. Described below are key services that are delivered at more than 70 locations statewide.

Cooperative Extension Offices Statewide
Washington State University, as part of the nation's land-grant system of universities, established its Cooperative Extension program in 1914. Its mandate is to extend results of research and scientific expertise to the people of the state in order to improve the quality of their lives and business enterprises.

With participation of each county government and support from federal, state and private sources, Cooperative Extension brings non-credit, practical education to the citizens of every county. Current programs emphasize five key areas: sustaining agricultural and natural resources, food safety and health, capacity building in families and youth, environmental stewardship, and community and economic vitality.

Small Business Development Centers Statewide
Headquartered in WSU's College of Business and Economics, the Small Business Development Center has a network of 24 regional offices throughout the state. Supported by federal and state agencies, the SBDC provides business counseling, education and research services to small businesses. In 1996, 2,800 small businesses received assistance from SBDC specialists. SBDC counseling has had a positive effect on 1,318 jobs and on nearly $21.5 million of working capital to finance operations and investments in plant and equipment.

Extended Degree Program
WSU is a national leader in the delivery of distance education. The Extended Degree Program, which now offers bachelor's degrees in the fields of social science and business, was established in 1992. This is the first program in the state delivered entirely by distance education technologies. Enrollment in EDP reached 668 in the fall semester of 1997.

Students in the EDP program reside in nearly every county in the state and are also enrolled from throughout the country. The average age of these students is 37; nearly three-quarters are women; and, half receive financial aid. Through this statewide program, WSU provides important workforce training and development.

The program has two major benefits for Washington citizens. First, it allows place-bound students to complete a bachelor's degree without having to attend campus classes. Second, it allows individuals who are job-bound, or who cannot afford to give up a full-time job, to acquire a degree.

Washington Technology Center
WSU and the University of Washington are the lead academic institutions of the Washington Technology Center, established by the Legislature in 1983 to be a catalyst for technology development and commercialization.

WTC industry-university partnerships focus on advanced materials and manufacturing, biotechnology and biomedical instrumentation, computer systems and human interface technology, and microelectronics. There are more than 70 participating companies, half of which have fewer than 100 employees.

Spokane Intercollegiate Research and Technology Institute
SIRTI is a technology development and commercialization institute that builds sustainable economic growth through the transfer, application and commercialization of technology. WSU is a partner in the institute with other Spokane area colleges and universities. A $15 million, five-year grant from the federal government funds its programs. Fields of interest include energy technologies, digital technologies and emerging technologies.

WSU Research and Technology Park
The university's Research and Technology Park, located on 116 acres at the edge of the Pullman campus, is a cooperative project of WSU and the WSU Research Foundation. The park's mission is to provide a supportive environment for companies that have been formed to transfer intellectual property from WSU to the private sector; to increase the interaction between the university businesses, commercializing university research; and to improve the economic base of the area by supporting companies interested in locating in the Palouse region.

Research Centers and Institutes
Numerous research centers and institutes at Washington State University pursue basic and applied investigations that benefit the state and nation. Principal among these is the Agricultural Research Center, which serves as an umbrella organization for the agricultural experiment work conducted in Pullman and at stations including Prosser, Puyallup and Wenatchee. Federal and state support provides funding for scientists to address issues specific to the agricultural industry.

Also receiving state and federal support is the International Marketing Program for Agricultural Commodities and Trade Center (IMPACT) whose mission is to identify new markets and market opportunities for Washington agricultural products.

Other key WSU research centers and institutes important to the economic and social development of the state include the Washington State Water Research Center, the Social and Economic Sciences Research Center, the Washington Center for the Design of Analog-Digital Integrated Circuits, the Center for Real Estate Research, the Center for Northwest Anthropology, the Washington Animal Disease Diagnostic Laboratory, the Laboratory for Atmospheric Research, the Wood Materials Engineering Laboratory, the Institute for Shock Physics, the Institute of Biological Chemistry, and the Washington State Institute for Community Policing.

WSU's Economic Impact in Washington

Current Examples of the University at Work
As Washington's land-grant university, WSU has a clear mandate to develop needed educational programs, conduct research and extend research results to the public and industry to benefit the state's economy. Here is a brief selection of ongoing projects that are making a difference in all regions of the state.

WSU Prepares Scientists for Washington's Booming Biotech Industry
The Seattle area is the sixth largest biotechnology center in the country. Companies apply biotechnology primarily to medical products -- cancer treatments, tests for AIDS, even pregnancy tests -- but also to farming, forestry, fisheries and environmental cleanup, important industries for the region.

A booming industry nationally, biotech sales surpassed the $10 billion mark in 1996, up 16 percent over 1995. In the same year, US investment in biotech companies rose from $52 billion to $83 billion and the industry spent $7.9 billion in research and development.

