What are economic benefits and why do we care?

My just-published book, From Preschool to Prosperity: The Economic Payoff to Early Childhood Education, focuses on preschool’s economic benefits. What are “economic benefits” and why should we care about them? Many people have an adverse reaction to focusing on the dollars and cents associated with human service programs, so there should be some rationale for what could seem a cold-blooded approach to helping children.

By “economic benefits”, I simply mean the increase in earnings. Preschool and other early childhood programs increase earnings in three ways:

  1.  Early childhood programs increase earnings as adults of former child participants, by helping set off a process that leads to these former child participants having higher skills as adults.
  2. Many early childhood programs also increase parents’ earnings. Child care programs free up time for parents to work or go to school, both of which increase parents’ long-run skills and earnings. Parenting programs not only empower parents to be better parents, but also help parents improve their own life course.
  3. These increases in skills of former child participants and parents have spillover benefits for the earnings of other workers. If my co-workers have better skills, this helps my earnings because it better enables my employer to introduce new technologies and be more competitive in the global market.

Why should we care about these earnings increases? One obvious reason is that increased earnings allow individuals to increase the quality of their life. But earnings increases are valuable not only because they allow increased consumption, but also because increased earnings from work provide individuals with a greater sense of self-respect, empowerment, and autonomy.

Beyond the value of earnings benefits for those receiving the earnings, such earnings increases also have benefits for the business community. Higher earnings from higher skills means that businesses benefit both through greater availability of skilled workers and greater consumer demand for their products. The core of the “business case” for preschool rests on these programs’ effects on earnings.

Earnings increases also have fiscal benefits for governments and taxpayers. “Fiscal benefits” are some combination of higher tax revenues and/or lower public spending needs without any change in tax policy or spending policy. Such fiscal benefits allow the government to lower tax rates or raise public services, which benefits taxpayers. Earnings increases produce fiscal benefits from the taxes on these earnings, and the reduced welfare expenditures that will accompany increased earnings.

Earnings benefits of public programs are valuable, and early childhood programs are a cost effective way of delivering such earnings benefits. From Preschool to Prosperity presents the research evidence for that assertion. The book tries to make that evidence accessible to a broad audience, and in a book that can be read in less than 2 hours.

From Preschool to Prosperity is available as a pdf (free from the Upjohn Institute), on Kindle ($0.99) and in paperback ($14.99 or whatever discounted price Amazon is experimenting with right now).


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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