Investments in Young Children: The Economic Case and How to Fund

July 18, 2011 CCSSO Summer Institute

Rob Grunewald Federal Reserve Bank of Minneapolis

Investments in Young Children: Economic Case and How to Fund

Early childhood development is economic development
Early investments yield a high public return States use a variety of funding sources Education chiefs play key role in moving agenda forward

Investments in Young Children: Economic Case and How to Fund

Early childhood development is economic development
Early investments yield a high public return States use a variety of funding sources Education chiefs play key role in moving agenda forward

U.S. Population Projections, Ages 15 to 64

1.2

Average annual percent change

1.0
0.8 0.6 0.4 0.2 0.0
2000-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50

Source: U.S. Census Bureau, Population Division

Occupation Growth by Primary Source of Education and Training, 2008 to 2018

Bachelor's degree or higher Associate degree Postsecondary vocational award Work experience in related occupation

Long-term OTJ training

Moderate-term OTJ training Short-term OTJ training

0.0

0.5

1.0

1.5

2.0

Average annual percent change

Source: U.S. Bureau of Labor Statistics, Employment Projections Program

Average Annual Wages of New Jobs by Primary Source of Education and Training, 2008 to 2018

Bachelor's degree or higher Associate degree Postsecondary vocational award Work experience in related occupation Long-term OTJ training Moderate-term OTJ training

Short-term OTJ training

$0 $20,000 $40,000 $60,000 $80,000

Average annual wages of new jobs based on median 2008 wages

Source: U.S. Bureau of Labor Statistics, Employment Projections Program

Investments in Young Children: Economic Case and How to Fund

Early childhood development is economic development
Early investments yield a high public return States use a variety of funding sources Education chiefs play key role in moving agenda forward

Human Brain Development

Synapse Formation Dependent on Early Experiences
Language Sensory Pathways (Vision, Hearing) Higher Cognitive Function

FIRST YEAR
-8 -7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Birth

(Months)

(Years)

Source: Nelson (2000)

Human Brain at Birth

6 Years Old

14 Years Old

Source: Chugani, Phelps & Mazziotta (1987)

Cumulative Vocabulary (Words)

Barriers to Social Mobility Emerge at a Very Young Age

1200

College Educated Parents 600 Very Low-Income Parents 200

16 mos.

24 mos.

36 mos.

Childs Age (Months)

Source: Hart & Risley (1995)

High/Scope Study of Perry Preschool

In early 1960s, 123 children from low-income families in Ypsilanti, Mich. Children randomly selected to attend Perry or control group. High-quality program with well-trained teachers, daily classroom sessions and weekly home visits. Tracked participants and control group through age 40.

Perry: Educational Effects

Age 14 achievement at 10th percentile+

Graduated from high school on time

Didn't require special education 0% 25%

Program group
Source: Schweinhart, et al. (2005)

50%

75%
No-program group

100%

Perry Preschool Costs and Benefits Over 62 Years

Program Cost K-12 Ed Higher Participants' Earnings Justice System Crime Victims Welfare Payments
$100,000
$140,000 -$20,000 $60,000

$20,000

For Public
Source: Schweinhart, et al. (2005)

For Participant

Perry Preschool Estimated Return on Investment

Benefit-Cost Ratio = $16 to $1 Annual Rate of Return = 18% Public Rate of Return = 16% Heckman Reanalysis = 10%

Sources: Schweinhart, et al. (2005); Authors calculations; Heckman, Moon, Pinto, Savelyez, & Yavitz (2010)

Benefit-Cost Ratios for Other Longitudinal Studies

Abecedarian Educational Child Care $4 to $1

Chicago-Child Parent $7 to $1
Elmira Prenatal/Early Infancy Project $5 to $1

Sources: Masse & Barnett (2002); Reynolds, Temple, Robertson, & Mann (2002); Karoly, et al. (1998)

