Economics of Early Childhood

One of my personal areas of advocacy is improving the quality of early childhood education. As a working parent seeking high-quality daycare and preschool services, I was frustrated by the lack of information about the quality of these services. I was, after all, leaving my child--my most precious possession--in the hands of these providers. For this reason, I now contribute my services to a local coalition dedicated to raising the quality of early childhood education. Coalitions like these are emerging across the country and have gained support through the use of economic arguments that declare the cost effectiveness of early childhood education.

Perhaps no other area of educational policy has benefited more from economic analyses than early childhood education. The landmark cost-benefit study of the High/Scope Perry Preschool Project, conducted over a forty-year period, provided empirical evidence of a host of social and economic outcomes. This type of evidence has shifted the terms of debate about early childhood education policy in the United States. While early arguments in support of early childhood programs focused on equity and promoting individual well-being, advocates today focus on these programs as sound public investment that supports human capital and economic development and, in the long term, lowered government spending. These arguments have realized higher levels of state investment in early childhood care and education, including in my state of Virginia.

Economic arguments have cited several positive social outcomes of early childhood education beyond those typically described for secondary and postsecondary education. Knudsen, Heckman, Cameron, and Shonkoff (2006) cited evidence of positive economic, neurobiological, and behavioral outcomes to support their argument that providing early child education to disadvantaged children was the most efficient strategy for strengthening the future workforce and improving its quality of life. Karoly, Kilburn, and Cannon (2005) presented a similar range of outcomes, including increased high school graduation, college attendance, and labor force and participation, and decreases in socially negative behaviors such as crime, substance abuse, and teenage pregnancy.

Economists Rolnick and Grunewald (2003) calculated an internal rate of return for one of the best known early childhood education programs, the Perry Preschool program. Following the identification of costs and the monetization of benefits, the authors estimated the time periods in which benefits and costs in constant dollars were paid or received by program participants and society. Rolnick and Grunewald estimated the internal rate of return for the High/Scope Perry School program at 16 percent, which they argue makes early childhood education an excellent buy when compared with other public investments.

The findings from the Perry Preschool study have often been cited as part of an economic argument for funding early childhood education initiatives, especially at the state level. The general argument is that cost savings for government could be large enough to not only repay the initial costs of the program but also to possibly generate savings to government or society as a whole several times greater than the costs (Karoly, Kilburn, and Cannon, 2005). These findings moved early childhood education policy from being strictly a social-service policy and philanthropic endeavor to help children from low-income families to also being considered an economic development strategy (Clothier & Poppe, 2008; Stone, 2008).

The impact of these advocacy arguments is clear. Overall, states have been increasing investments in early childhood education. Child care state appropriations from combined state general fund and TANF sources increased by $482 million from FY 2007 to FY 2008. Prekindergarten appropriations increased by almost $540 million from FY 2007 to FY 2008, with total state appropriations to prekindergarten programs were $4.5 billion. States reported an increase in total appropriations to additional early learning strategies of $26 million from FY2007 to FY 2008, with total reported appropriations were $347 million (Clothier & Poppe, 2008). Significantly, school funding formulas are increasingly used as an effective way to protect and advance state pre-k by tying funding to the popular support for K-12 education. The growing popularity of pre-k programs has prompted state policymakers to take this action (Stone, 2008).

In the Commonwealth of Virginia, arguments for expanding preschool education have often centered on the long-term benefits of this strategy. Economic arguments for preschool have fostered support by state-level economic development and workforce development interest groups. This support has helped Virginia’s Governor Kaine increase state funding of early childhood education. Child care state appropriations from combined state general fund and TANF sources increased by $9,800,000, or by 18.6 percent, from FY 2007 to FY 2008. Prekindergarten appropriations, funded as the Virginia Preschool Initiative, increased by $6,900,000, or 14.9 percent, from FY 2007 to FY 2008, with FY2008 state appropriations to prekindergarten programs at $53,100,000 (Clothier & Poppe, 2008).