Research Methodology

Introduction

As described by the U.S. Department of Commerce, an organization’s economic impact on a region results from a complex combination of inter‐industry relationships involving both corporate and consumer spending. Contributing to the total economic impact are the salaries that the organization pays to its employees and the dollars that it spends to purchase goods and services from local vendors. For academic institutions such as Boston University, the economic impact also includes expenditures made by its students and their out‐of‐state visitors.

As described below, an organization’s direct expenditures generate two types of additional indirect spending: Corporate Spending by the vendors who supply (sell) goods and services to the organization, and Consumer Spending by the organization’s own employees, and the employees of its suppliers. In turn, this spending also generates jobs and employment opportunities in the region.

This section describes the components of Boston University’s direct spending, how the expenditure data were collected, and how the expenditures were allocated by region. It also describes the U.S. Department of Commerce’s Corporate and Consumer Spending Model, and how the Department’s “regional input‐output multipliers” are used to compute both the indirect spending and the additional employment opportunities that result from an institution’s spending.

Direct Spending

The spending and employment data used in this report include the University’s subsidiary corporations, 660 Corporation, Hotel Commonwealth, and the employees hired by four management firms to provide the University’s food services (ARAMARK and SportServices) and parking services (Curbside Parking and Standard Parking). The 660 Corporation operates various retail stores such as Campus Convenience.

Direct spending is structured into the five major categories described below.

  1. Number of Employees and Employee Salaries
  2. Boston University’s employee and salary statistics are provided by BU Human Resources and are generated from the University’s Payroll System. Anyone who was employed in December of the fiscal year is included. The corresponding data for the subsidiary corporations and management firms (hereafter referred to as the “affiliated organizations’’) are provided by each organization. The University’s employee and salary statistics are computed by region, based on the home address of each employee. External professional, consulting, publishing, and lecture fees earned by faculty and staff are not included.

  3. Employee Benefits
    • FICA (Social Security and Medicare)
    • Pensions
    • Health and Dental Insurance
    • Tuition Remission
    • Workers’ Compensation
    • Unemployment Compensation
    • Life Insurance
    • Disability Insurance
    • Other (Accidental Death, Miscellaneous, Employee Counseling, Supplemental Death, Short Term Disability, Retirement Death Benefit, Supplemental Retirement Payments, and Bookstore Discounts).
  4. Total University expenditures for each employee benefit program are provided by BU’s General Accounting Office and by the affiliated organizations. These costs are allocated by region based on the employees’ home addresses. In accordance with the Department of Commerce’s Consumer Spending Model, employer‐provided benefits are treated as employee compensation. If employees had to pay the total cost of their benefits, their ability to purchase other goods and services would be reduced. The benefit programs included in this report are:

  5. Purchased Goods and Services
  6. University expenditures for goods and services are from reports produced from the Accounts Payable and General Ledger systems. The reports are divided into geographic regions based on vendor ZIP codes, and show the total dollars expensed in each object code to each vendor. Separate reports are provided for current funds (operating expenses) and for plant funds (capital expenditures). These reports show the Boston University Materials Codes (Commodity Codes) assigned by Purchasing Services to appropriate purchases. The University’s affiliated organizations provide total‐dollar expenditures by region and industry.

  7. Number of Students and Student Spending
  8. Institutional Research generates a report, based on official fall semester student enrollments, that shows the number of students by type of housing (dormitory‐style residences, University‐owned apartments, off‐campus housing) within each region. Region is determined from the students’ local addresses as recorded on the Registrar’s Personal Data File. When a student’s local address is not provided, the student’s record is reviewed and the student is allocated to the appropriate region. The number of students reported by type of housing and region include both college‐level and Boston University Academy students.

    Boston University publishes a table titled Estimated Academic and Living Expenses to illustrate the expenses that students are likely to incur depending on the type of housing that they select (dormitory‐style residences, University‐owned apartments, off‐campus housing). The estimated expenses for incidentals (books, transportation, and basic personal expense), room and board (for students who live off campus), and health insurance (for graduate and non‐degree students who live off campus) are applied to the above student counts to estimate what students typically spend for essential goods and services that are not provided by the University. A survey conducted in the spring of 1997 by Institutional Research showed that student spending on entertainment and other nonessential items, such as health clubs, pets, cable television, and private dance and music lessons averages $50 per student for each week that classes are offered (33 weeks during the academic year, 12 weeks during the summer). This amount is used to calculate discretionary spending by our students.

  9. Visitor Spending
  10. Spending by out‐of‐state family members and friends who visit Boston University students is estimated using data provided in a report by the Association of Independent Colleges and Universities in Massachusetts titled The Economic Impact of Massachusetts Independent Higher Education, 1989‐90 Academic Year. The spending data in that report (adjusted for inflation) are used to compute an average annual visitor expenditure per FTE student. Spending is allocated by region based on the students’ local addresses.

This report does not estimate spending by other out‐of‐state visitors who come to Boston University each year to attend Commencement, Alumni Weekend, professional and academic programs, athletic, cultural and social events, and class reunions. These visitors make considerable purchases, which include lodging, food, gasoline, parking, entertainment, and consumer goods.

Indirect Spending

The total economic impact of an organization is much greater than the sum of its direct expenditures. Using Boston University Materials Codes as a guide (see Purchased Goods and Services, Item 3 above), direct expenditures are aggregated into 60 industry codes as defined in the U.S. Department of Commerce Bureau of Economic Analysis Regional Input‐Output Modeling System. The total for each of the industry types is multiplied by regional input‐output multipliers in the model to obtain the level of indirect spending that is produced by the direct spending. The multipliers take into account specific inter‐industry relationships, and the impact which the University has on corporate and consumer spending patterns in the region.

Indirect corporate spending includes:

  1. the dollars which the University’s suppliers spend in Massachusetts (including payroll) to produce the goods and services which the University purchases from them;
  2. the dollars which our suppliers’ suppliers spend in Massachusetts (including payroll) to produce the goods and services that our suppliers purchase from them;
  3. the dollars which the suppliers of our suppliers’ suppliers spend in Massachusetts (including payroll) to produce the goods and services that our suppliers’ suppliers purchase from them;
  4. this process continues back to the acquisition of raw materials used for the production of goods and services ultimately acquired by the University.

Consumer spending consists of the dollars that are spent in Massachusetts by University employees and the employees of all of the suppliers described above.

The multipliers used in this report were obtained from the U.S. Department of Commerce for three geographic regions: Suffolk County (used for the City of Boston), the Boston Metropolitan Area (all of the cities and towns in Suffolk, Norfolk, Middlesex, Essex, and Plymouth counties), and the Commonwealth of Massachusetts. The multipliers for each region (and the resulting calculations of indirect spending and employment) are cumulative, i.e., the Boston Metropolitan Area includes the City of Boston, and the Commonwealth of Massachusetts includes the Boston Metropolitan Area. The more encompassing the region, the larger the multiplier because the spending of suppliers, and the suppliers of suppliers, and their suppliers, etc., has a cumulative effect.

Expenditures made outside of the region (to out‐of‐state employees and vendors) are considered to have no impact in Massachusetts and are excluded from this report.

Employment Impact

The U.S. Department of Commerce’s model also provides Employment Multipliers for each of the 60 aggregate industries. These multipliers estimate the number of jobs required to produce $1 million of each product. Employment Multipliers are applied to total direct expenditures in each industry to determine the total number of jobs created by Boston University’s spending in the region.

See a more detailed description in the U.S. Department of Commerce Bureau of Economic Analysis Regional Input‐Output Modeling System.