In Washington state, the continued growth of biotechnology, one of the most research intensive industries in the world, faces two major challenges. These are an immediate shortage of buildings with suitable laboratory space and an adequate supply of appropriately trained scientists. While real estate developers address the first problem, Washington State University offers a solution to the second through its Biotechnology Training Program.

The goal of this cross-disciplinary training program is to produce scientists and engineers with sound interdisciplinary backgrounds and experience in both basic and applied research. Thirteen trainees have already graduated and 22 are currently enrolled. During their training, students rotate through research labs in many disciplines as they work toward degrees in biochemisty, biophysics, chemical engineering, genetics and cell biology, microbiology, plant physiology and veterinary medicine. All trainees must do an industrial internship, and about half have been completed at the state's biotechnology firms or research institutes.

Funded by one of the initial National Institutes of Health grants, the WSU training program is nine years old and has already placed graduates at a number of biotech firms. The program is a natural fit for WSU, which for decades has been a leader in protein chemistry research. A central strategy of modern biotechnology is to manipulate segments of DNA by recombinant techniques in order to alter or produce large quantities of proteins with specific medical or commercial value.

The program's 23 core faculty have a long history of productive collaborations on an array of projects funded by the Washington Technology Center, biotechnology firms and the Pacific Northwest National Laboratory in Richland. Approximately 25 percent of the 200 scientists produced in the past 10 years by the laboratories of the training faculty are currently employed in the biotech industry. A substantial percentage of these are at Washington companies including Immunex, NeoRx and Zymogenetics.

"Biotechnology is one of the major areas of business and employment growth in the state of Washington. It depends on highly trained personnel in ever-changing fields. This is just the sort of training we offer," said program director Gerald Hazelbauer.

WSU Helps Introduce a New Northwest Industry -- Poplar Farming for Wood Pulp
Fast-growing hybrid poplars, which can be farmed like a crop, may soon reduce the reliance of the Pacific Northwest's timber industry on native forests for wood fiber.

The poplars were developed jointly by Washington State University and the University of Washington. They can grow up to 15 feet a year, reaching heights of 70 to 100 feet in six years, with stem diameters approaching ten inches. They can be harvested in just six years for wood pulp.

Seven paper companies are currently cultivating nearly 100,000 acres of hybrid poplars in the Pacific Northwest. At current Northwest prices, 100,000 acres of hybrid poplars would yield pulp worth between $243 million and $270 million.

Poplar acreage is expected to increase significantly by the year 2000. In the next decade, these fast-growing hardwoods may be used in solid wood products such as plywood, molding and millwork, as well as pulp, according to Jon Johnson, WSU scientist. In addition, poplar wood can be used in engineered wood products like oriented strand board made of glued wood flakes that find use in home construction.

Veterinary College Prevents $50 Million in Losses in Washington
Each year, without the services of veterinary medicine, the U.S. would suffer an estimated $17.7 billion in direct losses and decreases in productivity related to the prevention, diagnosis, treatment and eradication of animal and zoonotic diseases. The WSU College of Veterinary Medicine, by very conservative estimates, annually prevents some $50 million of such losses in Washington alone.

This loss prevention is a direct result of work done by the Washington Animal Disease Diagnostic Laboratory, the Veterinary Teaching Hospital, the Field Disease Investigative Unit and the academic units that are actively researching diseases of food animals.

For example, mastitis, the inflammation and infection of dairy cow udders, results in more than $2 billion in losses to the U.S. dairy industry each year. Washington produces 3 percent of the nation's milk supply. In Washington, annual losses to the dairy industry from mastitis top $60 million.

Mastitis prevention research conducted in the WSU College of Veterinary Medicine is estimated to prevent some $20 million in additional losses to the industry. As the compliance with prevention methods spreads through Washington's dairy industry, projections are that an additional $20 million can also be saved. Thus, a potential $80 million loss will be cut in half.

Veterinary education impacts the state's economy in yet another way. Veterinarians earn on average more than $35,000 additional income annually compared to recipients of bachelor's degrees. About 1,600 veterinarians live and work in Washington, and more than half of these are WSU alumni. This amounts to more than $28 million additional income in the Washington economy due to WSU veterinary alumni each year.

Food Scientists Work with Nalley's on Low Calorie Fats and Oils
Reducing fat is a major dietary goal for many consumers. Demand is increasing for foods and beverages naturally low in fat or prepared with low-calorie and calorie-free fat substitutes. Fat substitutes contribute fewer calories to foods without altering the flavor or mouth feel, viscosity or other sensory properties.

In cooperation with Nalley's Fine Foods of Tacoma, WSU food science and nutrition scientists are synthesizing fatty acids from surplus natural fats and oils, such as milk fat, tallow, lard and coconut oil, into glucose, sucrose and other sugars. The resulting saccharide fatty acid polyesters have functional properties similar to selected sources of fatty acids, yet are non-digestible, non-absorbable, non-caloric substitutes for fat or oil in formulated products. Saccharide polyester fat substitutes present many benefits and little risk to consumers. The fat substitutes are being successfully incorporated into Cheddar cheeses, pork sausages and dairy products. Chemical and sensory evaluations of the cheese and pork sausage suggest that fat substitutes exhibit potential marketability. Animal and clinical benefits studies found no adverse responses.

