Addressing the opportunity gap

Posted on July 10, 2012 by timbartik

In a New York Times column on July 10, 2012, David Brooks discusses some recent findings of Harvard political scientist Robert Putnam, who is best known for his work on social capital, most notably his book Bowling Alone.  Putnam’s recent work, according to this report, presents some data showing trends over the last 40 years towards growing gaps in the U.S. between different income classes in the time and money invested in children.

Putnam’s work appears to be largely as yet unpublished in the scholarly literature. Other summaries of Putnam’s recent work can be found in an article at the Atlantic by Garance Franke-Ruta, and in a blog post by David Weinberger.

Based on these reports, it appears that Putnam’s in-progress research compares investments of time and money in today’s children with investments made in children 30 or more years ago. The main argument is that there are increasing class disparities, in favor of the upper class, in the time and money invested in children. This growing gap includes investments in various “enrichment activities” as well as the time spent reading to kids or other parental quality time with kids. According to Weinberger’s report and Brooks’s report, Putnam finds that these class-based disparities are greatest in infancy.

One immediate consequence of these growing class disparities in parental investments are growing class disparities for school-age children in participation rates in sports, and in extracurricular activities such as music lessons and arts lessons. In addition, there appears to be growing class gaps in involvement in various social institutions, such as churches and community groups.  Finally, there are growing class gaps in whether young people feel that they can trust other people, and in whether they feel they have other people they can count on for support.

But what do we do about these trends? Brooks’s conclusion on policy alternatives is pessimistic:

“Equal opportunity, once core to the nation’s identity, is now a tertiary concern. If America really wants to change that, if the country wants to take advantage of all its human capital rather than just the most privileged two-thirds of it, then people are going to have to make some pretty uncomfortable decisions.

Liberals are going to have to be willing to champion norms that say marriage should come before childrearing and be morally tough about it. Conservatives are going to have to be willing to accept tax increases or benefit cuts so that more can be spent on the earned-income tax credit and other programs that benefit the working class.”

(By the way, there are some interesting variations between the online version and the print version of Brooks’s column. The print version asks conservatives to accept “higher taxes” and does not mention benefit cuts as an option.  The online version adds that liberals should be “morally tough” about marriage as a social norm, which is not mentioned in the print version. I assume the online version reflects Brooks’s more recent editing.)

I don’t think the policy alternatives are necessarily so bleak. There are broad-based public policies that would help improve the well-being of the vast majority of all Americans, but would particularly help lower income families and their children. Cost-effective job creation policies would help boost earnings of most Americans, but would particularly help provide lower-income families with more resources to meet a variety of needs, including their children’s needs.  High-quality universal preschool programs would help improve the adult earnings of all former child participants by similar dollar amounts, but the same dollar boost to all income classes represents a tremendous redistribution of income.

It is true that “doing something” about any large social problem requires some resources, which requires either raising taxes or cutting spending on some other program. But the required public expenditures are not necessarily huge given the size and resources of the U.S. For example, universal preschool for all 4-year-olds might have annual costs in the range of $15 billion (half-day program) to $30 billion (full-day program).  But in a country of over 300 million people, $15 billion to $30 billion amounts to only $50 to $100 per capita, which is certainly not an extraordinarily high cost. If we decided to undertake this investment, either through federal initiative, or through state and local initiatives, we could certainly find relatively modest changes in taxes or other spending priorities that would free up this magnitude of resources. And middle-class Americans would find that the benefits for their children of universal pre-K would on average exceed the costs of paying for universal pre-K through tax increases or other budget changes.

My main point is that it is possible to help the poor or lower-income groups while at the same time growing the economic pie for most Americans.  Let’s start with policies, such as high-quality early childhood programs, that have rigorous research evidence of working, and that provide broad benefits for many groups. Once we’ve done everything we can in those policy areas, we can then consider the “uncomfortable decisions” that require other Americans to make significant sacrifices for the sake of reducing income inequality.

Posted in Distribution of benefits, Early childhood programs | Comments Off on Addressing the opportunity gap

Politically-feasible policies to reduce poverty: the role of early childhood programs

Posted on July 9, 2012 by timbartik

A recent issue of The American Prospect has a special section focusing on poverty. This special section has numerous useful ideas for addressing poverty, such as expanding the Earned Income Tax Credit, increasing customized job training programs, and expanding career education. Yet in the end, I don’t think that this special section deals with the key issue: What types of anti-poverty policies are sufficiently cost-effective and politically sustainable that they could be run on a large enough scale to significantly reduce U.S. poverty? In this blog post, I focus on one such politically sustainable anti-poverty policy that deserves more detailed attention in poverty policy discussions: high quality early childhood programs.

