Eds and Meds as City Anchors

January 31, 2023

By Deborah Diamond, Director, Anchor Economy, Federal Reserve Bank of Philadelphia

If there is one enduring lesson from the pandemic, it is that long-standing economic trends that regions have come to count on can be upended more quickly than we thought. Consider the decades-long move back to dense, urban downtowns; the office as an amenities-rich home away from home; and the countercyclical nature of higher education in economic downturns. All have been challenged, and to varying degrees, changed.

In 2022, the Federal Reserve Bank of Philadelphia launched the Anchor Economy Initiative to focus on health care and higher education (“eds and meds”)  – two of the industries hardest hit during the pandemic – in order to help them deal with some of these complex challenges they are now facing. These two sectors are often referred to as anchors, because of their enduring ties to the places they’re in, in contrast with corporate headquarters and manufacturing facilities that often pick up and move to greener pastures.

Neighborhoods, communities, and cities have relied for decades on these anchor institutions to employ local residents, invest in community development projects, keep regions healthy, and provide education, which all fuel and sustain local economies. But the enduring nature of some of these anchors is challenged as higher education and health care respond to forces that could change the roles they have played in regions.

Among the significant trends that anchor institutions face are declining college enrollments, hospital consolidations and closures, and a continued sorting of higher ed and health care into those powerhouse institutions with tons of resources versus those struggling institutions with fewer students and patients.

As part of the initiative, which is geared toward planning experts, leaders, and community partners, the Philadelphia Fed has created the Anchor Economy Dashboard,  as a benchmarking tool and fact base for regions that depend on anchor institutions to better plan for potential disruptions to both the health care and higher education sectors.

The dashboard calculates the economic impact of hospitals and higher education institutions (including community colleges) for all 524 metro and nonmetro regions that make up the U.S. In addition to aggregating the impact of these institutions in terms of people employed, income earned, and gross value added produced, the dashboard provides a “reliance index,” which measures how dependent a regional economy is on the eds and meds sectors.

The reliance index uses a scale in which scores of above 1 indicate a region that has a higher concentration of economic activity attributable to health care and higher education. Conversely, regions with a lower concentration of economic activity from eds and meds have a reliance index measure below 1. Here are some of the interesting takeaways from the dashboard:

• While the reliance index ranges from a low of 0.18 for Midland, TX, to a high of 3.71 for Ithaca, NY, large metro regions (the 56 regions over 1 million in population) never reach a reliance index above 2, while smaller regions with less diverse economies tend to have higher scores on the index. Of the large metro areas, Rochester, NY, and Cleveland are the most reliant on these anchor institutions, with Rochester at 1.9 on the reliance index and Cleveland at 1.7
• While eds and meds may have a significant economic impact on the larger regions, that doesn’t necessarily equate to greater reliance on them. The top five regions for employment impacts from eds and meds are the large metros of New York, Los Angeles, Chicago, Boston, and Philadelphia. But only Philadelphia and Boston have comparable rankings on the reliance index (at 1.4 and 1.5, respectively), while New York, Los Angeles, and Chicago all hover around 1 — or average — on the reliance index.
• In regions with a significant number of both higher education and hospital institutions, it is the hospital sector that most drives economic impact. Hospitals employ more people and at generally higher salaries than higher education institutions, so even in a region like Ann Arbor, MI, the impact of the University of Michigan and other higher eds in that area is dwarfed by the hospitals and healthcare systems there, which generate twice as many jobs and three times as much income as the higher eds.

For those engaged in community development planning and projects, the Anchor Dashboard can be a useful tool for catalyzing important conversations and forging key partnerships. Particularly in regions with high reliance index values, these data can serve as the impetus for bringing diverse partners to the table to examine both the strengths of local anchors as well as the challenges they face. Using this information, community planners and leaders will be better equipped to talk about public-private investments that can strengthen anchor institutions and meet community needs. Last, the combination of the reliance index and anchor impact data offers a unique way for regions to identify similarities and connect with each other on ideas and best practices in anchor-related community development.

Looking forward, the Philadelphia Fed’s Anchor Economy Initiative will continue to be a resource for cutting-edge research, novel data sets, and visualizations, and opportunities for partners and experts engaged in community development to come together, share information, and seek out solutions.

 Learn more about the Anchor Economy Initiative at the Philadelphia Fed and join the mailing list for updates and new releases.

The contents of this blog post reflect those of the author, and not necessarily those of the GFRC.