Economic Geography of Eds and Meds

What's happening with institutions of higher education and medicine?
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What's happening with institutions of higher education and medicine?
Hamerschlag and Roberts Halls are two of the teaching facilities of Carnegie Mellon's College of Engineering. (PHOTO: MEWTU/WIKIMEDIA COMMONS)

Hamerschlag and Roberts Halls are two of the teaching facilities of Carnegie Mellon's College of Engineering. (PHOTO: MEWTU/WIKIMEDIA COMMONS)

Eds and meds are dying. That's bad news for Rust Belt cities such as Pittsburgh, where hospitals and universities support much of the regional job growth. Recently, Richard Florida walked a fine line between sounding the alarm and raising a significant caveat:

The reasons many cities turn to eds and meds for economic development are easy to understand. Both industries have been defined by substantial growth over the past few decades, and that looks set to continue. America’s aging population needs medical care, and the knowledge economy demands an increasingly skilled and educated workforce. Both are personal service industries that require face-to-face interaction. This, many have argued, makes them locationally “sticky” and less likely to uproot from cities, increasing their appeal to economies that have been battered by the outsourcing of manufacturing jobs.

But both of these assumptions, Chatterji explains, are problematic. Over the past few years, new technology has exposed both industries to greater competition nationally and globally, trends that will only increase in the future. (In education, for example, the rise of MOOCs increases the reach of large institutions while devaluing local degrees. In health care, Chatterji points to policies that companies like Walmart have recently implemented to send employees to bigger, more cost-effective health centers like the Cleveland Clinic rather than local hospitals).

These developments, he argues, are bringing increased competition to these once-insulated fields. The consequence is likely to be greater concentration of the education and medicine sectors in fewer cities and regions. Eds and meds seem set to follow in the clustering pattern seen in other industries, from high-tech to music to finance, even as economic activity and jobs continue to grow on the whole. Sooner rather than later, he notes, the United States and the world could see “the same dynamic of winners and losers observed in other industrial sectors, as top universities and hospitals become larger and absorb most of the increase in students and patients from across the nation.”

Emphasis added. Chatterji describes the possible economic divergence of eds and meds. That's neither a dying economy, nor a bubble. It is an ascendant economy, the upward part of a cycle.

Instead of face-to-face and "sticky" (non-tradable), eds and meds become part of the tradable sector. Generally, tradable for eds and meds means people from outside of the regional market buy the local services. Foreign-born student moves to Pittsburgh and attends Carnegie Mellon University. This institution of higher education is exporting, engaging in international trade. Pennsylvania is dying:

[The pool of high school graduates] peaked at 3.4 million in 2010 after uninterrupted growth spanning two decades, but as of this fall was down by an estimated 190,000 students. Though some improvement is forecast next year, numbers are not expected to fully recover until 2024, according to Colorado-based Western Interstate Commission on Higher Education.

Pennsylvania's total, which peaked at 150,000 in 2009-10, is expected to bottom out at 136,000 in 2019-20 before rebounding.

The effect on schools in this state has not been uniform, due to myriad factors including perceived prestige, location, financial aid offers and recruiting strategies, experts say.

For example, most of the 14 universities belonging to the State System of Higher Education lost students this fall, and a few have seen declines since 2010 approaching or exceeding 20 percent, among them Clarion, Edinboro and Cheyney universities.

Yet the University of Pittsburgh, whose $16,240 base yearly tuition is more than twice the State System's $6,622 rate, saw more main-campus undergraduates, while Penn State University enrollment is at an all-time high, despite declines at some of its locations.

Emphasis added. Welcome to the Talent Economy. The University of Pittsburgh can charge much more than other public institutions in the state. High school graduates stream into the urban campus from New Jersey since the shrinking city figured out how to deal with the same demographic decline now vexing the entire country. Eds and meds in Pittsburgh have long been tradable.