To get a sense of a size of the U.S. poverty problem, consider the “poverty gap”: the annual dollars needed to bring each family and individual in poverty up to the poverty line. In the U.S., for 2010, this poverty gap was $162 billion. (Calculated using data on families and unrelated individuals from this Census Bureau table.) In practice, any income transfer program that sought to deal with U.S. poverty would also have to deal with the many families and individuals with income just above the poverty line. So any income transfer solution to the poverty program would have to transfer many hundreds of billions of dollars per year. Any earnings solution to the poverty problem would have to generate hundreds of billions of dollars per year. For example, if we imagine a skills training solution to the poverty problem with an annual rate of return of 10%, the required job training investment would be somewhere in the trillions  of dollars.

As Robert Greenstein of the Center on Budget and Policy Priorities points out in the special section, we have been able to run some anti-poverty policies on a large enough scale to significantly reduce poverty.  Such policies principally reduce poverty for the elderly, who are considered to be “deserving poor” who have earned their government benefits.  Yet it seems that this success is not easily extended to other anti-poverty programs. Given the economic challenges facing many working class and middle class Americans, there is much voter resistance to paying increased taxes to expand government assistance to the non-elderly poor.

The customized job training programs and career education programs advocated by Harry Holzer in the special section would be helpful. But it seems unlikely that such programs will be expanded to a sufficient size to really make a dent in the poverty problem.  As long as such programs are perceived as programs targeted at the poor, their scale and scope will be limited.

High-quality universal early childhood programs could make a significant contribution to helping solve the poverty program, but only in the long-run. A universal full-day pre-K program would in the long-run, based on some conservative estimates, add at least $75 billion in annual adult earnings to children from disadvantaged families.  (This calculation is based on estimates from studies of Tulsa that full-day pre-K on average boosts annual future adult earnings of children eligible for a free lunch by about $2,500 per year. Such children were 37% of the public school population in 2007 (Table 2-1), and the public school population is about 85% of all children of school age (Table 41). A universal program might enroll at least 70% of these children, based on Oklahoma’s experience.  Total U.S. workers are a little over 140 million. $2,500 times 37% times 85% times 70% times 140 million is $77 billion.) These long-run effects would be achieved after the entire workforce had the opportunity to participate in high-quality universal preschool.

The key political point is that such anti-poverty benefits could be achieved with a universal program that provides services for which all children are eligible. This universal eligibility makes the program much more politically potent.  Universal pre-K would not solve the poverty problem. But it would make a big dent in the problem, while delivering valuable services to children from all income classes for which voters from many income classes may be willing to pay higher taxes.

Posted in Distribution of benefits, Early childhood programs | Comments Off on Politically-feasible policies to reduce poverty: the role of early childhood programs

Why education is important to the economy, especially the local economy, and how business can help improve education

Posted on June 14, 2012 by timbartik

On June 13, I gave a presentation to a group of business leaders on why education is important to national and local economic development. The presentation then went on to review how we’re doing on educational quality, what the key “leverage points” are in improving educational quality, and what businesses can do to help improve education. The presentation can be found here, and the accompanying PowerPoint slides here.

The main reason that education drives local economic development is that the overall skill level of the local labor force is one of the key drivers of local job growth and wage growth.  If some workers get better skills, this not only benefits those workers, but also increases the employment rates and wage rates of everyone else in that local economy.

This particular presentation focuses on educational quality trends in the Kalamazoo/ Battle Creek area, but these trends are fairly typical of the U.S. Across the U.S., there has been some improvement in school test scores. However, high school dropout rates are still too high, and high school graduates still do not have high enough skill levels. The educational system has made some improvements, but it is short of where the system should be to adequately support increased earnings per capita growth for all workers.

But improving educational quality in a complex educational system is challenging. We need to focus on the key “leverage points”, where politically feasible investments of money and political capital can yield large changes in educational quality. The presentation argues that the two key leverage points are early investments (pre-K to 3rd grade)  in added learning time, and later investments (high school or later) in more career-relevant education.

Early investments work because people are more malleable at early years, and because this malleability allows us to make investments that increase people’s future ability and motivation to learn at later ages. Pre-k’s long-run effects are not due solely to program participants knowing a few more letters or numbers at kindergarten entrance, but rather are due to pre-k’s effects in providing hard skills, soft skills, and self-confidence that increase learning in later grades.