Five-State Pre-K Evaluation

Estimated size of intent-to-treat effect
1.2 1.0
0.8

* * * * *

0.6
0.4 0.2

*
*

0.0
-0.2

Michigan

New Jersey

South Carolina
Math

West Virginia
Print Awareness

Oklahoma

Vocabulary (PPVT)
*Significant at 5%

Source: Wong, V. C., Cook, T. D., Barnett, W. S., & Jung, K. (2008)

Lessons Learned from Research

Invest in quality
Involve parents

Start early
Reach at-risk population

Bring to scale

Investments in Young Children: Economic Case and How to Fund

Early childhood development is economic development
Early investments yield a high public return States use a variety of funding sources Education chiefs play key role in moving agenda forward

Funding Pre-K
General revenue School funding formula
At least 11 states and D.C. Community programs can provide preschool

Designated sales or excise tax

South Carolina and Denver: Sales tax California and Arizona: Cigarette tax

Lottery
Georgia raises about $300 million

Funding Prenatal to Age 3

Set aside Pre-K funds for ages 0 to 3
Illinois and Kansas

Endowment
Nebraska, $60 million

Public-Private Partnerships
Smart Start (North Carolina) Smart Beginnings (Virginia) Minnesota Early Learning Foundation

Investments in Young Children: Economic Case and How to Fund

Early childhood development is economic development Early investments yield a high public return States use a variety of funding sources Education chiefs play key role in moving agenda forward

Roles for Education Chiefs

Advocate for early childhood funding Partner with Human Services and Health Departments to improve program quality

Encourage schools to partner with child care, Pre-K and Head Start to improve transition to kindergarten
Apply for Early Learning Challenge funds to build a stronger state early learning system Promote partnerships with the private sector

Sources
Chugani, H.T., Phelps, M.E., & Mazziotta, J.C. (1987). Positron emission tomography study of human brain functional development. Annals of Neurology 22, 487-497. Hart, B., & Risley, T.R. (1995). Meaningful Differences in the Everyday Experience of Young American Children. Baltimore: Paul H. Brooks Publishing Co. Karoly, L.A., Greenwood, P.W., Everingham, S.S., Hoube, J., Kilburn, M.R., Rydell, C.P., et al. (1998). Investing in Our Children: What We Know and Dont Know About the Costs and Benefits of Early Childhood Interventions. Santa Monica, Cal.: RAND Corporation. Masse, L.N., & Barnett, W.S. (2002). A Benefit-Cost Analysis of the Abecedarian Early Childhood Intervention. New Brunswick, N.J.: National Institute for Early Education Research. Heckman, J. J., Moon, S.H., Pinto, R., Savelyez, P., & Yavitz, A. (2010). The Rate of Return to the HighScope Perry Preschool Program. Journal of Public Economics 94(1-2), 114-28. Minnesota Early Learning Foundation. www.melf.us. Nelson, C.A. (2000). The Neurobiological Bases of Early Intervention. In J.P. Shonkoff & S.J. Meisels (Eds.), Handbook of Early Childhood Intervention, second edition (204-227). Cambridge, Mass.: Cambridge University Press. Reynolds, A.J., Temple, J.A., Robertson, D.L., & Mann, E.A. (2002) Age 21 Cost-Benefit Analysis of the Title I Chicago Child-Parent Centers. Educational Evaluation and Policy Analysis 4(24), 267-303. Schweinhart, L.J., Montie, J., Xiang, Z., Barnett, W.S., Belfield, C.R., & Nores, M. (2005) Lifetime Effects: The High/Scope Perry Preschool Study Through Age 40. Ypsilanti, Mich.: High-Scope Press. U.S. Census Bureau, Population Division. Population Projections. http://www.census.gov/population/www/projections/. U.S. Bureau of Labor Statistics, Employment Projections Program. http://www.bls.gov/emp/.

Wong, V. C., Cook, T. D., Barnett, W. S., & Jung, K. (2008). An Effectiveness -based Evaluation of Five State Prekindergarten Programs. Journal of Policy Analysis and Management, 27(1), 122-154.

minneapolisfed.org