Early childhood education is obviously not the only way to improve local labor force quality, and thereby improve local per capita earnings. Other policies can also improve local labor force quality. Many such policies can do so in a cost-effective manner.
Chapter 12 of Investing in Kids explores the potential for other types of improvement in local labor force quality to provide “economic development benefits” for a state economy. These “economic development benefits” are the improvements in per capita earnings in the state as the better labor force quality encourages the growth of more jobs and better jobs in the state.
One “labor force quality” improvement that I consider is a modest improvement in early elementary school test scores. I consider an improvement in early elementary scores for one student. This improvement is assumed to be what education researchers call an “effect size” of 0.1. In early elementary school, an effect size of 0.1 is typically equal to or slightly more than what students typically learn in one month of school.
I analyze the effects of this improvement for one student using methods similar to what I use to analyze the economic development benefits of universal pre-k and other early childhood programs. I use studies of how early elementary test scores are related to later earnings. I adjust downwards for the possibility that the student may move out of state. And I make moderate assumptions about how attractive a better quality labor force is to business.
I conclude that a test score improvement in early elementary school of 0.1 in effect-size units for just one student yields economic development benefits for the state economy of $8,312. This is the present value of the increased per capita earnings for the state economy associated with this improvement for one student.
If such an improvement were made for an entire class of 20 students, the benefits would be quite large. For such an improvement for a class size of 20 students, the total state economic development benefits would be 20 times $8,312, or about $166,000.
This analysis is essentially the “benefit” side of a benefit-cost analysis. Whether a policy intervention to improve test scores would pay off would also depend on program costs. But it certainly seems possible to envision many policies that might improve test scores in early elementary school by a month or two by more modest costs than these economic development benefits. How much would a tutor cost for one student? What about improvements in teacher quality due to better personnel and compensation systems? What about better curricula and better use of technology? How about expanded and improved summer school, or a longer school year?
The key point is: there are large economic development benefits to even slight improvements in academic performance in early elementary school. Therefore, it is worth making even quite costly investments if they are shown to be effective in increasing early elementary performance.