Enriching our Communities, Part 1: An Analysis of Museums as Economic Engines

Museums play an essential role in our civic life. They are places where we preserve our past, gather and reflect on our present, and think about our future. Museums also serve as economic engines, providing hundreds of thousands of jobs and generating billions of dollars in tax revenues across the country. To understand the role museums play in our economy, the Mellon Foundation supported a study by the American Alliance of Museums and Oxford Economics called Museums as Economic Engines: A National Report.

Museums as Economic Engines is a first-of-its kind report that highlights the need for a greater understanding of the full scope of how museums benefit our lives and the economy.

Our first blog post in this series will examine the effect museums have on a macroeconomic level. Museums as Economic Engines found that museums generate $50 billion in the US, roughly 0.3 percent of the Gross Domestic Product (GDP). Museums generate this economic activity through direct, indirect, and induced impact.

Direct impact includes wages for museum employees, operation expenditures, and the taxes paid to local, state, and federal governments. The direct GDP impact from museums in 2016 was $15.7 billion.

Museums influence other aspects of the economy through “indirect” and “induced” impact. Indirect impact refers to the museum supply chain and reflects what museums spend on services such as public relations or IT. In 2016, museums contributed $14.6 billion to the US GDP through indirect impact.

Induced impact calculates the consumer spending driven by employees’ wages. Museums as Economic Engines estimates that in 2016, induced impact attributable to museums’ operations accounted for $19.6 billion in contributions to US GDP. In other words, every $100 of economic activity created by museums generated an additional $220 in other sectors of the US economy.

Museums as Economic Engines reports that the sum of the three sources of museums’ economic impact on the US GDP – direct ($15.7 billion), indirect ($14.6 billion), and induced ($19.6 billion) impact – totals $49.9 billion. The report also found that museums have especially significant impact in sectors such as financial activities (24 percent), trade, transportation, and utilities (12 percent), and professional and business services (10 percent).

Despite these significant contributions, the federal funding for arts and education that many museums rely on is under threat. A reduction in such funding would not only compromise the $50 billion in substantive contributions to the GDP, it would also hamper the ability of museums to provide their incalculable non-monetary benefits to individual lives and communities across the country every day.