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).

Recommended ed policy blog

One of my recent blog finds is Dean Millot's blog on the Education Week website. Dean offers straight talk on a range of school improvement topics from a market-driven perspective. His critiques of school district requests for proposals (RFPs) on school improvement topics are usually dead on (and this comment is from yours truly -- someone who reviews RFPs on a daily basis). Check out this blog sometime.

Educational Policy Institute

Check out the Educational Policy Institute (EPI), a non-profit think tank dedicated to the study of educational opportunity. EPI research focuses primarily on the issues related to educational opportunity throughout the education continuum, from early childhood education to graduate and professional studies, including adult education and workforce development. Specifically, EPI focuses on academic preparation for, access to, and success through postsecondary education, since the global society increasingly demands skill sets that require learning and training past compulsory school. EPI is also committed to research which measures and improves the quality of education these students receive. www.educationalpolicy.org.

Value-Added Assessment

Found this nice selection of articles and reports on the Teacher Quality Partnership website on the topic of value-added assessment: http://www.teacherqualitypartnership.org/valueaddedassessment.html.

New Education Sector Report: Waiting to be Won Over: Teachers Speak on the Profession, Unions, and Reform

In the world of educational policy, where the chatter of policy wonks and policymakers often edges out the voices of key stakeholders, it is refreshing to see a publication such as "Waiting to be Won Over" (Education Sector, 2008), which shares the opinions of teachers on a wide range of issues facing K-12 education today. Want to know about teachers' opinions on incentive pay? Burnout? Teacher retention? Unions? Then dig into this great report. A link to the report is provided below.

Use of Cost-Benefit and Cost-Effectiveness in K-12 Education

Hooray for the new Center for Benefit-Cost Studies of Education at Teachers College, Columbia University. The Center is led by the very able Henry Levin, the William Heard Kilpatrick Professor of Economics and Education at Teachers College, Columbia University, and the David Jacks Professor Emeritus of Higher Education and Economics at Stanford University, and Clive Belfield, an Assistant Professor in the Economics Department at Queens College, the City University of New York, and widely published author in the economics of education. Levin and Belfield most recently contributed to an examination of the economic losses associated with high school dropouts in California.

This focus on cost-benefit (and cost-effectiveness) studies in K-12 education is long overdue. Standards-based reforms come in many expensive forms these days, ranging from school choice and charter schools to school-based management and year-round schedules. Most educational reforms face constraints in the availability of budgetary and other resources, and limiting their evaluation to educational outcomes without considering their costs provides an inadequate basis for decision-making. Both costs and effectiveness must be known in order to make good educational decisions. Cost-effectiveness analysis is a proven evaluation tool designed to assist in comparing alternative programs or policies when resources are limited and providing guidelines on which of the alternatives provides the most impact relative to cost.

Popular in other fields, such as health care, cost-effectiveness analysis is, unfortunately, rarely used in education. A panel of experts convened by the New York State Board of Regents in 1995 identified three factors hampering use of cost effectiveness evaluation in education. One of those barriers was the lack of incentives for superintendents, principals, and other stakeholders to use cost effectiveness in decision making (NY State Board of Regents, 1996). Levin (2001) has also pointed to policymakers’ lack of demand for cost-effectiveness analyses as a reason for their paucity in educational evaluation.

Policy could be an effective tool to promote the use of cost-effectiveness analysis. The federal government could incentivize its use through inducements, such as discretionary grants to support evaluation activities for the implementation of innovative programs and policies. This approach has proven effective in promoting “scientifically-based research” and rigorous evaluation through discretionary grants under the No Child Left Behind Act. However, federal grants provide a very small percentage of school revenues and, therefore, have minimal impact on creating a widespread demand for cost-effectiveness analysis.

States, on the other hand, fund a considerable share of local education and exercise strong authority over local spending. State policy on use of cost-effectiveness analysis could have a substantial impact on school district practices. Working on this issue with a powerful bipartisan public policy group such as the National Governors Association or the Education Commission of the States might provide the lever to ensure that cost-effectiveness analysis becomes a widely accepted technique of educational evaluation.

Educational decision-makers need to understand the relationship between policy expenditures and student achievement outcomes in order to make the most informed decisions on how to allocate funding. Use of cost-effectiveness analysis in program evaluation holds the potential to make considerable contributions to informed public discussion on educational policy and resource allocation.

The Economics of Early Childhood

Economic analyses of early childhood programs are hardly new: the High/Scope Perry Preschool Program cost-benefit analysis is an obvious example. But a new study by the RAND Corporation, "The Economics of Early Childhood: What the Dismal Science Has to Say About Investing in Children," aims to serve as a primer for policy-makers in the use of cost/benefits/rate-of-return analysis in making early childhood policy. A link to the study report is posted below.