McMaster's Economic Impact on the Hamilton Community
June 9, 2004
Good afternoon. I am very pleased to be here today to talk to you about McMaster University's role in the Hamilton economy. The Chamber and the University are both critical elements of Hamilton's economic health and future, so I think that any opportunity to enhance the dialogue about our shared interest in the fortunes of our city is an opportunity we need to seize. Plus, I enjoy talking about McMaster. Give me an audience, a microphone and a McMaster topic and I could talk for hours. ... Of course, this afternoon I will limit my remarks to ... let's say ninety minutes. ...
All right, let's call it twenty minutes. But let me assure you that when it comes to McMaster's role in the local community, whether it is social, cultural, health-related, or, in this case, economic, I have no shortage of material.
As business people, you are perhaps the truest barometers of our city's economic state, so I probably do not need to convince you of McMaster's important role in our local economy. I am, however, an economist by training, so I look forward to putting some hard numbers to things you may already suspect or intuit.
I am also an historical economist, which means that in addition to presenting numbers, I enjoy telling stories that get at the less quantifiable aspects of our economic context, so I will do a bit of storytelling as well. In fact, that's where I will begin.
McMaster University arrived in Hamilton in 1930, coming from the city of its founding, Toronto. Hamiltonians campaigned actively to bring the University here. They raised money, set aside land and mobilized the human capital necessary to build a university, both in the physical sense, but also in the academic and social senses. It was a great and visionary investment on the part of Hamilton's civic leaders of the day.
McMaster's presence began paying immediate dividends to the city and vice versa. Though Hamilton was and perhaps always will be predominantly a steel town, it became then, a university town.
Hamilton, of course, was a great fit for McMaster. Much like the University, the city is big enough to be vibrant without being overwhelming. McMaster found its place comfortably in that environment. The city supported McMaster with fundraising campaigns and students, staff and faculty, and McMaster relied on civic services and experience to build its community within a community.
But all this happened, in a way, by accident. Hamilton and McMaster were like two parts of the same ecosystem - we sustained each other without ever getting together and acknowledging the depth and power of our symbiotic partnership. We knew we were good for each other, but perhaps neither wanted to acknowledge how much we needed each other.
Over the last decade or so, that has changed.
McMaster, for its part, has spent a great deal of time defining - or rather, refining - our vision and mission. In fact, the final sentence of our mission statement is now, and I quote, "We serve the social, cultural and economic needs of our community and our society."
The question for today is whether McMaster is achieving that mission statement, and in particular, the economic part. Let's find out by starting with some facts about McMaster University that will be the foundation for the more economic statistics I will present to you soon.
Since moving to Hamilton in 1930, McMaster has produced over 100,000 alumni who live in almost 130 different countries. McMaster is Hamilton's sixth largest employer with approximately 3,500 full-time equivalent academic and support staff. We have six partner hospitals in the city, each of which, of course, could provide its own powerful economic impact numbers.
McMaster has a full-time student body, including undergraduate and graduate students, of almost 19,000 and a part-time and summer session contingent that pushes our total student population well over 27,000. The University generates over 17,000 room nights from visitors to campus for summer conferences alone. Our students, staff and faculty buy the majority of their goods and services locally and our campus is growing, literally, as I speak. Right now we are in the middle of a construction boom during which we will spend over a quarter of billion dollars just on the new buildings that have recently opened or are currently in development.
With these numbers, there is no disputing that McMaster contributes to the local economy, but we were interested in knowing more precisely and comprehensively what that contribution is. So, in January of this year, PriceWaterhouseCoopers presented our Regional Economic Impact Analysis Final Report.
Before I talk about some of the highlights of the report, I offer one small caveat. The study worked with data from 2001. Though the University provided up-to-date data, other statistical elements of the study were only available for 2001, so the study is a snap-shot of that year.
Here's what we learned about McMaster's impact on the community in dollars and cents.
In 2001, McMaster's annual operating expenditures were over $477 million. Those expenditures created $670 million of provincial economic activity, and $455 million of economic activity in Hamilton. McMaster was responsible for creating 14,500 person-years of employment province-wide, with 11,600 person-years here in Hamilton. Our annual operations generated government revenues in excess of $201 million, with almost $139 million of that accruing from within the Hamilton economy.
By way of update, McMaster's forecast operating expenditures for 2004-2005 will be approximately $640 million, so that some of the economic impacts can be increased by 30% in order to estimate current-year impacts.
I mentioned a portion of our construction plans a moment ago, but the total value of current and planned capital projects is almost a third of a billion dollars. The comprehensive economic impact of completing these projects will be powerful.