At later ages, more learning time by itself is not enough. Rather, we need to focus on in providing educational time that is more career-relevant, more motivating, and more hands-on. There is good evidence that well-designed career and technical education programs can work for a wide variety of students, assuming they have at least some minimal skill levels entering high school.

What can businesses do to affect these educational leverage points? First, they can advocate for changes in public policy, to supply more funding support for early childhood education, extended learning time in early elementary school, and career and technical education. Second, they can donate funds to support scholarships for early childhood education and summer school in early elementary school, and to provide support for some of the extra expenses of career and technical education. Third, they can be willing to become directly involved with career and technical education, for example by providing the job shadowing and internship opportunities that are needed in these programs.  Finally, they can provide support and encouragement for individual employees and employee groups to target their volunteer efforts on some of these key leverage points, for example by helping out as tutors in pre-K to 3rd grade, and volunteering in career and technical education programs.

Why should businesses become involved in these educational issues? Because it is in the enlightened long-run self-interest of the business community to do so. If we want higher rates of broad-based economic growth in this country, which will help support the prosperity of many businesses, we need to increase our labor force skills. This can be most effectively done through increasing investments in the early development of skills, and then later on focusing that skills development around career relevant skills.

Posted in Early childhood programs, Economic development | Comments Off on Why education is important to the economy, especially the local economy, and how business can help improve education

What is needed for large-scale evaluation of the effectiveness of pre-K programs?

Posted on June 12, 2012 by timbartik

The Center for American Progress recently released a report on improving the efficiency of publicly-supported early childhood programs.  This report includes many useful recommendations. These recommendations include national standards for pre-K learning, assessment, and data collection.

However, I want to focus in this blog post on one crucial omission, in this otherwise excellent report. The report mentions that policymakers need to “determine what is working and why” in early childhood education. Yet the report never discusses what I believe to be the most promising approach to rigorous, large-scale evaluation of pre-K programs. This promising approach is “regression discontinuity design” evaluation of pre-K programs. If this approach is to be implemented, it has some unusual implications for what data on pre-K programs are to be collected, and how such data are to be collected.

For any educational or social program, evaluations of program effects may be biased by unobserved pre-program differences between participants and non-participants. These differences may arise from many causes, including selection by program administrators, selection by program participants (or their parents, in the case of early childhood programs), or selection by various happenstances. Because of these unobserved differences between participants and non-participants, a comparison of outcomes for participants versus non-participants may not reveal the true effects of the program, but rather may be due to these unobserved differences. This is referred to as “selection bias” in estimating program effects.

In the case of pre-K programs, program administrators may in some cases seek to enroll “needier” children. This will result in program participants tending to have worse outcomes than non-participants, due to needier children being selected. On the other hand, among eligible children, more assertive parents may be more likely to enroll their children in a pre-K program. This will tend to select children for pre-K participation who may tend to do better even without the program.

The “gold standard” for eliminating selection bias is random assignment. If eligible families who apply to a pre-K program are randomly selected for participation, then we can reasonably expect that as the sample size increases, program participants and non-participants will on average be very close in all observed and unobserved characteristics.  Therefore, any differences in outcomes between participants and non-participants must reflect a true effect of the program, rather than unobserved pre-program differences.

However, it is infeasible to do random assignment evaluation of all pre-K programs. Random assignment experiments are difficult to run properly. They require soliciting excess applications for available slots, which is both logistically difficult and troublesome ethically. It is easy for program staff to make errors in random assignment, so it is better for random assignment to be run by an independent researcher.  For universally accessible pre-K, it would be ethically questionable to exclude some children from a program that is meant to be accessible to everyone.

A good substitute for random assignment in evaluating pre-K programs is what is called a regression discontinuity design. This approach has been used to evaluate pre-K programs in multiple states, and in Tulsa.   Regression discontinuity designs only allow an evaluation of the effects of pre-K programs on kindergarten readiness, as measured by kindergarten entrance test scores.  However, knowing the true effects of a pre-K program on kindergarten readiness is useful information. Such information can tell which programs and which program approaches are working in affecting kindergarten readiness. This information can be used over time to improve program effectiveness.

In the case of pre-K programs, implementing regression discontinuity requires giving the identical tests to pre-K program entrants, and to graduates from these same pre-K programs at kindergarten entrance, at the same time of the year.  With an age cutoff for kindergarten entrance, we will have child respondents who range in age over a two year period. In particular, there will be some individuals who are just old enough to enter kindergarten, and others who just missed the age cut-off for entering kindergarten and are entering pre-K.

