As mentioned in a previous post, one possible short-term benefit of pre-k is an increase in local property values. The argument is that preschool will increase elementary test scores, and higher elementary test scores have been shown to increase property values. Calculations based on this research suggest that due to elementary test score effects, an expansion of pre-k should result in property value increases of as much as 13 times the annual program costs of the expanded pre-k.
I also show in chapter 7 of Investing in Kids that property value increases of pre-k could be even higher, if parents and others fully understood how large the effects of pre-k are on the child’s later earnings as an adult. Only a portion of the effects of pre-k on the adult earnings of former child participants are due to the “hard” skills that are measured by elementary school tests. Much of the effects of pre-k on adult earnings are due to changes in behavior and soft skills, which are reflected in increases in educational attainment, employment rates, and wage rates that go well beyond what would be predicted based on school test results.
I calculate that if parents fully understood the earnings effects of pre-k, the resulting property value increase could be as much as 80 times annual program costs for pre-k. (Given the magnitude of property wealth, even this large ratio of property value increases to annual pre-k costs only requires a housing price increase of 5 %.) At average property tax rates in the U.S., such a property value increase would be sufficient for the increased property tax revenues to cover annual program costs of the pre-k expansion. (Some property tax limitation provisions of some states’ constitutions may prevent these increased property valuations from increasing property tax bills, so such a self-financing effect would not occur in all states.)
This calculation suggests one strategy to increase the short-term political benefits of pre-k. Suppose parents and the general public were more fully educated about the benefits of high-quality pre-k. Suppose parents and the general public had better comparative information about the availability and cost of high-quality pre-k in different local economies. This increased education and information should result in high-quality pre-k having larger property value effects. These higher property value effects provide greater property tax receipts to local governments, and provide greater short-run benefits to homeowners, who comprise a majority of voters.
Such educational/information campaigns would also more directly increase short-run political support for expanding pre-k. Voters who more understood the benefits of pre-k for their child’s future, and their state or local area’s future, and more fully understood the quality of their own state or local area’s efforts in pre-k, would be more likely to support a well-planned expansion of high-quality pre-k.
Using property value increases as a rationale for human capital investments has a long tradition in the U.S. Claudia Goldin and Larry Katz, in their book The Race Between Education and Technology, have a great quotation on this topic. The quotation comes from the Iowa Department of Public Instruction in 1914:
“The landlord who lives in town… may well be reminded that when he offers his farm for sale it will be to advantage to advertise, “free transportation to a good graded school”.” (Goldin and Katz, p. 193)
The same type of property value argument can be used today to argue for high-quality preschool.