The total impact on Gross Provincial Product will be approximately $396 million, with $234 million of that economic activity within the City of Hamilton. That economic activity will generate 5,400 person-years of employment province-wide, with almost 2,800 of these person-years realized in our city. Our governments, locally, provincially and federally, will garner revenues from this construction activity in excess of $133 million, with almost $84 million accruing from within the Hamilton regional economy.
Those numbers point to McMaster being a real economic engine, not just locally, but provincially. That's before we even pause to consider the economic impact of the people associated with the University, primarily our students.
Almost two-thirds of our students come from outside the immediate Hamilton region. These students also attract additional visitors. Conservative estimates suggest that these students and their visiting friends and family spend approximately $101 million in our community annually. That, in turn, creates almost 2,100 person-years of employment and total government revenues amounting to over $26 million.
I hope you're still with me after all those digits and dollars. Don't worry, the numbers section is almost over. Let me finish, however, on government revenues.
Using the province-wide economic activity stimulated by McMaster University as our base, the University generates almost $120 million in federal government revenues, $70 million for the Province of Ontario and $12 million for various local governments. If we look only at our own community, the Government of Canada receives $86 million, the Province of Ontario $46.5 million and the City of Hamilton $6.5 million. I would like to see our City receive a greater share, but that is another topic for another day.
All these numbers describe and quantify the university-as-economic-engine. But as powerful as the statistics are, they don't even scratch the surface of the most important aspect of McMaster's economic impact.
A significant part of the study deals with the impact of formal and informal knowledge transfer: the diffusion of knowledge through the employment of graduates adds value to the operations of employing firms, but it is very difficult to estimate and to attribute them back to the University; collaborative research ventures, including sponsored research chairs and contract research, also add value to business and industry partners, and the estimates in the report are essentially attributing a pro-rata share to McMaster of a national estimate; technology transfer through formal licenses of intellectual property and spin-off firm formation are important potential contributions of McMaster to the Hamilton regional economy.
Adding all the impacts together, McMaster's total impact on provincial GDP ($670million in operating expenditures impacts plus $94 million in student/visitor expenditure impacts plus an estimated $525 million in technology and knowledge transfer impacts) is $1.289 billion. Capital project impacts and informal/unmeasurable knowledge transfer impacts are not included in this total, and would be in addition to the $1.289 billion estimate.
The numbers just describe the current state - or actually, the state as it was in 2001. What you really want to know about is the future.
To get there, however, I'm going to take a quick detour into some history ... remember, I'm an historical economist. Historically, the Hamilton region has been recognized as one of Canada's centres of heavy manufacturing. In particular, Hamilton has been Canada's steel and metals manufacturing capital for over a century. Over the last two or three decades however, Hamilton has undergone a transformation, sometimes painful, sometimes beneficial, but a transformation nonetheless.
With the emergence of free trade and the globalization of the economy, large-scale manufacturing, particularly in branch plants, diminished significantly in Canada, hitting Hamilton hard as a number of operations relocated to lower-cost regions or countries.
While steel and metals manufacturing remains an important economic activity in our city, the structure of the Hamilton economy has changed considerably since our industrial zenith. Since our city cannot rely on the single tent pole of heavy industry to prop up our economy, what does the future hold? I think the City of Hamilton has done a good job of predicting our direction with its recently-updated economic cluster strategy.
I also think it is no coincidence that every one of the City's identified clusters can be connected to McMaster University's strengths and strategic research priorities. Additionally, two-thirds of the original clusters - industrial manufacturing; agri-business; health and biotechnology; and information and communications technology - depend heavily on McMaster's research strengths.
These clusters are not randomly selected economic avenues. These are strategic areas, built on past success and critical foundation elements like proximity and access to a critical mass of research excellence, access to a highly skilled work force, and access to networks of leaders in their fields. McMaster's economic impact in the future will be measured significantly by its ability to stimulate and participate in the success of these clusters.
Here is where the University's impact will surpass and even defy mere numbers. Here is where the story takes over. I only have ninety minutes, so I will focus on two clusters in particular - biotechnology and manufacturing.
Let's start with the health and biotechnology cluster where McMaster and our partner research hospitals are clearly at the core. By building on our research strengths and leveraging our intellectual and capital investments made in the biomedical and healthcare systems, we are able to work in partnership with other jurisdictions to build a globally competitive biotechnology industry right here. We have some of the leading minds and facilities in the world already and our standing is about to surge even higher.
Why? I'll give you 105 million reasons. Michael DeGroote's historic gift to McMaster this past December takes our health research and biotechnology capabilities, not just at McMaster but throughout the Hamilton community, to the next level - to the highest level.
