Income distribution effects of high-quality full-time child-care and preschool, birth to age 5

Chapter 8 of Investing in Kids also considers the effects on different income groups of more intense early childhood programs. I consider the effects of a program similar to the Abecedarian program.

The Abecedarian experiment provided full-time child care and preschool, from shortly after birth to age 5, to children from disadvantaged families. The program was run as a random assignment experiment, so we have rigorous evidence on its effects. We have follow-up information on Abecedarian participants through age 21. The Abecedarian program is a past experiment. However, it is quite similar to the current Educare demonstration program sponsored by the Ounce of Prevention Fund and the Buffett Early Childhood Fund.

I consider how an Abecedarian program targeted at the disadvantaged would affect the income distribution. I assumed that such a program would be restricted to families in the lowest 15 percent of the income distribution, but would be provided to all such families. One reasons for targeting this program is that it is so expensive. The program’s gross costs, over the five-years of service, are almost $80,000 per child. Even if the program was targeted at low income families, its annual net costs would be about $40 billion.

An Abecedarian-style program for every child whose family’s income was in the lowest 15% of the income distribution would have large effects on average incomes in the lowest income quintile. These lowest income quintile households have less than about $20,000 in annual income. An Abecedarian-style program would boost the earnings of the lowest income quintile by over 35% of this quintile’s income.

The Abecedarian boost to the lowest income quintile is considerably more than is provided by one year of half-day school year preschool. As detailed in a previous post, such a preschool program does provide a significant boost to the earnings of the lowest income quintile, of over 6% of quintile income. But the Abecedarian boost is over five times as great.

The Abecedarian program’s benefits to the lowest income quintile are so great that, despite its high costs, such a program provides economic development benefits to a state economy that exceed program costs.  Each dollar of program costs increases the present value of state residents’ earnings by over $2.

On the other hand, the Abecedarian program has large costs for the remaining 80% of all households, those with annual household income over $20,000. Due to the taxes needed to pay for a full-scale Abecedarian program, these remaining four income quintiles would suffer income losses of about one-half of one percent of income. This is a considerable cost to pay for one government program. It could be argued to be affordable, but it might be a hard sell.

These large costs for most households contrast with universal pre-k. As detailed in a previous post, universal pre-k has net benefits for about 60% of all households. Universal pre-k’s net excess of taxes over benefits for the remaining 40% of upper income households are only one-fifth of the net losses caused by the Abecedarian program.

Of course, an Abecedarian-style program does not need to serve all children from low-income families.  But a more limited Abecedarian program would face the challenge of deciding which low-income households to choose from among those eligible. This raises questions of equity among low-income households. In addition, scaling back the program would limit the benefits as well as costs of the Abecedarian program.

A full-scale Abecedarian –style program could have dramatic effects on the income distribution. But it is so targeted and so expensive that it is reasonable to doubt whether such programs could be politically expanded to a large-scale.  Such large-scale expansion might require a considerably different political and economic climate.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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2 Responses to Income distribution effects of high-quality full-time child-care and preschool, birth to age 5

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