In chapter 12 of Investing in Kids, I consider how more community college graduates affect a state’s economic development. The skills from more graduates of community colleges will spur a state’s economic growth by increasing the skill level of the state’s labor force.

I make the conservative assumption that we increase the number of community college graduates with associate degrees without any subsequent increase in bachelor degrees. I also use estimates about how many associate degree graduates will stay in the state, and the effect this has on increasing the number and quality of jobs.

Based on this analysis, getting one person to earn an associate’s degree provides state economic development benefits of $127,000. This is the increase in the present value of state residents’ per capita earnings.

It is important not to assume that “high-skill” is the same as “holding a bachelor’s degree”. There are many technical and vocational skills that are needed by the U.S. economy, and that are best provided via a certificate or an associate’s degree.

There are a number of important demonstrations and experiments exploring how best to increase student success at community colleges. For example, the well-known research group MDRC has done much work in this area.

Early childhood education can also significantly affect associate degree attainment. This is a big part of the mechanism by which early childhood programs affect the economy, by affecting subsequent degree attainment. However, early childhood programs also affect adult earnings by increasing employment rates and wage rates even for individuals at the same level of educational attainment.

Community colleges also play an important role in economic development by their frequent involvement with customized job training programs. Customized job training programs are business incentives in which state or local governments try to encourage job growth or retention by providing individual businesses with free or low-cost job training that is customized to the individual business’s personnel needs. As discussed in chapter 5 of Investing in Kids, the research evidence suggests that customized job training is 10 times as effective in creating jobs, per incentive dollar, as more typical business tax incentives.

Community colleges thus should be a vital part of any state’s economic development strategy. Community colleges can enhance labor supply quality while more directly encouraging increases in labor demand. Early childhood programs can help by putting more state residents on the path where they can take good advantage of the education and job training provided by community colleges.