Fiscal benefits: pre-K pays for itself in the long-run

As I discuss in my new book, From Preschool to Prosperity, pre-K and other early childhood programs provide important “fiscal benefits”. By “fiscal benefits”, I mean increases in tax revenue or reductions in needed spending, even at the same tax rates and with the same spending policies. These fiscal benefits allow governments to lower tax rates without cutting public services, or to increase public services without increasing tax rates, either of which will benefit taxpayers.

Fiscal benefits of early childhood programs occur through several mechanisms. In the short run, the most important fiscal benefit is the reduction in special education costs. Special education is very expensive, costing as much as $10,000 per year per child. High-quality pre-K leads to significant reductions in special ed assignments. However, these reductions vary greatly from study to study, ranging from 23 to 86 percent. Although all such reductions could yield significant cost savings, especially given that special ed assignments tend to persist over most of a child’s K-12 career, the wide range means there is some uncertainty about the exact magnitude of these shorter-term cost savings. (See ReadyNation for more exploration for the potential for special ed cost-savings for financing pre-K programs.)

In the longer run, a wider variety of fiscal benefits become important. These fiscal benefits include: savings in prison costs and criminal justice system costs due to the effects of early childhood programs in reducing crime; increases in tax revenue at the same tax rates due to higher earnings; reductions in welfare costs due to higher earnings. These longer-run fiscal benefits also vary greatly from study to study. For example, in the Abecedarian study of child care and pre-K from birth to age 5, there were no significant reductions in crime. This may reflect that the control group in this study also had lower crime rates. Therefore, the fiscal benefits of early childhood programs may be greater if the programs are targeted at groups that are likely to have more substantial problems, such as involvement with the criminal justice system.

A variety of simulation studies find that in the long-run, the fiscal benefits of pre-K are sufficient for such programs to pay for themselves. However, the studies vary in how long it takes for pre-K programs to become self-financing. Lynch’s work suggests that pre-K breaks even fiscally about 9 years after the program is begun. In contrast, Dickens and Baschnagel conclude that pre-K breaks even fiscally about 49 years after the program is begun. These different break-even periods reflect different assumptions about program costs and program effects.

The challenge for public policy is that policymakers make decisions in the short-run and often take a short-run perspective. Early childhood programs require short-run investments, and aren’t self-financing immediately. However, if policymakers can be encouraged to take a longer-run perspective, early childhood programs can help improve the long-run budget position of all levels of government, federal, state and local.

Government’s goal is not to make money. However, government policymakers and the public should be concerned about fiscal commitments that might yield escalating costs over time. In the case of early childhood programs, over time the fiscal resources needed to finance these investments will diminish, and eventually the programs will help either reduce taxes or finance other public services. In the meantime, these programs will provide important benefits, both to participating children and families, and to the national economy.

Posted in Distribution of benefits, Timing of benefits

Anti-crime benefits of pre-K are another good rationale for broad public support for pre-K

Another important spillover benefit of high-quality pre-K is the effect of these programs on lowering subsequent crime rates of participants. As discussed in my new book, From Preschool to Prosperity, these anti-crime effects provide broad public benefits by reducing the odds of becoming a crime victim, and by lowering prison costs.

Benefit-cost studies of both the Perry Preschool Program and the Chicago Child-Parent Center pre-K program have found significant anti-crime benefits. When economists put a dollar value on these anti-crime benefits (that is, when they add up the reduced criminal justice system costs plus how much people are willing to pay to reduce their odds of being victimized by crime), the results frequently show that anti-crime benefits are of similar order of magnitude to the future earnings benefits of pre-K.

Although I think anti-crime benefits are important, and appeal to some audiences, I think it is important to also emphasize positive benefits such as the broad increase in wages and prosperity due to broad access to quality pre-K. A focus on anti-crime benefits always runs the risk among some voters of stigmatizing the disadvantaged, which may reduce voter sympathy and support for educational and other programs to help the disadvantaged. This emotional reaction may not make rational sense, but there is a natural human reaction among some people to respond to threats of violence with solutions that rely on retribution and punishment.

However, from a rational analytic perspective, high-quality pre-K can be a cost-effective way of reducing the costs of crime. These anti-crime benefits of pre-K are why lobby groups such as “Fight Crime: Invest in Kids” have found broad support among police chiefs and sheriffs for crime prevention via early childhood education.

Posted in Uncategorized

Peer effects in K-12 education are important spillover benefits of early childhood education

One reason why all families benefit from publicly-funded preschool, including families who don’t enroll their children in public preschool, is the increased educational achievement due to peer effects in K-12 schools.  As discussed in my new book, From Preschool to Prosperity, these peer effects provide an important “spillover” rationale for why preschool might attract broad voter support.

Empirical evidence finds that everyone in a kindergarten class benefits if a higher percentage of the kindergarten class enters with better skills from high-quality pre-K. The effects on an entire class’s end-of-kindergarten test scores, due to having one additional child who enrolled in high-quality pre-K, are 16% to 50% greater than what would be expected from the direct effects on that individual child’s achievement. Other studies find similar peer effects in subsequent grades, with achievement gains of children during a given grade being higher if the entering skills of their peers in the same class are higher.

Peer effects make intuitive sense. If my child’s peers have better cognitive skills, the teacher doesn’t need to spend as much time remediating these peers’ skills, and can spend more time enhancing my child’s skills. If my child’s peers have better social skills and behavior, less class time is lost to classroom disruption, and my child will learn more. In addition, my child may directly learn better cognitive and social skills from his or her peers.

