How Do the Arts Affect Economic Growth?

By: Brian Points
Data Analysis: Render Thomas

Introduction

Once upon a time, most people considered where they live to be an afterthought in comparison to where they work. But in recent years, the tables have turned. Talent now has leverage on employees as they seek out the right blend of characteristics that support their lifestyles. As a result, across the United States individual companies and regional coalitions are engaged in a fierce competition to attract talent. This issue is particularly important with the rise of millennials, who as of 2015 are the largest generation group in the American workforce (1). Studies indicate that millennials highly value work-life balance and quality of place to a far higher degree than previous generations (2). To respond to this new reality, there is scarcely an economic development professional in the country who is not ready to promote the quality-of-life in their region as one of their economic development strengths.
One strategy that has blossomed in recent years as a means for attracting young, creative professionals is the promotion of a region’s creative and artistic assets. The concept is not new, with research dating back at least as far as 2004 with Richard Florida’s The Rise of the Creative Class. To be clear, Florida and others since have defined “creatives” as a much broader group than just artistic people, but certainly the artistic-creatives have always been a core element of this movement. Now, more than 10 years into this experiment, we should have enough data to be able to say whether places that have strong artistic clusters actually do perform better economically. We can all think of anecdotal data points to support this — Nashville, Tennessee; Austin, Texas; etc. — but does this hold true on the large scale? In other words, do places that have strong artistic cultures also have growing economies? If this is true, more regions that aspire to attract millennials may adopt this strategy as well.

The Statistics

Correlation of CVI to the Gross Domestic Product

To examine this issue, we used several basic statistical techniques to consider the relationship between arts and economic growth, including correlation and regression analysis (3). We used two data sources to define the core variables. First, we used WESTAF’s Creative Vitality Index, a composite of numerous variables, including employment in artistic jobs, charitable contributions to artistic nonprofits, and other factors. The CVI serves as our measurement of “artsy-ness” for each region. Second, we used growth of Gross Domestic Product (GDP) by metropolitan area between 2010 and 2015 from the US Bureau of Economic Analysis. This served as our measurement for overall economic growth.

If these two phenomenon are connected in the real world, we should expect to see a positive numerical relationship (or correlation) between these factors. Not surprisingly, the correlation analysis indicates that artsy-ness is indeed positively correlated with economic growth. In other words, generally speaking, when the CVI goes up, GDP growth goes up too. Likewise, when the CVI goes down, GDP changes negatively (4).

How correlated is the CVI to other economic and geographic factors

Though this insight is interesting, it would be more interesting to measure the degree of affect that artsy-ness has on economic growth. Fortunately, regression analysis can be used to accomplish that. When conducting any regression analysis, it is important to look outside of the variable you care most about. Doing so allows you to consider the other variables that may be affecting the variable you are targeting. In this case, that variable is economic growth. We could get a lot more in-depth on this issue, but for the sake of simplicity only six other factors are considered in this data analysis. They are:

• Population
• Cost-of-living
• Diversity (measured by percentage of population that is non-White)
• Educational attainment (measured by percentage of population that possesses a bachelor’s degree or greater)
• Number of Fortune 500 companies
• Region (based on dividing the nation into five geographic areas)

This time the results are different. Our statistical model still indicates that artsy-ness has a positive affect on economic growth, but the relationship is not strong enough to state the degree of connection with any level of confidence (5). The model indicates that some factors have a very positive influence on economic growth, such as high educational attainment and being located in the southeastern region of United States. There is also one factor that has a very negative effect on economic growth, namely, being located in the northeastern United States.
What all this indicates is not that artsy-ness is irrelevant to economic growth, rather that there are other factors that are more impactful, such as geographic location and educational attainment rates. However, at this point, it is worth considering the options local organizations have for stimulating economic growth. Picking up a city and re-depositing it in a southeastern location, like Texas, is certainly not an option. Increasing educational attainment is possible, but likely an expensive one. On the other hand, supporting and promoting an existing arts culture is something within the reach of nearly any organization interested in stimulating growth.
The regression model indicates that not every city with strong growth has a strong artistic culture, but there certainly are some cities that have made arts a significant pillar of their growth strategies. A few of these cities are highlighted below.

Minneapolis-St Paul

The Minneapolis-St. Paul metro area has successfully integrated a booming arts and culture scene with a strong degree talent recruitment, which is necessary to feed the numerous large companies in the area. The region has an above-average CVI value of 1.43, while at the same time is home to 16 Fortune 500 companies and has recruited 13,200 knowledge class jobs to the economy between 2000 and 2010 (6). The region has actively highlighted the vibrant cultural atmosphere to attract people and companies to the area. Numerous independent artists are in the process of mapping out the creative strategy of the region, which can be seen at www.creativeminneapolis.org. The City of Minneapolis also sponsors several placemaking collaborations.

Denver

The Denver metro area has a strong arts scene indicated by its above-average CVI value of 1.24. The city has leveraged its arts culture into attracting talent to the area. For example, the area added 9,600 knowledge class jobs to the city from 2000-2010, which was associated with an increase of $709 million in income (7). The city has emphasized ambitious public art efforts and has developed an aggressive art/culture strategic framework in their “Imagine 2020” website.

Nashville

Nashville has leveraged its musical history and art scene as major tools for recruiting talent to the region. The success of this effort is indicated by its CVI value of 2.15, the 3rd highest value among all cities measured by the CVI. Nashville also serves as an interesting counterpoint to other cities that have seen strong economic growth, in that there is not an unusually high proportion of college-educated people. Only 21% of the metro area’s population possess a bachelor’s degree or higher. By comparison, Denver and Minneapolis are at 27% and 26%, respectively. In Nashville, the Mayor’s Office of Economic & Community Development highlights Creative Economy & Placemaking and the Music City Music Council as some of its priorities. To learn more, review the Metropolitan Nashville Arts Commission’s Culture Here: A Report on Cultural Assets and Activities.

Conclusion

A thriving arts culture is one component that talented millennials value when looking for a place to live. Regions everywhere are pursuing developing-sector and cluster-based strategies aimed at retaining and attracting more of the types of businesses that they want. The health of our future cities relies on creating an innovative, beautiful, and thoughtful environment that people want to live in. As we see in the analysis conducted in this study, the arts do affect economic growth. The challenge ahead lies in finding a better understanding of how the arts correlate with economic growth and conducting a deeper investigation into the non-economic measurements that catalyze economic growth.
Footnotes
1. Richard Fry, Millennials surpass Gen Xers as the largest generation in U.S. labor force, Pew Research Center, May 11, 2015. http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/
2. Dr. Patricia Buckley, Dr. Peter Viechnicki & Akrur Barua, A new understanding of Millennials: Generational differences reexamined, Deliotte University Press, October 15, 2015. https://dupress.deloitte.com/dup-us-en/economy/issues-by-the-numbers/understanding-millennials-generational-differences.html.
3. Correlation is an index describing the strength of a relationship between two variables. Regression is a statistical model that tests the significance between variables and can be used to predict the dependent variable.
4. For the nerds out there, the correlation statistic is 0.23, which is valid at the 99% confidence interval.
5. Again, for the nerds, it cannot be determined with certainty if this effect is greater than zero. The range of possible coefficients at the 95% confidence interval is -1.15 to 1.68.
6. Richard Florida, How the arts add to urban economies, CityLab from Atlantic, December 24, 2015. http://www.citylab.com/work/2015/12/how-the-arts-add-to-city-economies/421191/.
7. Ibid.