WSU Spokane Launches Two Programs to Benefit Biotech, Medical Industries
Biotechnology and medical technology companies represent one of the state's most rapidly growing economic sectors. WSU Spokane's Health Research and Education Center (HREC) is developing a stand-alone community research and science education facility at the Sacred Heart Medical Center Kingsport Building in Spokane. Serving researchers, educators, secondary students and the public from throughout eastern Washington, this facility will include two integrated units: a Biomedical Research Unit and WSU Spokane CityLab.

Biomedical Research Unit
This laboratory and office space will house ten clinical investigators and their support staff. Centralizing available laboratory facilities near the Spokane clinical community will significantly enhance participation of clinical investigators in research activities and strengthen collaborations with basic research scientists from local and regional institutions of higher education. These research activities will generate revenue for the Spokane region and establish the creative environment from which biotechnology ideas and companies can be developed.

A significant number of biotech companies develop marketable products and processes from ideas generated from basic and clinical research projects. These emerging companies generate jobs, research and development revenue and eventual sales revenue for the Spokane area. An example is Advanced Reproduction Technologies, Inc., a Spokane-based company founded by two researchers from WSU. This firm develops specialized products for the fertility industry. Since its inception in l994, this firm has secured more than $400,000 in private and federal funding and recently has licensed its product line to a regional company for commercialization.

WSU Spokane CityLab
WSU Spokane CityLab is a laboratory-based science teaching center offering programs to high school teachers and students to effectively increase students' science literacy and critical-thinking skills. The unit is a satellite extension of a highly successful program currently in its sixth year at Boston University School of Medicine.

CityLab will train high school teachers from urban and rural schools to do inquiry-based teaching consistent with the National Research Council's National Science Standards. It will train teachers in the latest laboratory techniques, especially in biotechnology, and expose them to research being conducted in Spokane. The teachers in turn will help their students learn answers to complex questions through discovery.

Trained teachers will bring their students to CityLab for all-day field trips, providing hands-on laboratory experiences in biotechnology applications and problem-solving experiences. The center will be a comprehensive center for training secondary and community college teachers, for hands-on student training, for post-secondary training for technical/clinical laboratory jobs, for public forums to discuss benefits and concerns related to biotechnology applications, and for specialized biotechnology workshops and programs.

WSU Weather Network Aids Central Washington Orchard Owners
Timing is a critical factor in orchard management. Knowledge of current weather conditions helps fruit growers make critical management decisions about frost protection and pest control.

In 1988, WSU Cooperative Extension launched the Public Agriculture Weather System or PAWS to address this need. It was the first true real-time network of weather stations in the nation. For the cost of a subscription, growers can access weather data via the Internet or by computer modem that is up-dated every 15 minutes. PAWS has grown to include 58 collection stations, most located in central Washington.

Tim Smith, WSU Cooperative Extension agent in the Wenatchee area, uses the data to monitor conditions across the orchard region. He runs the data through computerized insect and disease models and posts summaries on the PAWS web site as well as his own. The summaries also go into reports faxed to field workers for packinghouses, chemical dealers and other consultants who work with growers. The system has 161 subscribers.

This past spring, Smith helped pear producers fend off a fire blight infestation by posting predictions for conditions favorable for the blight several days before it rained. Fire blight is a bacterial disease that occurs when abnormally warm weather during bloom is followed by rain or heavy dew. The only way to avoid an infection is to spray just before or after it rains.

What do growers think of PAWS? "Within minutes, you can decide to roll the sprayers or not," one said. "Big bucks hang on the decision. Saving an unnecessary spray is good for the bottom line, both at the bank and in the environment, but saving a crop or trees from damage by making a critical spraying is just as important," says another.

WSU's Salishan Learning Center in Tacoma Helps Workers and Families
Washington ranks 49th in the nation in per capita enrollment in four-year degree programs. As part of its initiative to increase access to credit and non-credit higher education, WSU has established eight learning centers across the state through Cooperative Extension. The Salishan Learning Center serves time- and place-bound residents of East Tacoma and the Salishan Public Housing Development, a largely low-income, urban area.

In 1997 the center collaborated with partners to offer education and training to students in computer skills, job readiness and retraining, life-long learning, and professional development in support of community and human services providers. Approximately 3,000 students took advantage of the center's resources in 1997. Thirty women completed a 100-hour computer skills curriculum. A third have found jobs requiring basic computer skills. More than 20 transfer students are taking at least six credits at WSU through the Extended Degree Program. Referrals to Tacoma Community College have resulted in 12 new students beginning studies leading to an Associate of Arts degree. Twenty-four adults learn basic clothing and textiles skills, and half are using their new skills to make or alter clothes for their families.