With the continuous range of ages, we can control for the influence of age on test scores. With the age cut-off for entering kindergarten, we have an abrupt shift in whether children were enrolled in the pre-K program for a year or not. If the pre-K program is effective, we expect to see that while test scores will smoothly increase with age, they will take an abrupt jump as we go from children who just missed the age cut-off for being in pre-K the previous year to children who just made the cut-off for being in pre-K the previous year.  Because everyone in the sample participated in the pre-K program being examined, there is no selection bias.

This regression discontinuity approach relies on comparing test scores at pre-K entrance, and kindergarten entrance, to compute program effects, with the range of ages considered controlling for age. Pre-K program participants are in the control group when they are entering pre-K, and in the treatment group when entering kindergarten. We don’t have to do any complicated random assignment or matching or other analyses to create a control group.

However, this approach depends upon a somewhat unusual testing procedure. We have to use tests that are appropriate to administer to both pre-K entrants and kindergarten entrants, with the tests covering the wide range of abilities of children over that two-year age interval.  We have to administer the tests in the same way at the same time of year, even though it might be more customary to test program graduates at the end of the pre-K year rather than at the beginning of kindergarten.   This is not a testing approach that is likely to be adopted by accident.

I should mention that this approach is compatible with testing a wide variety of skills. For example, the administered tests could examine a child’s social skills, not just more academic skills. Nor does this approach necessarily involve over-testing children. The tests could be quite short, as long as they are given in the same form to both pre-K entrants and kindergarten entrants.

If we are to have continuous improvement in pre-K programs, we need good information on their effectiveness. This requires approaches that can separate the true effects of various pre-K programs from the effects of who is selected into the program.  Simply collecting good data on children, as the CAP report advocates, isn’t enough. Good data by itself will not identify and estimate pre-K programs’ true effects.  Program effectiveness analysis on a large scale requires the inclusion of some assessment data that are collected identically at both pre-K and kindergarten entrance.

Posted in Early childhood program design issues, Early childhood programs | Comments Off on What is needed for large-scale evaluation of the effectiveness of pre-K programs?

ReadyNation issue brief on my book

Posted on June 7, 2012 by timbartik

ReadyNation has a new and improved version of an issue brief that summarizes my 2011 book, Investing in Kids.

This issue brief summarizes the main points of my book, and accompanies this summary with some great graphics. Specifically, the issue brief emphasizes:

1. The sizable national as well as local economic benefits of a wide variety of early childhood programs.

2.  The surprisingly high proportion of 4-year-olds who end up living in the same state or metro area as working adults.

3. The significant effects of universal pre-K in raising property values by attracting parents to a local housing market.

The issue brief also includes estimates for each state of universal pre-K’s benefits relative to costs.

Posted in Early childhood programs, Local variation in benefits, National vs. state vs. local | Comments Off on ReadyNation issue brief on my book

What is a good business climate for job creation? Changing the conventional wisdom

Posted on June 1, 2012 by timbartik

Most people use some simple principles to guide their judgments about public policy. I think this is quite understandable. Why should we expect most people to spend their time trying to interpret conflicting empirical studies?

As a recent blog post by Digby reminded us, the conventional wisdom is that the only conceivable “job creation policies” are based on “low taxes and regulation”.   As Digby says, “Many people…can’t really see how anything else would work [to create jobs].”

As this blog has outlined in numerous posts, indeed in most of its posts, there are many other policies that can work to create jobs at the state, local, and national levels.   In particular, high-quality early childhood programs have been shown by a great deal of rigorous empirical work to be highly-cost effective in creating additional jobs and earnings opportunities, and can work when implemented on a large scale.

On the other hand, it is difficult to support the other extreme position that taxes and regulation are irrelevant to job creation. There is significant empirical evidence that there is a modest response of new business activity in a state to higher business tax rates, holding public services constant.

How can this somewhat complicated empirical reality be summarized in some simple principles? I would propose the following:  to create jobs and broad-based economic prosperity in your state, local, or national economy, reduce the costs of business job creation while improving your economy’s human capital.

The costs of business job creation are the additional costs associated with some business expansion. These costs can be reduced by services to help facilitate expansion by small and medium sized business. These “marginal costs” of business expansion can also be reduced by lower marginal tax rates on business.  By marginal tax rates, all that I mean are the additional taxes associated with some business location or expansion decision.