Peer effects provide an argument from enlightened self-interest for why all families with children in public school should support government efforts to broaden access to quality pre-K. Broader access to pre-K will improve overall achievement gains in the K-12 system.

Posted in Distribution of benefits

Spillover benefits of early childhood education may more than double economic benefits

In my new book, From Preschool to Prosperity, I devote an entire chapter to discussing “spillover benefits” of early childhood education, that is benefits that spillover from the families participating in early childhood programs to other people. Evidence suggests that spillover benefits are large enough to more than double economic benefits.

Spillover benefits are important because they provide an argument, from the perspective of enlightened self-interest, for why all voters should support early childhood education. Some voters do not have children. Some voters with children may believe that their families do not need any government assistance with early children education. Why should such voters be willing to pay taxes to provide early childhood education for “other people’s children”? Compassion is one rationale, but enlightened self-interest provides a complementary rationale: early childhood education can be argued to provide economic benefits for all voters, including those who do not have children in these programs.

One important spillover benefit of early childhood education is the effects of broader development of skills on overall business competitiveness and hence worker wages. Business productivity and competitiveness depends on overall worker skills, not just one individual worker’s skills. I can be the most skilled worker in the world, but my employer will find it more difficult to introduce new technologies unless my co-workers are also skilled. Greater skills by my co-workers will thus enable my employer to be more competitive and increase my wages. In addition, my employer’s competitiveness and ability to pay high wages may also depend on the skills of the suppliers to my employer. Finally, my employer’s competitiveness, in high tech clusters such as Silicon Valley, may depend on the flow of ideas and skilled workers across competing firms in related industries, and therefore greater skills in these clusters will increase overall cluster wages.

These skill spillovers explain the empirical finding that an individual’s wages depend not only on his or her own educational level, but also on the average education level of all other workers in the same metropolitan level. These empirical estimates of wage determinants find that the spillover effects on others’ wages of an individual getting more education actually are greater, summed over all workers, than the direct effects on the individual’s own wages.

Therefore, I benefit, and my children benefit, if “other people’s children” get more skills, through early childhood education or other policies. This goes against the intuitive notion that some people have that there is a fixed number of good jobs that pit my children’s interests against the interests of other children. This intuition is wrong because when we increase everyone’s skills, the number of good jobs will expand in response, and will expand enough that everyone’s opportunities are enhanced.

We’re all in this economy together. If policies broadly raise skills, this will increase overall economic productivity and prosperity. Early childhood education is one research-proven strategy for broadly increasing skills in a cost-effective manner.

Posted in Economic development

My article with Elaine Weiss in Huffington Post on pre-K as part of pro-children strategy

In a recent article in Huffington Post, Elaine Weiss and I discuss pre-K’s potential as part of a pro-children strategy. Elaine Weiss is National Coordinator of the Broader, Bolder Approach to Education at the Economic Policy Institute.

The article describes some of the evidence from my new book showing that pre-K works, and in particular highlights the research evidence from Boston. The article argues that pre-K can overcome fade-out of effects as children age, and that this works particularly well when pre-K is accompanied by smart investments in K-12 education. Massachusetts again provides a good example of such smart investments.

As both my book and the article argue, pre-K and other early childhood education investments can be even more effective as part of more comprehensive strategies. Early childhood education investments are not the only investments in skills that can work. And policies to invest in skills should be accompanied by policies to create more demand for high-skill, high-wage jobs.

Posted in Early childhood program design issues, Economic development

My article for Bridge magazine on Michigan’s pre-K program published September 30

My article for Bridge Magazine on Michigan’s pre-K program was published on September 30.  Bridge Magazine is a publication of the Center for Michigan, a non-partisan organization that examines policy issues connected with Michigan’s future.

To sum up the article: Michigan has significantly improved pre-K access in the last two years. But Michigan’s pre-K program may need additional funding, intelligently spent, to maintain its past record of getting high-quality results.

Posted in Early childhood program design issues

The pre-K controversy over teacher credentials: mixed evidence, but successful programs tend to use certified teachers paid public school wages

My new book, From Preschool to Prosperity, includes a discussion of the controversy over whether pre-K programs get better results if they use credentialed teachers. The controversy arises because the research on this topic is mixed.

However, even though the research is mixed, the pre-K programs with the best evidence of success tend to use credentialed teachers paid public school wages. This is true for Perry Preschool, the Chicago Child-Parent Center program, and the universal pre-K programs in Boston and Tulsa.

Obviously more research on the impact of different teacher credential requirements is warranted. But if one wants greater assurance that a pre-K program will be effective, it seems prudent to follow the example of programs with demonstrated success, and seek to hire credentialed teachers and pay wages close to the public school standard.

It seems likely that paying higher wages will reduce teacher turnover. Most studies of teaching suggest that new teachers are less effective than teachers with some experience, so higher teacher turnover would be expected to lower program quality.

It is possible that the mixed research on teacher credentials is related to the interaction of credential requirements with salary standards. Imposing credential requirements, but then paying salaries below public school levels, may increase teacher turnover by restricting the pool of eligible teacher candidates to those who have the alternative of teaching in the K-12 system, but then underpaying them relative to their alternative opportunities.

In addition, the impact of teacher credentials and salaries may depend on the size of the pre-K program. A small program may be able to find some dedicated staff who will work at the program despite the low pay. At a large scale, this strategy is harder to carry out.

Given the importance of quality in pre-K, a wise strategy is to err on the side of overinvesting in quality, until further research clarifies what program features are essential for quality.

Posted in Uncategorized