Business LINKS at WSU Tri-Cities Has Helped Citizens Start 127 Companies
The prospect of starting her own business was enticing, but so was an offer to join a team of professionals launching a new medical technologies company in the Tri-Cities. Faced with this mid-life career decision, Barbara Fecht turned to WSU Tri-Cities Business LINKS.

This innovative program began three years ago as a catalyst to diversify the Tri-Cities economy and help displaced Hanford workers start their own businesses. Today clients range from workers who have voluntarily left Hanford to local entrepreneurs. Business LINKS has helped start 127 new businesses and has created 240 jobs in the Columbia Basin.

Through Business LINKS training, entrepreneurs explore the feasibility of their business idea and develop marketing and business plans. Counselors help business owners determine their company's strengths and weaknesses and develop action plans to increase profitability.

Fecht is one of hundreds of local residents who have taken advantage of the training, counseling and support services the WSU-based program offers to new and existing businesses. The services helped her explore both career options. In the end, she joined Advanced Diagnostics, Inc., as the director of applications research. The classes gave her the ability to assess the business opportunity and decide what was right for her, she says.

Support for Business LINKS has come from federal displaced worker grants, a $470,000 gift from the Westinghouse Electric Corporation and service fees.

Business LINKS is located in the Consolidated Information Center on the WSU Tri-Cities campus in Richland.

New Work at WSU's Wood Lab to Transform the Nation's Ports
The Wood Materials Engineering Laboratory in the College of Engineering and Architecture has a 50-year history of significant contributions to the forest products industry.

The wood materials program and lab are unique in the United States. They provide the engineering focus needed for research on combining wood with synthetic materials and used/recycled materials, and on the optimal use of materials in structural systems.

The WMEL has advanced more than 25 patents and inventions in such areas as particleboard blending, nondestructive testing equipment for the industry and veneer and composite materials production. Examples of direct economic benefit include the development of laminated veneer lumber and the construction of plants using these new technologies. Sources of green and waste wood in the Grays Harbor and the Puget Sound areas provide the raw material for new wood composite plants.

Now, WMEL is the lead agency for a group of experts from universities, government agencies and industries teaming up for an all-out attack on the marine elements destroying the nation's piers and ports. With a three-year, $7.5 million grant from the Office of Naval Research, the team will develop a new hybrid wood-based material impervious to marine borers, water logging and many other destructive elements of the marine environment.

The engineered pier components made of thermoplastic wood may eliminate the need for creosote- or pesticide-treated timber. They will be used for a new generation of concrete pier fendering systems to replace decaying wood in the majority of the U.S. Navy's waterfront facilities. As many as 8,000 tons of timber could be removed each year as the Navy replaces timbers that have been treated with creosote, pesticides, preservatives or other environmentally compromising substances. As much as $1 billion in structural deficiencies affect current Navy shore facilities, most of which were established in the 1940s.

Animal Disease Diagnostic Lab Aids Food Animal Industries
The agricultural animal industry of the state and region relies heavy on the services of WSU's College of Veterinary Medicine and its Washington Animal Disease Diagnostic Laboratory.

WADDL received 12,395 case accessions in 1996 with 55 percent of them coming from individuals or firms inside the state. Services provided out-of-state generate $500,000 in revenues each year.

The Avian Health Laboratory in Puyallup, administered by WADDL, serves the state's poultry industry, receiving more than 1,300 requests annually and performing more than 12,000 laboratory tests.

The aquaculture industry, valued at $55.9 million in 1994, also is bolstered by WADDL's aquatic animal health certification program, one of a kind in the nation, which makes possible the export of aquaculture products to foreign markets.

WSU Vancouver Engineering Initiatives Geared to Region's Industries
The presence of WSU in Southwest Washington has affected the way businesses view the region's potential as a source of well-trained employees and cutting-edge research. It has also helped businesses decide where to locate. In 1996, the Taiwan Semiconductor Manufacturing Corporation, a high-tech manufacturer of semiconductors, announced that the presence of WSU Vancouver was integral to its decision to locate a $1.2 billion Wafer Tech manufacturing plant in the region. The facility will open in late 1998 and employ more than 800 workers. WSU Vancouver is making strides to provide the region's many manufacturers with the engineers of the 21st century.

A first-of-its-kind bachelor's degree in manufacturing engineering will emphasize the advanced processes and technologies valuable to the region's many manufacturers. It is a particularly pertinent degree to offer in the region, as the region's rapidly growing semiconductor industry plans to hire nearly 7,000 more engineers and plant workers by the year 2000. In response to this need, WSU Vancouver developed the degree program with WSU's College of Engineering and a number of local industries.

