Economic Impact Study
Seven years ago, the University completed its first study of the economic impact of Penn on the community and region, studying FY1990 (Almanac, February 11, 1992). This year, Penn completed its second such study, focusing on FY1997. Penn continued to be the largest employer in the region with 28,169 employees, up from 19,982 in 1990. Penn paid $1.059 billion in wages in 1997, up from $536 million in 1990. Penn's growth rate over this period was five times that of the Philadelphia area. The following is adapted from a brochure that was distributed to the Trustees on October 22, 1999.
Penn and the Region: An Economic Impact Study
To the University Community:
It has been seven years since Penn quantified its economic impact in the region. It is timely, therefore, to analyze and document again the immense contribution made by Penn to the economy of the City of Philadelphia and the Commonwealth of Pennsylvania through its employment, spending, tax revenue generation, technology transfer, and neighborhood development activities.
This study puts all of Penn's contributions into perspective. It is based on indepth analysis of Penn's economic impact by PriceWaterhouseCoopers (PwC), an international accounting and consulting firm. In order to provide the most comprehensive view of Penn's economic impact, PwC analyzed direct spending as well as indirect spending, with the latter accounting for the secondary ripple or "multiplier" effect that each dollar of Penn spending has as it is re-spent by Penn employees and suppliers. The information presented here is taken largely from the fiscal year (FY) 1997, ending June 30, 1997, and updates a similar study completed for FY'90.
While many are familiar with the contributions Penn makes as one of the world's leading educational, research and health services institutions, we think it is eye-opening to take full measure of the large--and growing--economic impact that Penn generates:
- Penn generates $4.3 billion in direct and indirect combined economic activity in Pennsylvania, $1.5 billion in Philadelphia alone.
- Penn supports the equivalent of over 46,000 full-time jobs in the region.
- Penn's 9% average annual economic growth rate between FY'90 and FY'97 is five times that of Philadelphia and its surrounding counties.
- Penn's extensive research capability has helped to launch 30 new start-up ventures and over 200 licensing agreements with private companies.
- Penn completed over $255 million in new construction projects between FY'95 and FY'98, and plans to spend another $817 million on construction through FY'02.
- Penn purchased $42 million of goods and services from local West Philadelphia vendors in FY'98.
- Penn's community partnering and economic development initiatives have fueled the revitalization of University City's residential neighborhoods and commercial corridors.
Penn is a crucial player in the area's economic development, and the University has become a 21st century destination. Its reputation for academic excellence and its world-class museums and theaters draw tens of thousands of researchers, skilled workers, entrepreneurs and visitors to the region annually.
So long as Penn is able to secure appropriate space for future development, it will continue to be a dynamic knowledge resource providing world class educational, research, healthcare, and public services that generate economic vitality throughout the region.
--Judith Rodin, President
--John Fry, Executive Vice President
A Complex Modern Enterprise
A Broad Array of Educational Disciplines
Penn provides world-renowned educational opportunities to a diverse student population of approximately 22,000 through 12 undergraduate, graduate, and professional schools (Arts and Sciences, Engineering, Law, Medicine, Veterinary Medicine, the Wharton School, Nursing, Communication, Dental Medicine, Education, Fine Arts, and Social Work).
Commitment to Healthcare
Penn's Health System consistently rates as one of the nation's best. In FY'99, as in previous years, it was chosen as one of only 14 institutions for the "Best Hospitals Honor Roll" by U.S. News & World Report. Penn's exceptional health services are a key reason why Philadelphia is considered a leader in medical services. The Health System's integrated network of hospitals and clinics now includes the Hospital of the University of Pennsylvania, Pennsylvania Hospital, Presbyterian Medical Center, and Phoenixville Hospital. Collectively, the system provides nearly $50 million in uncompensated care annually.
Links to Research and Business
With the largest university research complex in the Mid-Atlantic region, and one of the 10 largest nationwide, Penn expended approximately $400 million on funded research in FY'97. Penn is a crucial link connecting the area's knowledge industries to the lifeline of basic science and applied research. One significant measure of Penn's growing collaboration with the private sector: a 100% increase in industry research funding from FY'92 to FY'97. The practical results of this research turn up as scientific breakthroughs that enhance healthcare and help to spawn start-up companies through Penn's Center for Technology Transfer and the University City Science Center, of which Penn is the largest shareholder.
Support for the Neighborhood and Culture
Penn provides a host of educational, cultural and economic resources to local neighborhoods and the region. Cultural attractions such as the Annenberg Center, Morris Arboretum, and the Museum of Archeology and Anthropology serve wide public audiences. At the grass roots level, Penn invests time and resources in job training and skills development for area residents, purchases goods and services from local and minority businesses, and develops underutilized properties to foster new businesses and create jobs.
Penn Stimulates the Area's Economy
With some 28,000 direct full- and part-time employees, Penn is one of the chief engines of regional growth. The University's focus on businesses of the future has helped it to grow by more than five times the rate of the Philadelphia area over a seven-year period.
