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Southern California's Hidden Industry

by Steven B. Sample
President, University of Southern California
December 10, 1993

An address to the Greater Los Angeles Area Chamber of Commerce Economic Development Luncheon.

Right now Southern California is in the glare of the media spotlight. We are depicted around the world as a region staggered by misfortune. The problems we face ? the natural disasters, the social turmoil and the economic restructuring ? are indeed formidable. But we should not lose hope, for these troubles are essentially transitory. By working together we can triumph over the daunting challenges we face, incorporate people of all backgrounds and races into the horizon of opportunity, and rebuild our community ? not as it once was, but as it should be.

I want to focus today on an enterprise that is critical to the renaissance of Southern California, and that will play an increasingly important role in the next century. It is a hidden industry, one that is not always included when we think about the economic fabric of our community, but one which is already a major player in our regional economy. The industry I refer to is higher education ? that is, Southern California's colleges and universities.

There are more than 175 accredited colleges and universities located throughout the Southland, serving over a million students. These colleges and universities have helped our region grow by training generation after generation of professionals, artists, scientists, public officials and business leaders. They have sustained and nurtured industries as diverse as aerospace, biotechnology, communications and medicine. They have attracted and retained many of the world's best and brightest young people. And they have brought billions and billions of dollars into the Southern California economy.

How important is higher education to our economy? Economists have generally overlooked higher education as an actual industry, so obtaining reliable statistics is difficult. But a quick survey of Southland colleges and universities reveals that they generate roughly $30 billion in regional economic activity each year, directly support more than 120,000 full?time jobs as well as an unusually high number of part?time jobs, and indirectly support hundreds of thousands of jobs in other industries. From this we can say that, as an industry, the impact of higher education on Southern California ranks right up there near the top, about the size of tourism and just a bit behind aerospace. But unlike those more visible industries, higher education attracts not just money but intellectual talent as well ? talent which more often than not remains in this area to multiply its impact for years.

Southern California's colleges and universities represent a broad spectrum of academic institutions. There are private colleges and universities such as Pepperdine, Occidental, the Claremont group, Caltech and USC, and public institutions that include four campuses of the University of California, the CSU system and the California community colleges. There are also specialized institutions such as the Art Center College of Design.

Of the 175 colleges and universities in Southern California, four are members of a very elite group known as the Association of American Universities, or the AAU: USC, Caltech, UCLA and UC San Diego. Out of the more than 3,700 colleges and universities in America, only 56 are members of the AAU. These 56 research universities ? including Stanford, Harvard, Michigan, Texas, Berkeley, Yale and Chicago ? conduct most of the basic research in the United States and much of the basic research for the rest of the world. They produce many if not most of our physicians, our Ph.D.'s, our postdoctoral scholars and our practicing professionals.

Southern California is blessed with four of these nationally ranked research universities. Three are comprehensive institutions ? UCLA, USC, and UC San Diego ? and one, Caltech, is a world?famous scientific institute. Together they bring to our area over a billion dollars annually in federal funding for research, development and other work. This cluster of four major research universities is a very important asset for all of us.

As the new information age unfolds, the region's intellectual capital is probably our most precious resource. Southern California has one of the largest concentrations of college graduates in the world. A fourth of our adult population have college degrees and one?half have finished at least one year of college; these figures are much higher than the national average. Our college?educated population more than doubled during the 1980s and is still growing rapidly. All of this bodes well for our region.

Higher education is a tremendous asset for yet another reason. It represents a key export industry, and is one reason why Los Angeles is the American city for trade with the Pacific Rim. International scholars are an important part of our student population today. Higher education has internationalized, as has every other American industry. In the past decade the number of young men and women coming to the United States as students from Asian nations has tripled. Today, the top 10 countries sending students to America are all on the Asian Pacific Rim.

Why do so many foreign scholars come here to study, especially in view of the global recession and the rising costs of education in this country? The answer is simple: they know a good product when they see it. U.S. universities can be expensive, but they are of very high quality. They are unquestionably the best in the world, and no one from any other nation would seriously dispute that claim.

I think this trend will continue for many years to come, which is very good news for all of us. Foreign students who choose to stay here in the Southland represent some of the top talent in their respective fields, and those scholars who return home create an international network that benefits us. We are now seeing increased technological interdependence between Asian firms and Southern California's research universities, which will have a significant impact on this region's continued competitiveness in global markets.

Whether large or small, public or private, our colleges and universities have never been as attuned to our region as they are today. We are redefining our role in the community and taking bold steps to help create a new urban environment here in the Southland. We are marshalling our intellectual and economic resources to help our neighbors in unprecedented ways. In so doing, the Southern California academic community has become a model that colleges and universities across the country want to emulate.

To give you a sharper picture of the types of contributions that higher education is making to Southern California, I should like to talk for a few minutes about USC. It is the institution I know best, and it offers an excellent case study on the various roles that a university can play within a modern urban community.

First of all, USC serves as an economic engine for Southern California. The university is now the largest private employer in the city of Los Angeles, with some 17,000 full?time and part?time workers. We are also the largest private employer of minorities in the city. We have an operating budget of just under $1 billion per year, which means USC contributes some $3 billion a year to the local economy and generates some 40,000 jobs outside the university.

USC is also one of Southern California's principal export industries in the private sector. You see, USC provides teaching, research, and patient care inside Southern California, which are then sold to "customers" outside the region. For example, USC generates nearly $400 million a year in tuition income. Most of these dollars come from wallets and purses located outside the city of Los Angeles ? in San Francisco, Taiwan, Houston and Chicago.

