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A New Take on Economic Development: Universal Preschool
by Sara McCormick, CPPA Research Associate
In Utah’s recent legislative session, a bill was proposed
for an optional full day kindergarten program. In arguing for the bill, Senator Hillyard stated, “It is for the
kids and for us. Practically and
monetarily we save money … ” What if it
were taken a step further and care for children prior to formal elementary
education was viewed from a different perspective as an economic development tool.
Several recently published studies have done so.
Longer term studies of universal preschool programs reveal economic
benefits to the community as well as societal benefits, such as crime reduction. The following provides a brief overview of
these studies as well as the relevance to Utah.
Economic Impact of a Universal
National Preschool
Timothy Bartik, Senior Economist for the W.E. Upjohn
Institute for Employment Research, compares the permanent investment in high
quality preschool programs with more traditional economic development
subsidies. Bartik modeled his analysis
on the costs associated with an existing program in Chicago called the
Child-Parent Center (CPC). This program
for four-year olds is half-day and targets economically disadvantaged children.
Using data and costs from this program as well as an additional one in Michigan,
Bartik estimates that the net national annual cost of providing a universal
program of this nature would be $15 billion.
Since his proposed model would not target only economically
disadvantaged children, it is assumed that the effect would be lower than the
Chicago program. This estimate is then
compared with the effect of investing this same amount of money in more
traditional economic development activity.
Based on simulations, the study finds that by increasing the
quantity and quality of the state labor’s supply through a preschool program,
the investment in preschool has a larger return over the long term in terms of
the number of jobs generated.
Looking
at the impact on the present value of real earnings, investing $1 in either
business subsidies or preschool is estimated to yield approximately $3 from a
state’s perspective. From a national perspective, $1 invested in preschool results
in a $4 increase in the present value of earnings versus a less than a $1
return from business subsidies.
Clearly, an argument for the national government to fund this effort
which is often more palatable to states!
In addition, the study found that attending high quality preschool like
the CPC raised “long-run earnings of participants from low-income families by
16 percent.” (p. 28)
The Effects of
Investing In Early Education on Economic Growth
A 2006 study by William T. Dickens, Isabel Sawhill, and
Jeffrey Tebbs of the Brookings Institution used three separate economic models
to calculate the impact of an early childhood education program on the gross
domestic product (GDP). The analysis
was based on the Perry School Model as well as outcomes of universally
accessible programs currently available in Georgia and Oklahoma. The Perry
school model targeted at-risk, low-income children and provided 12.5 hours of
preschool per week for 30 weeks a year.
In addition, the parent had an hour and a half in-home meeting with the
child’s instructor. Based on other
research performed, the researchers assumed that only about 70% of eligible
students would access the program and that children from a wide range of social
economic status would benefit from it.
With
the preferred assumptions of the authors, the models predict “an increase in
GDP in 2080 of over two trillion 2005 dollars—an increase of about 3.5 percent.”
(p. 12) Putting this into financial
terms, by 2080, the cost of the program to the federal government will be $59
billion [net of existing
early childhood education and childcare expenditures] for a net fiscal surplus
of $341 billion. The findings do vary
based on the parameters/assumptions and model used with the range of GDP
increases from 1.34 to 4.02%. It is
important to highlight that for all the realistic scenarios constructed, a
positive increase in the GDP is realized.
Dickens, et al., note that because “most of these benefits
are long term while the costs of mounting the programs are immediate; the
political system tends to be biased against making such investments.” Given their findings, this is a disadvantage
to children as well as our economy.
Early Childhood
Development: Economic Development with a High Public Return
Art Rolnick and Rob
Grunewald of the Federal Reserve Bank of Minneapolis also analyzed the Perry
School Model in terms of its economic development potential. These researchers found that although
program participants did benefit from the program, the general public benefited
more. In fact, they calculated a 12%
internal rate of return to the public when factors such as participants being
less disruptive in future classes and committing fewer crimes, as well as a 4%
rate of return for program participants due to increases in after tax-earnings
and other benefits.