Penn Creates Employment Opportunities
Job generation is probably the most important measure of an organization's economic impact on a community. Penn is the largest private employer in Philadelphia and the second largest in the Commonwealth. More than 46,000 Pennsylvania workers depend on Penn directly and indirectly for employment.
Direct & Indirect Expenditures
A Leading Engine of Economic Growth for the Region
Penn's "not-for-profit" status belies its striking contributions as an engine of growth for Commonwealth jobs and businesses. Penn draws much of the raw material to support that growth from out of state. If Penn were a country, it would have an enviable balance of payments surplus. While nearly half of Penn's funding originated outside of Pennsylvania in FY'97, nearly three quarters of direct spending remained in the Commonwealth.
Taking Full Measure
A full measure of Penn's economic impact includes the compounding of benefits that results when payments to Penn employees and suppliers are re-spent successively for additional purchases or salaries. This indirect economic ripple, which economists call the 11 multiplier effect," creates billions of dollars worth of additional economic activity throughout the Commonwealth
A Host of Additional Indirect Benefits
There are myriad indirect benefits that Penn brings to our region. For example, there are 65,000 Penn alumni living in the Commonwealth serving as knowledge workers, entrepreneurs and community leaders. The fruits of innovation in healthcare and in technology, including sophisticated new diagnostic tools and promising new therapies, flow to the public via research and development at Penn. Penn's ability to attract knowledge and capital to the region also helps incubate significant new businesses, notably the following:
- Penn's Center for Technology Transfer has helped to launch 30 new start-up ventures based on University research and has completed over 200 licensing agreements with private companies. Penn's exclusive licenses have generated more than $151 million in pre-commercial investment.
- As the largest shareholder in the University City Science Center, Penn has helped fuel 219 start-up companies, including 38 directly involving Penn faculty research. These companies had grown from 837 employees to 4,488 by FY'96.
West Philadelphia Initiatives
Penn's enhanced efforts to help develop surrounding neighborhoods include numerous public/private projects and targeted local procurement.
Penn is increasingly targeting retail developments that create ongoing employment, while providing skills training to prepare neighborhood residents to fill the positions. A prime example is Sansom Common, the single largest commercial investment in the history of West Philadelphia. It includes a hotel, restaurants, the Penn Bookstore, and many other retail and student service operations. The project has created some 400 new jobs, most of them filled by West and Southwest Philadelphia residents.
Penn also has emulated the success of Business Improvement Districts (BIDs) in promoting a cleaner, safer environment with the creation of The University City District (UCD). Following Penn's UCD launch, area crime dropped 21%, thanks in part to the introduction of 40 uniformed, unarmed "Safety Ambassadors" patrolling the streets of University City.
The University's Community Housing Program, meanwhile, encourages home ownership in West Philadelphia through redevelopment of underused property, employee mortgage assistance, and home improvement grants.
Penn also is increasing its partnerships with community institutions on such initiatives as the Market Street Corridor, where the Market Street Development Corporation is working with the city's Redevelopment Authority to find locations and funding for retail and light industrial tenants-particularly in the high-tech area--between 40th and 52nd streets.
- Penn's purchases from minority- and women-owned suppliers have jumped more than 60% over 4 years from $14 million in FY'93 to nearly $36 million in FY'97. Twenty-five percent of the total contracts on the new Biomedical Research Building II went to minority- and women-owned firms and 27% of employees working on the project were members of those groups.
- Comparable figures for the Sansom Common project are 44% and 35% to date. Penn's overall spending in West Philadelphia has more than quadrupled between FY'93 and FY'98.
- Penn's spending in West Philadelphia has soared 400% since FY'95. Refer to the chart below.
The Future
Construction
Penn's ongoing construction and renovation projects add another significant boost to the regional economy. Between FY'95 and FY'98, Penn completed over $255 million in new construction projects, and Penn expects to spend another $817 million through FY'02. Nearly all of the expenditures go to Pennsylvania businesses and workers.
Growing Towards the Future
Penn's mission goes far beyond education, healthcare, research, and public service. As one of the most valued economic resources in the Commonwealth--and the Philadelphia area in particular--Penn offers economic stability and stimulation, and the potential to help nurture the business powerhouses emerging in our backyard.
Penn's ongoing leadership as an engine of economic growth, employment, and neighborhood development will continue to depend on the availability of adequate space for expansion.
The opportunities for expansion are at hand. Penn's academic programs continue to be among the best available and are drawing increasing interest, with last year's freshman applications topping 17,000. The University's Health System, already a comprehensive network of regional service, will continue to evolve with today's ever-changing healthcare needs. Penn's increasing research capabilities, fueled by a projected 27% jump in federal research funding during FY'98-FY'03, will fortify the University's ability to create knowledge and transfer it to the marketplace.
Supporting all of this is a slate of construction projects--over $1 billion worth over the next 10 years--promising more jobs for the Commonwealth that will remain even after the cranes come down. Some of these new jobs will be entry-level, while others will call for highly educated researchers, medical specialists, and other professionals. All, however, will strengthen the local economy, as will the ongoing success the University expects from its neighborhood revitalization efforts.
Almanac, Vol. 46, No. 10, November 2, 1999