We are also a magnet for new dollars through research grants, research contracts, patient income and gifts. Recently USC received a $120 million gift from Ambassador Walter Annenberg ? the largest cash gift in the history of American higher education. It also was one of the largest private investments in Southern California since the recession. Walter Annenberg does not live here, and he and his wife are not USC alumni. He did not have to give his money to USC; he did so because he believed that, in the field of communications, USC and Southern California offer opportunities and strengths that are unmatched anywhere else in the world.

The University of Southern California is an important anchor institution for Southern California. We have been a part of this region for over 100 years, and we plan to remain right where we are for centuries to come. There is an impressive historical relationship between Southern California and USC. The university, which was formed during the region's first real estate boom in 1880, was built on a mustard field at the outskirts of a small village known as Los Angeles. At the opening of this proud little university in a single white?framed building, over a thousand Angelenos turned out, which was 10 percent of the city's population at that time!

Southern California and the university grew up together. As needs developed, USC was there providing trained professionals, community leaders and much?needed expertise. Through the years our faculty, students, staff and alumni have made important contributions to Southern California businesses and industries. USC?trained architects, engineers and urban planners have literally built this region. Sixty percent of the dentists, 50 percent of the pharmacists, and 30 percent of all the school administrators in Southern California have earned their degrees at USC. Our faculty physicians serve more than a million patients each year through our medical center campus and 12 affiliated hospitals. Our School of Cinema?Television has played an important role in the development of the motion picture industry.

The university has helped shape Southern California, but Southern California in turn has helped shape the university. We are now the largest private research university west of the Mississippi, thanks in large part to this region and its spectacular growth over the last century. We have 27,000 students, roughly half of whom are undergraduates and half of whom study at the graduate and professional levels. They come from every state in the nation and from 105 countries around the world. Indeed, our campus has the largest international enrollment of any private university in the country and ranks in the top three among all universities, public and private.

USC's hallmark has traditionally been its 19 professional schools ? including medicine, law, engineering, cinema?television, music and business ? all of which enjoy international reputations for excellence. Our College of Letters, Arts and Sciences, the heart of this great university, offers students a first?class liberal education and opportunities for doctoral and postdoctoral work at the hands of faculty who are sought by outstanding universities throughout the world. Through our teaching, research and clinical practice, USC prepares leaders for tomorrow while addressing the needs of society today.

The educational and social roles we play are probably the ones with which you are most familiar. However, you may not be aware of how broadly our programs reach into the larger community. They encompass the fields of health care, economic development, social welfare, elementary and secondary education, scientific research, public policy, and the fine arts. Many are collaborative efforts with business and government.

Over 500 of our faculty have some kind of direct involvement in the community. They range from USC engineers working with Southland aerospace companies on defense conversion technology, to USC physicians at the Norris Comprehensive Cancer Center conducting the largest multi?ethnic study of cancer and diet in history, involving more than 300,000 people throughout Southern California.

Public outreach is also an important component of the student experience at USC. Our students' service to the community allows them to put classroom theory into practice and make valuable contributions in the process. Sixty percent of our undergraduates ? a volunteer army of 9,000 young people ? perform some kind of public service every year in our community. We believe this is the highest rate of student participation in public service of any national university.

USC now conducts over 200 outreach projects that impact hundreds of thousands of people in Southern California every year. And we are creating new community and volunteer programs, many of which are collaborative efforts with business and government. For example, in the area of elementary and secondary education alone, the university is involved in 80 partnerships reaching more than a 100,000 school children each year.

A great number of our outreach projects involve the sharing of resources with our sister academic institutions in this region. One example is the nationally?chartered Southern California Earthquake Center, which is located administratively at USC but which involves seven core universities, including Caltech. This center brings together an army of outstanding scientists to better understand the geological forces that affect the Southland. Students and faculty at the center are pooling their expertise to develop technologies that will help predict the occurrence of earthquakes both here and around the world.

Many people in Southern California believe the essential feature of the relationship between USC and UCLA is simply intense rivalry at every turn. Certainly it is exactly that on the football field and on the basketball court. But USC and UCLA are also educational partners who, more often than not, combine talents and share resources. As a matter of fact the city of Los Angeles is the only city in the nation to have both a public and a private AAU research university within its city limits. Our two institutions have a working partnership that is the envy of many other universities around the country.

At USC, we believe that public/private partnerships represent a powerful prescription for change. Cooperation and sharing of resources among business, government and higher education can strengthen existing industries and spark new ones, create jobs and career opportunities, increase technological and medical developments, and improve the quality of life for all. Collaborative effort ? teamwork ? is the key to the reinvention of Southern California. The issues facing our cities cannot be solved by either government or the private sector alone. All of us with a stake in this city will have to put our collective shoulder to the wheel.

If I could leave you with just one message today, it would be this: higher education, as an industry, is helping to bring about the renaissance of Southern California. You can be proud of Southern California's colleges and universities, for we are not simply ivory towers that observe the world from a safe distance. Rather, we help shape the world through our intellectual, cultural, scientific, technological, economic and social contributions. We are an existing strength that can help resolve this region's social and economic problems. We are a thriving industry on which Southern California can build for the future.

Please remember that we in academe want to continue to work with you in business and government. Together we can make this one of the finest urban regions in the world, which will benefit all of us, as well as the tens of millions of Southern Californians who will come after us.