The researchers conclude that the rates of returns of more
traditional economic development activities need to be compared to this rate of
return. Often economic subsidies just
move businesses within the state, resulting in a zero public rate of return. They also question whether proposals for new
sports stadiums will have similar rates of return for the public or “reduce
crime, increase earnings and potentially break a chain of poverty.” (p. 3)
The Economics of
Investing in Universal Preschool Education in California
Lynn A. Karoly and James H. Bigelow of Rand’s Labor and
Population Unit performed a cost benefit analysis of providing universal
preschool education for California children. In addition, they looked at potential indirect economic as well as
non-economic benefits of such a program. As the basis for the analysis, results from the Chicago CPC were
used. It is assumed that 70% of
children will enroll in the program and, although disadvantaged children
(single parent households, poverty status, or low maternal education) will
obtain more benefit from the program, less disadvantaged students will also
benefit. The program is designed like
the CPC (see Bartik above) as a half day, academic year program. In addition, a one-year program is proposed
since lower rates of return are experienced from the second year. So it is more advantageous to serve a greater
number of children over a shorter period.
Based on the researchers’ preferred assumptions, each $1
invested in preschool education will result in a $2.62 return or a 10% annual
rate return over 60 years. Looking at a
range of assumptions, the rate of return falls between $2 and $4 for every $1
invested.
Karoly and Bigelow state that the benefits to society which
they calculated are likely understated because they do not account for “lower
intangible losses from crime and child abuse and neglect averted, reduced
reliance on public welfare programs, improved labor market outcomes for parents
of preschoolers, improved health and well being of preschool participants, and the
intergenerational transmission of favorable benefits.” (p. 30)
Universal Preschool
and Utah?
The percentage of Utah’s population in the preschool age
group (less than five years of age) is the highest rate of any state in the
country, 9.5%. (GOPB, ERG 2007). Of this
population, 40% are enrolled in preschool, which is not surprising given that slightly
over 50% of Utah children under the age of 6 live in households where either
both parents work or in working, single parent household. Given the size of this segment of our
population, the preschool age group is clearly an area to which we could pay
attention.
Some of the studies noted above looked at the educational
achievement for children that were enrolled in a high-quality preschool. Although findings are mixed, Bartik found
that high school graduation rate were higher for those that attended; Dickens
et al. found that the group of students that attended a high quality preschool
had “levels of educational attainment 0.9 years greater than members of the
no-program group” (p. 9).
Richard Kendall, Utah’s Commissioner of Higher Education,
noted that educational achievement for the younger generation (24-35 years) is
lower than for the older generation of Utah citizens (45-64 years). Educational attainment of Utah’s citizens is
critical for economic development.
Preschool is just one component of education but the studies indicate it
is a valuable step for the individual and our economy.
For more information and resources, see the Action Kit from the Institute for Youth, Education and Families
Bibliography
Bartik, Timothy, J. The
Economic Development Benefits of Universal Preschool Education Compared to
Traditional Economic Development Programs, W.E. Upjohn Institute for
Employment Research, www.upjohn.org/preschool/short_report.pdf
Census Bureau, QT-P26. Employment Status and Work Status in 1999 of Family Members 2000
Data Set: Census 2000 Summary File 3 (SF 3) - Sample Data
Dickens, William
T., Isabel Sawhill, And Jeffrey Tebbs, Brookings Institution, The Effects Of
Investing In Early Education On Economic Growth, April 2006
www.brookings.edu/views/papers/200604dickenssawhill.pdf
Governor's Office
of Planning and Budget, Economic Report to the Governor,governor.utah.gov/dea/ERG/ERG2007/Chapters/06Demographics.pdf
Karoly, Lynn A. and James H. Bigelow, The Economics of
Investing in Universal Preschool Education in California, 2005, Rand Labor and
Population Unit, www.rand.org/pubs/monographs/2005/RAND_MG349.1.pdf
Kendell, Richard E.,
Commissioner of Higher Education. Position
Paper on Education Finance and Reform For Utah Foundation Forum on September 7,
2006 http://utahfoundation.org/printview.html?viewpage=/forum2006/higher_ed.html
Rolnick, Art and Rob Grunewald, Early Childhood Development: Economic Development with a High Public Return, March 2003 http://minneapolisfed.org/pubs/fedgaz/03-03/earlychild.cfm
Hillyard, Lyle. Utah
State Legislature, 2007 session, http://le.utah.gov/asp/audio/index.asp?Sess=2007GS&Day=33&House=S
Listen SB49s2
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