By human capital, all I mean are whatever worker skills are associated with being able to be more productive at the workplace. This includes both “hard skills” such as math and reading skills, and “soft skills” such as social skills of working in teams and relating to customers and supervisors.

In sum, to create jobs, low marginal burdens on business job creation and human capital quality should be our guiding principles.

Notice that these principles are silent on the merits of many other policies.  These principles say nothing about income tax rates, for which there is far less evidence that high tax rates on the wealthy have significant economic costs. It says nothing about average business tax rates, as opposed to the tax rate on new job creation and investment. We can have high average business tax rates and low tax rates on new job creation and investment if job creation and investment tax credits are sufficiently generous. These principles also say nothing about government social welfare programs, for which the evidence suggests that there are not huge net negative effects on work incentives.

These many other public policies of course may be important to social well-being.  What tax and welfare system is the fairest?  How progressive should the tax system be? How generous should safety net programs be? All of these are important issues. However, for these other policies, I would argue that their impact on job creation is a secondary concern.

Job creation and earnings creation also depend on luck. For example, a great deal of the short-term and medium-term economic fortunes of a state or local economy depends on how demand for the area’s main industries is growing in the global economy.

But some public policies can significantly affect job creation. The public policies that have the biggest bang for the buck in driving job creation are lowering costs for job creation, and making large-scale and cost-effective investments in human capital.

The current conventional wisdom errs in assuming that the plausible positive impacts of lower marginal business tax rates means that all tax rate cuts are a cost-effective way of encouraging job creation. The current conventional wisdom also errs in ignoring the importance of worker skills in creating additional jobs and earnings. And creating such worker skills requires a tax system that raises the revenue needed to support the large scale creation of better worker skills. High-quality education and job training is not cheap.

On the other hand, advocates for a more redistributional tax and welfare system should realize that such a system can only be sustained if there is sufficient emphasis on encouraging jobs and earnings creation.  As economic historian Peter Lindert has argued, economic and political systems with strong social welfare components have been best able to be economically sustained if they also pay attention to marginal cost burdens on business, as well as on making sure that the public spending mix emphasizes services that boost productivity.  We also need to make sure that our investments in human capital are organized to be as effective as possible.

This new conventional wisdom, of creating broad-based prosperity through lowering costs for job creation and increasing worker skills, can also be framed as an issue of fairness. Isn’t it fairer to focus more public resources on those businesses that actually create jobs, as opposed to across the board tax cuts? Isn’t it fairer to focus more public resources on helping people develop skills that will benefit the entire economy? There are huge social spillover benefits both of business job creation, and of higher worker skills.

I don’t know exactly how the “conventional wisdom” is changed. But our future as a society rests on whether there is broad public understanding of the best paths to greater economic prosperity.

Posted in Business incentives, Early childhood programs, Economic development | Comments Off on What is a good business climate for job creation? Changing the conventional wisdom

Why relocation doesn’t solve local labor market problems

Posted on May 28, 2012 by timbartik

Well-known blogger Matt Yglesias has an interesting post commenting on labor economist Enrico Moretti’s recent Wall Street Journal column. Moretti argues that policymakers should help workers to move away from high unemployment metro areas. (Moretti’s column is based in part on his recent book, The New Geography of Jobs.)

Other labor economists have recently argued for subsidizing workers to move away from high unemployment cities. For example, in a recent paper for the Hamilton Project of the Brookings Institution, Jens Ludwig and Steve Raphael developed a specific proposal for relocation subsidies to help workers in distressed area.

The argument for relocation subsidies is that not only do such subsidies help the workers who are relocated to a stronger local labor market, but that the induced relocation will help the remaining workers left behind in the distressed local labor market. The argument is that the relocation subsidies reduce the labor supply compared to the available jobs in the distressed local labor market, thereby reducing the distressed area’s unemployment rate.

I am much more skeptical than most labor economists of such relocation subsidies. First, I don’t think that relocation subsidies are the best solution to the problems facing workers in distressed labor market areas. If unemployment is high in some workers’ home area, and they could more readily get a job by moving elsewhere, yet these workers do not do so, the most plausible reason for this behavior is that these workers have strong and valuable ties to familiar people and places of their home area.  Solving this problem by subsidizing relocation is clearly a second-best solution. A better solution is to figure out a way to encourage stronger labor demand in their home metro area, or to figure out a way to strengthen these workers’ skills so they can more readily get a job in their home metro area. (This was shown many years ago in the work of regional economist Roger Bolton.)

