Analysis of the Return on Investment and Economic Impact of Education

With and without social savings Earlier in this chapter, social benefits attributable to education (reduced crime, lower welfare, lower unemployment, and improved health) were defined as externalities that are incidental to the operations of MCC. Some would question the legitimacy of including

these benefits in the calculation of rates of return to education, arguing that only the tangible benefits (higher earnings) should be counted. Table 3.4 and Table 3.6 are inclusive of social benefits reported as attributable to MCC. Recognizing the other point of view, Table 3.7 shows rates of return for both the taxpayer and social perspectives exclusive of social benefits. As indicated, returns are still above threshold values (a benefit-cost ratio greater than 1.0 and a rate of return greater than 1.4%), confirming that taxpayers receive value from investing in MCC.

TABLE 3.7: Taxpayer and social perspectives with and without social savings

INCLUDING SOCIAL SAVINGS

EXCLUDING SOCIAL SAVINGS

CONCLUSION

TAXPAYER PERSPECTIVE Net present value

$334,365

$312,679

This section has shown that the education provided by MCC is an attractive investment to students with rates of return that exceed alternative investment opportunities. At the same time, the presence of the college expands the state economy and creates a wide range of positive social benefits that accrue to taxpayers and society in general within New York.

Benefit-cost ratio

4.9

4.7

Internal rate of return

14.8%

14.0%

Payback period (no. of years)

9.0

9.4

SOCIAL PERSPECTIVE Net present value

$3,943,756

$3,552,515

Benefit-cost ratio

13.9

12.6

Source: Emsi impact model.

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