Pandemic Poses Huge Challenge for College Town Economies Already Facing Changing Dynamics

A longtime business operator in downtown State College once told me that his business made the huge bulk of its money when the students were in school, and on special events like football weekends, graduation, Blue-White weekend and Arts Festival. That revenue sustained him through summer when the student spending power was gone.

After the coronavirus struck and universities started to shut down earlier this month, I asked him what would happen if students were suddenly gone for seven weeks of a semester.

The question was met with grave silence.

The coronavirus pandemic and subsequent shutdown will hit our local economy very hard, and there is no way to know just yet when it will end. But is the near-term pandemic damage just a harbinger of change in the economics of higher education and for college towns? In State College it is a big question given the number of cranes building tall apartment buildings and adding lots of volume to downtown retail space.

Even during a growing economy, some of the sustaining big-ticket items for this town’s economy have changed or even faded recently. More and more businesses are on campus with a wider array of places to eat and  buy books and T-shirts, among other things. That means less money being spent in town. Actual scanned-in attendance is lower for football games meaning less people spending less money in town. New roads have also made it easier for football visitors to make day trips rather than spend a whole weekend here.

And while subtle changes have already been impacting local business, this latest development is on a whole new level.

In 2020 businesses will lose seven to eight weeks of most students here in town. Blue-White weekend is gone. Commencement has been postponed. What do the fates hold for Arts Festival and will people be ready to gather in large crowds in July? Will people be ready to gather in a large stadium come early September?

With the volatile markets and the national economy facing severe headwinds will people have the disposable income needed to pay for football weekends at prices that were raised significantly this offseason?

Hotel operators, wait staff, bartenders, Uber and taxi drivers, small business owners and so many other people are staring at a great unknown. Landlords and developers are looking at the potential for a lot of vacant inventory. And let’s not forget hourly and union university workers who come every day from neighboring communities like Tyrone, Lewistown, Bellefonte or even as far away as Clearfield or Dubois. Money earned here supports those communities too.

If this pandemic takes weeks or even months to subside, the challenges for this community will be immense. But as I mentioned earlier, the foundation of the local economy that is dependent on Penn State may already have been undergoing unseen change.

For years, college towns like State College were driven by the recession-proof economy of higher education. They were oases of steadiness and relatively immune to the ups and downs faced by the rest of the nation. Here in Happy Valley it has always been hard to fathom the downturn in mill and factory towns of Pennsylvania and the industrial Midwest. In the late 1970s and early 1980s as mills and factories in places like Bethlehem, Pittsburgh and Johnstown were shutting down, Penn State continued to grow and thrive.

In the recent past, readily available student loans supported escalating tuition fees flowing in to pay an ever-expanding pool of professors, instructors and administrators with good pay and solid benefits. At the top level were people at universities making very good money no matter the economic conditions the rest of the country was facing.

But higher education faces the same threat from technology that changed those mill towns. Jobs in factories could be done by automation, or be done more cheaply by lower-wage non-union workers in other parts of the country, or by very cheap labor in foreign countries.

Similar changes to lower costs have come to higher education. Many classes are being taught by TAs or cheaper adjunct instructors rather than full professors. Higher education is increasingly delivered online. And through all this, national polling shows that more and more people do not see higher education as being worth the cost.

In the current case of a campus shutdown, classes are taught remotely to students who can be living anywhere. If social distancing becomes a part of a new way of living, will more and more students choose to learn from home? If the next seven weeks show parents a more cost-effective way to get a Penn State degree will the demand for the full on-campus college experience change?

If that changes, Happy Valley may no longer be a recession-proof refuge. If a faltering economy hastens a change in the dynamics of higher-education, the current challenges could become part of a more permanent foundational shift in our local economy.