But McMaster is not just sitting back, counting its blessings. About two years ago, the University and the City established a steering committee to help develop Hamilton's biotechnology strategy. This strategy will be completed over the next few months. It will bring greater focus and cooperation to an important economic cluster at exactly the point when we are best-positioned not just to move forward, but to leap forward.
In the manufacturing sector, McMaster is positioned to capitalize on its worldwide reputation for research in advanced manufacturing. We are active participants with local industrial partners in pushing the envelope of manufacturing technology. In the process, not only are we creating new knowledge, but we are adding to the critical mass of talented people available in this field. We are creating a hub where people with expertise in manufacturing technology can come and find a community of brilliant minds - at the University and in industry - that feeds the research and speeds the progress.
For example, the McMaster Manufacturing Research Institute works closely with the automobile sector and provides autopart manufacturers with the resources to compete effectively. We are discovering ways of increasing productivity, developing new products, inventing new materials and doing it all in cooperation with partners like Dofasco, Stelco, Alcan and General Motors.
McMaster contributes in ways like these to all the clusters. In the clusters based on technology, research strength is the absolutely essential foundation of success and McMaster has a demonstrably strong research enterprise. In the last five years alone, McMaster has tripled its research income, from $70 million to nearly $200 million annually.
We continue to be recognized internationally for our research, as proven by the 2003 Academic Ranking of World Universities which places Mac in the top 100 universities in the world for academic and research performance - one of only four Canadian universities on the list. Another example is Research Infosource which ranked McMaster third in Canada by research intensity and second in the category of "Research University of the Year." Clearly, McMaster is a national and international leader in research. As our reputation grows, so does Hamilton's. As our research enterprise grows, so does the availability of state-of-the-art facilities. As our research enterprise succeeds, so do we attract the best and brightest researchers to our city.
So, I can roll out all these numbers - the statistics, the economic impact, the rankings, the influence on the economic clusters - but I still haven't told you the most important part of the story.
The most important part of the story is that McMaster's true impact on our community will never be measured in numbers and dollars. It is measured in people. It is measured in the ways McMaster provides people with the skills necessary for high-productivity jobs, access to better health care, and better recreation facilities, and more library resources, and one-act plays and writers-in-residence and works by Monet and Matisse.
Simply put, McMaster University enhances the lives of the people who live in our community and attracts some amazing people to join us here. In fact, just recently, Ayra Sharma, one of the world's leading experts on obesity, a physician with one of the greatest clinical and research minds in the world, came to Hamilton from Berlin. Why? Because of McMaster.
McMaster is also a keen participant in rolling up our sleeves and becoming part of the drive to make Hamilton's economic future as bright as possible. A good example of this is the Hamilton Civic Coalition which I co-chair with Don Pether of Dofasco. This group has a simple but ambitious goal - to make Hamilton one of Canada's top five cities in which to live and work.
We hope to achieve that by providing recommendations that will attract support and action. I have other McMaster people joining me in the Coalition and I look forward to being able to present our first report and showing you yet another way McMaster University is contributing to the economic future of our city.
In closing, let me ask you to imagine the unimaginable ... Imagine Hamilton without McMaster University. You would watch our brightest young people leave their city to attend university. Lincoln Alexander, Martin Short, and Nobel Prize winner Myron Scholes ... they would all be McGill graduates or Western graduates or University of Toronto graduates like me; or even worse perhaps they would never have been able to attend university at all!
Our community would never be enriched by the faculty, staff and students who have come to McMaster to make their marks, in many cases, on the world stage. Roberta Bondar would never have gone on to acclaim elsewhere, so too Nobel Prize winner Bert Brockhouse, and one of our most recent faculty recruits, Henry Giroux, named one of the top fifty modern thinkers on education. Michael Lee Chin would have made his entrepreneurial start with offices in Ottawa or Kingston instead of on streets like Fennell Avenue and Jackson Street. Our city would lose hundreds of millions of dollars and thousands of well-paid jobs. If I really had ninety minutes, I could go on.
I want to conclude, however, with the people. Look around this room. How many of you are McMaster alumni? How many of your friends, your family members, your clients, your employees are McMaster grads? Where would those people be without a university in Hamilton and where would they be if that university were not world-class? How would Hamilton make up for the absence of the contributions those people make to our social fabric, to our culture and yes, to our economy? There are McMaster people everywhere in Hamilton - students, alumni, staff, faculty - both current and past - making a difference ... making a big difference. Our mayor, our highest profile entrepreneur, even our football coach ... they're all McMaster people.
Hamilton has been a wonderful, accommodating and generous community for McMaster University to call home. The benefits McMaster has reaped from being here are almost immeasurable. We simply hope that we have contributed to our hometown in equal measure.
Thank you for your attention, and thank you for allowing McMaster to be an important part of our community.