Another initiative that will benefit the region's industries lies in a proposed Center for Excellence in Semiconductor Research. The center will bring together the university, semiconductor manufacturers and their equipment suppliers in a cooperative venture to educate engineers for the regional industry and to enable industry and academia to perform collaborative research and development on semiconductor manufacturing technology.

Such local industries as SEH America, Linear Technologies, Sharp Microelectronics, Siemens and Wafer Tech are assisting in the center's development and will benefit from its cutting-edge engineers and research.

Holistic Resource Management Benefits Ranchers and Environment
Agriculture dominates the landscape in southeast Washington and livestock production accounts for a large portion of agriculture's land use. As a result, ranchers are stewards of a complex natural resource system that affects not only agriculture, but also the environment and the region's quality of life.

Several educational programs were delivered to livestock producers in 1997 to help them implement innovative ideas in resource management. Included were regular meetings of a local holistic resource management support group and four seminars on principles of farm and ranch management. In addition, six ranch tours were held to teach grazing management, water quality, and resource stewardship and to promote a holistic approach to farm and ranch management.

Based on what they learned, 43 farmers and ranchers changed management practices. These changes resulted in a 15 percent improvement in pasture production for grazing and a 10 percent improvement in water cycling on pasture and rangeland by reducing runoff.

WSU Research Benefits Westside Agriculture, Water Quality
More than 50,000 acres of farmland in Washington's Skagit Valley are used for row crop vegetable production. When crops are harvested, nitrogen remains in the soil due to breakdown of crop residue, unused nitrogen fertilizer and breakdown of soil organic matter. When winter rains come, soil nitrate may run off into surface water, leach to groundwater or be released to the atmosphere.

Since 1991, a team of WSU scientists and extension educators in northwest Washington has been testing fall cover crops to determine if such crops can reduce the loss of nitrogen from the production system. A 15-member focus group representing diverse interests was assembled to study the topic and work toward solutions.

Researchers have found that fall cover crops planted in early September can recover up to 150 pounds of nitrogen per acre by December. This nitrogen can be returned to the production system when cover crops are incorporated into the soil in the spring.

Through the focus group process, individuals having potentially opposing ideas identified issues and reached consensus on solutions. They identified three areas of needed research and education: use of fall-planted cover crops; coordinated, efficient use of dairy and poultry manure; and modification of fertilizer practices.

Growers have tested three cover crop species while an additional 19 species were tested at the WSU Mount Vernon Research and Extension Unit. Both studies showed the importance of early planting. Cover crops planted on September 1 recovered four times more nitrogen than cover crops planted on October 1.

Growers who did not use fall-planted cover crops before participating in the on-farm study now plant several hundred acres of cover crops each fall and report noticeable benefit in soil quality and efficiency of potato harvest.

WSU Continues Research for State's Grape Industry
WSU researchers and extension agents play key roles in development of grape production and wineries in Washington. Today, WSU aids the industry through work on grape phylloxera, a grape root pest that can cause widespread economic damage.

According to recent data, the cost of the grape phylloxera infestation in California has exceeded $1 billion. The discovery of grape phylloxera in Washington, the nation's second leading grape producing state, has caused great concern.

John Watson, Jr., WSU's Benton County extension agent, has launched a program to make the industry aware of the threat and to find measures for its control. During the work's first phase, infested areas have been identified and mapped. A bulletin on phylloxera has been published and distributed to the industry. Watson has surveyed the industry to determine other likely areas of infestation and has alerted growers to the threat's seriousness at meetings and in newsletters.

The second phase — determining the extent of infestation and mobility of the insect — is in progress. Aerial infrared photographs have been taken around known areas of infestation to help monitor insect spread. A rootstock task force is developing a control strategy. Resistant rootstocks have been identified and are being propagated. Trial plots will be planted in 1998.

Three vineyards where grape phylloxera have been found have been taken out of production, leaving only six known sites with the insect. Four are commercial Concord vineyards; two are backyard situations. Also, trapping and digging in vineyards surrounding positive sites have been negative. The insect's lack of mobility in Washington provides a control strategy. No new infestations were found in 1997.

WSU Research Team Develops New Export Product – Wagyu Cattle
The Japanese market has been gradually opening for imports of U.S. beef. However, because of high tariffs, returns to U.S. producers have been low. Because large premiums are paid in Japan for beef from Wagyu cattle, a Japanese breed, this breed is seen as a profitable export product.

While it has been argued that the Wagyu could thrive only under Japanese production conditions, a team of WSU scientists, statisticians, marketing specialists, animal nutritionists, beef specialists and others have built a successful herd of Wagyu cattle in Pullman from scratch.

They have demonstrated optimal techniques for breeding, feeding, fattening, slaughter and marketing of Wagyu cattle. The offspring of this project are now in many herds across the nation and are being crossbred successfully to improve the desired traits of U.S. cattle and beef. The research has given the U.S. cattle industry entry to a lucrative market niche in both Japan and upscale markets in the United States.

WSU Researchers Aid Washington's Famous Apples
The Food Quality Protection Act of 1996 will disproportionately restrict the use of broad-spectrum insecticides in apple orchards. Washington produces more than half of the nation's commercially grown apples. Fifty to 60 percent of the insecticides applied to apples in the state are directed at controlling the codling moth.

WSU scientists have conducted research on mating disruption and have set up six demonstration orchards to compare mating disruption and conventional control techniques.

In just six years, Washington apple growers have enthusiastically adopted use of mating disruption to control the codling moth. Use of this single pest control strategy has climbed from 1,500 acres in 1990 to more than 32,000 acres in 1997, now covering about 20 percent of the apples grown in the state. The goal is to reduce the use of broad-spectrum pesticides in apples by 75 percent in five years.

WSU Explores the Potential for Perennial Wheat Production in Eastern Washington
Agriculture is the number one source of non-point water quality degradation. If successful, perennial wheat should offer the unique combination of increased profits to farmers, a reduction in Federal subsidies and an improvement in environmental conditions. Concern about soil loss, especially from fragile lands in eastern Washington, has spurred new interest in an old idea: perennial wheat that regrows each spring as opposed to annual wheat which must be replanted each year.

Wheat breeders at WSU investigated perennials 60 years ago, and a few farmers in the state even grew them as late as the 1960s. The drawback has always been yields. Perennials produce only about half as much grain as traditional winter wheat. Even so, growers never lost interest. Recently, as a byproduct of crosses to move disease resistance traits from a perennial wheat grass to an annual wheat, scientists at WSU came up with perennial wheat that shows promise.

The best lines of perennial wheat have produced 70 % of the yields of annual fall wheat. At that level, they are more lucrative than the average Conservation Reserve Program payment Washington farmers have received. Factoring in reduced planting costs and the drastic reduction in soil erosion, perennials look like a valuable alternative. They also produce an abundance of straw, more than is needed to protect the soil from erosion. The surplus could be a raw product for production of paper and fiberboard, another concept that is receiving serious study.

"We have no fantasies of taking over the Pacific Northwest with perennial wheat," says Steve Jones, winter wheat breeder. "We see it as a powerful tool growers could use in certain situations. If it is successful, the payoff could be very great. Anything that we can do to reduce erosion and to keep the farmers in business is being investigated. We feel perennials will gain wide acceptance."

Jones believes about 2 million acres of erosion-prone land in the Pacific Northwest could be brought back into production safely. Currently the Federal government pays farmers an average of $50 an acre annually to not farm this vulnerable land. Non-point pollution resulting from eroded soil washing into streams would also be reduced.

Recent Evidence on Earnings and Employment of WSU Baccalaureate Graduates

The Benefits of Post-Secondary Education
Post-secondary education provides a range of benefits to individuals and society. These are:

• To preserve and transmit important social and cultural values
  

• To create and transmit knowledge through research and instruction
  

• To promote economic growth and development by creating human capital
  

This section focuses on the promotion of economic growth and development. Higher education promotes economic growth and development by providing individuals with skills and knowledge through formal and informal educational processes.

This investment in human capital shares many of the characteristics of other social and economic investments such as investment in technology or construction of roads and airports. First, there is an initial period of investment where costs are incurred by individuals, families and society as a person acquires knowledge and skills. This investment period is followed by entry of the educated individual into the labor market. The result is a lifetime of more stable employment and significantly enhanced earnings compared to the less skilled and educated.

How Education Increases Earnings
Earnings are higher first due to improved employment experience. The educated person gets a job sooner and has more stable employment in that job. Second, the educated person has more skills and knowledge to apply to the job situation. The individual becomes more productive, resulting in a higher wage rate. Third, the job is a better job, in the sense that there is greater opportunity for future skill acquisition and advancement. Such enhanced skill acquisition results in a steeply rising and long duration growth in lifetime earnings. These three effects are summarized over one's lifetime as enhanced earnings, which are the return on the educational investment.

Education as an Investment
Like any investment in physical capital and technology, the stream of benefits can be related to the stream of costs, with the relation summarized succinctly in the concept of the return on investment (ROI). The greater the ROI, the greater the contribution of the human capital investment to economic growth and development.

Recent Experience on Earnings of WSU Baccalaureate Graduates
The most comprehensive data on the earnings of WSU baccalaureate graduates comes from Lamoreaux (1996). Using quarterly data on earnings taken from official records of the Department of Employment Security, State of Washington, Lamoreaux statistically estimates the lifetime earnings of the entire cohort of WSU baccalaureate graduates for the graduating classes of 1984-85, 1989-90 and 1991-92. The data apply to approximately 2,250 graduates per cohort and relate to the 60 percent of each cohort who have been employed fulltime in the State of Washington since their date of graduation.

(Note: Exhibits are available upon request. Please write to petura@wsu.edu.)

Exhibit 1 sets forth the estimates of projected lifetime earnings across six major educational groups:

• Humanities, Agriculture and Home Economics, and Other
  
• Business and Economics
  
• Natural Sciences
  
• Engineering and Architecture
  
• Education
  
• Social Sciences except Economics
  

Three types of students are considered, by gender:

• Native students—those who enter as freshmen and stay until their graduation
  
• Associate of Arts degree transfer students — those who transfer to WSU with a complete AA degree from a Washington or Oregon community college
  
• Transfer students from either a college, university or community college who enroll to finish their degree at WSU
  

Several findings stand out.

• Men uniformly earn more over their lifetime than women, regardless of major or method of matriculation.
  
• Native students earn slightly more than AA degree transfer students and those who transfer to WSU with no degree.
  
• The highest lifetime earnings accrue to students from the Engineering and Architecture curricula, regardless of gender or matriculation method.
  
• Lifetime earnings from the Business and Economic curricula rank second.
  
• Lifetime earnings from the Education curriculum rank last.
  

Net lifetime earnings range from a high of $3,515,000 (based on the 1996 price level) for native male graduates of Engineering and Architecture to a low of $1,464,000 for female transfer students entering WSU with no degree and majoring in Education. It is important to note that these earnings estimates are adjusted for academic achievement (cumulative grade point average) and a variety of other socio-demographic characteristics such as national origin, state of residence and ethnic origin. Thus, the estimates are net estimates of the effect of the particular educational major.

Other, more limited data, exist on recent graduates from the College of Business and Economics (CBE). The CBE surveyed the entire graduating classes of 1992 and 1994 — approximately 1,300 individuals. Data on the estimated annual earnings of these graduates, adjusted for gender, ethnic origin, year of graduation and cumulative grade point average are shown in Exhibit 2.

In general, these estimates of average annual earnings are quite high. Baccalaureate graduates with an option in Information Systems earn an average of $39,655 per year. This occupational area, of course, is a major growth area in the state and in the national and international economy. The introduction of a wide variety of business information software into the management of business and the operation of manufacturing and production constitutes nothing less than a second Industrial Revolution. WSU is responding to this need.

The other degree options in the CBE program also do well by their graduates. Law and Public Policy graduates are earning $38,580 per year. Accounting graduates, who work with large amounts of business information software, earn $37,655 per year. Hotel and Restaurant Administration graduates, who work in a growing, but relatively low wage industry sector, earn $31,570 per year. The lowest earnings accrue to those with a Real Estate option. However, this estimate is based on a small sample size and is less statistically reliable.

The Rate of Return on Investment in a WSU Baccalaureate Degree
The above estimates of lifetime and annual earnings, while very dramatic, present an incomplete picture of the true impact of a college degree from Washington State University. The picture is incomplete because the earnings must be related to the costs incurred to achieve those earnings. Both the stream of costs over time and the stream of earnings over time must be expressed in terms of the present value of these dollars — in this case, the present value as of 1996. The return on investment, or ROI, summarizes these two streams and makes a comparison among degree majors possible. Exhibit 3 sets forth the ROI by gender and method of matriculation for each of six broad curriculum areas. Finally, note that the ROI are expressed as the investment gain of college compared to a high school education only.

First, these returns on investment are quite high. The highest is for female native students in Business and Economics — 15.16 percent — an extraordinarily high rate compared to yields on all other investments in our economy (see Exhibit 4.). This ROI implies a very high contribution of post-secondary education gained to economic growth and development in the State of Washington. For, this ROI represents the advantage to women of achieving a BA degree over and above completing high school only. It is true in general, that for graduates from both the College of Engineering and Architecture and from the College of Business and Economics, the ROI contributes as much to economic growth and development as does conventional investment in physical plant and equipment across the state and nation.

In fairness, some of the ROIs are relatively low. The lowest ROI is for the BA graduates from the College of Education. However, even these ROI are comparable to Municipal Bond Yields for State of Washington Aa Bonds. So, from the standpoint of the citizen and taxpayer in the State of Washington, investing the tax dollar in higher education (both community college and four-year college and university) is as good an investment, and very often much better, than investing in State Municipal Bonds.

What this boils down to is that investment in post-secondary education is highly desirable for the citizens of this State. Such investment contributes dramatically to the economic growth and development of the State.

ROI for Different Matriculation Strategies
Considerable debate exists in the State of Washington concerning the value of different strategies to achieve the BA degree. These data suggest that the native student is more successful in terms of his or her educational investment than the AA transfer student. However, the ROIs are very close to each other. Second, if a student cannot afford to be a native student, and must earn his or her AA degree close to home before matriculation at WSU, such a student is still much better off than if he or she had stopped their education at the high school level. In short, both strategies to achieve a BA degree are financially viable and yield generally high returns. The AA/BA mix benefit the job-bound and relatively low income student in particular.

ROI by Gender
Finally, note that the ROI for women are uniformly higher than the ROI for men, even though the expected lifetime earnings of women for the BA degree are lower than for men. Remember that the comparisons being made are between stopping one's education with just a high school diploma versus going on and earning a BA degree. This comparison highlights the fact that earnings for women with just a high school diploma are much lower than earnings for men with a high school diploma. Thus, a college degree turns out to be a better investment (in ROI terms) for women than for men. Put another way, women who have a BA degree contribute more to the economic development of the State than do women or men who stop their education with only a high school diploma.

How General Are These Findings?
It is a fair question to ask how general, that is, how reliable, are the above estimated ROI. How do they compare to recent estimates of ROI for post-secondary education across the United States?

It turns out that these estimates are quite comparable, and, in this sense, relatively reliable. A recent study by Cohen and Addison (1997) summarizes the statistical record for the United States and a variety of other nations across the world.

Several sets of estimates of ROI to post-secondary education exist for the United States. These estimates fall in a range of from 8.4 percent to 17.9 percent (Cohn and Addison, 1997, Table 2). This range encompasses the estimates of ROI for the WSU BA degree presented in Exhibit 2. Estimates for men and women, taken separately, fall in the range of 12.2 to 12.9 percent (Cohn and Addison, 1997, Table 3). In summary, the above estimates of the ROI for WSU BA graduates are reliable in the sense that they reflect the size and range of estimates found in other independent studies of the ROI to investment in post-secondary education in the United States.

Evidence for Graduate Education
We do not have evidence on the ROI for graduate education at WSU. However, we should note that across the United States the ROI for the Masters level of training is 10.7 percent to 12.7 percent, based on a summary analysis of recent nationwide studies.³

Summary
Post-secondary education, particularly the BA degree, is a major contributor to economic growth and development in the State of Washington. It reduces poverty. It improves the economic well-being of women. It reduces unemployment. It represents a major contribution to economic growth. Investment in this form of human capital is likely as effective a tool to foster economic growth and development as is the investment in physical plant and technology.

Non-Money and External Benefits to Society Due to an Educated Populace and Work Force
The evidence presented above on the return on investment in human capital at the post-secondary level is not wholly sufficient to guide social policy in education. The reason is that education, including higher education, creates a wide variety of personal, familial and social benefits that are not captured in the earnings measures that make up the calculation of the return on human capital investment. To fully understand the total social impact of education, including that provided by Washington State University, all of the effects of education must be accounted for.

Direct and Indirect Economic Impacts
Of course, the impacts easiest to measure are the monetary impacts of education on earnings due to increased productivity on the jobⁱ. These benefits are summarized by the discussion on return on investment to education above. Concomitant with these benefits are those that accrue to more effective job search, whether this search be among occupations, firms or locations. Social resources are allocated better; earnings will rise; and economic costs will fall.

As a final economic effect of post-secondary education in particular, there is evidence that education increases the rate of technological advance through enhanced research and development.

Individual and Family Well-Being
A wide range of benefits accrue to individuals and families that are not captured by labor market earnings. There is improved productivity and increase in the quality of the wide range of tasks that are necessary to operate a household. There is also an increase in the effectiveness of spousal earning power due to education. Increased education results in improved consumer choice efficiency — persons make wiser and more considered purchases. They have more effective buying and consumption habits. Finally, education is directly related with increased income savings rates.

Child quality improves along several dimensions due to the increased education of a parent. A child's health and cognitive development improve. There is a direct relationship between the education of parents and grandparents and the educational level of children and grandchildren. Finally, an individual's personal health improves as does the health of the family.

As a last broad category of benefits, there is evidence that education increases social cohesion — indeed, that is one of its purposes. In addition, social altruism increases. More educated individuals donate more time and money to activities to aid others in society outside of their immediate families. Finally, there is evidence that increased education leads to a reduction in crime.
______________
Notes:

¹⁾This major is characterized by small sample size.

²⁾ This study focuses on the earnings of WSU baccalaureate graduates. The cost of education at WSU is not discussed. However, a full discussion of the costs underlying the ROI discussion below is contained in David P. Lamoreaux. An Analysis of the Economic Returns to Higher Education in the State of Washington. Department of Economics. College of Business and Economics. Washington State University. Pullman, Washington. August 1996. Elchanan Cohn and John T. Addison. The Economic Returns to Lifelong Learning. Economics Working Paper Series B-97-04. Division of Research. College of Business Administration. The University of South Carolina. Columbia, SC. Revised September 1997.

³⁾Cohn and Addison, 1997.

ⁱ⁾Source: Robert H. Haveman and Barbara L. Wolfe. "Schooling and Economic Well-Being: The Role of Nonmarket Effects". The Journal of Human Resources. Vol. XIX. No. 3. 1984.