Second, the available empirical evidence suggests that relocating some workers away from distressed local labor markets will not help reduce these distressed areas’ unemployment rate. The reason is that reduced labor supply in distressed local labor markets will also reduce labor demand. As some workers relocate, this reduces demand for local consumption goods in distressed area, and also dramatically reduces demand for housing and other infrastructure, which will cause a short-run downturn in local construction activity.  Some estimates, such as a classic article by Dick Muth, and other work by Mike Greenwood, suggest that at least in the short-run, a reduction in local labor supply by a certain percentage will cause a similar percentage reduction in local labor demand. The distressed areas’ unemployment rates will stay the same.

If relocation subsidies are not the solution to distressed areas’ problems, what is the solution?  What can we do to avoid the significant costs of high long-run unemployment in local labor markets, which will permanently damage the skills, productivity, and wages of many workers?

Distressed areas’ labor market problems are best dealt with by a combination of labor demand and labor supply policies. On the demand-side, distressed areas need policies that can cost-effectively raise labor demand. Business financial incentives for additional job creation in high-wage industries can in some cases be effective. Even better are business services to small and medium sized businesses that have been shown to be cost-effective in encouraging job creation. Such cost-effective services include manufacturing extension programs and customized job training.

On the labor supply side, distressed areas need policies that can cost-effectively increase the quality of local workers’ labor supply. Such policies will help attract higher wage jobs to the area, as well as helping local workers regardless of whether they stay in or leave the distressed area.  Cost-effective local labor quality policies include high-quality early childhood programs. Other cost-effective local labor quality policies include mandatory summer school in early elementary school, high school career academies, and employer-oriented job training programs for adults.

What distressed areas need are solutions that address the underlying problem, which is a lack of high-quality jobs for area residents.  Policies that develop high-wage jobs while creating higher worker skills directly address the real problems of distressed areas.

Posted in Business incentives, Early childhood programs, Economic development, National vs. state vs. local | Comments Off on Why relocation doesn’t solve local labor market problems

Special education cost savings

Posted on May 22, 2012 by timbartik

A recent report released by ReadyNation, prepared with support from the Kauffman Foundation, provides much research information on how special education cost-savings might be used to fund high-quality pre-K. The report, written by Rob Dugger and Bob Litan, argues that some recent estimates of special education cost savings suggest that these cost savings may be sufficient to fully fund high-quality pre-K. In particular, this report points to the results for the Pennsylvania Pre-K Counts study, which found that this program was associated with a decline in the rate of special education assignment from 18 percent to 2.4 percent.

A great deal of the report explores what the implications of these findings are for financing pre-K programs with a combination of some state government assistance, some program-related investments by private philanthropies, and some bond financing by private investors. The specifics of the resulting cash flows depend upon the assumptions made, but under many combinations of assumptions, it is certainly possible for pre-K to generate positive cash flows in the long-run, if the special education cost savings are large enough.

While I think the financing discussion of the report is important, for some readers it might obscure the larger point: pre-K can generate significant cost savings that can be used to finance a large part or perhaps all of its costs. This is true regardless of who provides the initial financing.  Private investors can provide the financing, as the report discusses. But if this option is infeasible or unattractive for whatever reason, financing could potentially be provided by school districts, state governments, and private foundations.

In other words, a school district could decide to begin a pre-K program at a small scale. The district could compare the experience of pre-K students with similar students at schools not offering the expanded program, and monitor the cost savings over time. Cost-savings could be plowed back into sustaining and possibly expanding the program.

Similarly, a private foundation might offer a grant to a school district to invest in an expanded pre-K program for some number of years.  In return, the school district could agree with the foundation on some procedure to estimate cost savings, and agree to put these cost savings back into sustaining or expanding that program over time.

This is an area where a great deal of local experimentation would be helpful. We need to better estimate what these costs savings are over time, and explore a variety of mechanisms of possibly using such cost savings to finance pre-K.  While there is good evidence that high-quality pre-K reduces special education assignments, we know less that we would like about the exact magnitude and timing of such cost-savings. We also have less evidence than we would like on the cost savings for other remedial programs, for example savings in summer school and tutoring programs.

If we can estimate and document specific, large savings in the costs of various remedial programs due to pre-K programs, there will be many options for making the needed investments to realize these cost savings.

Posted in Early childhood program design issues, Early childhood programs, Timing of benefits | Comments Off on Special education cost savings

Different views of “investing in Julia”

Posted on May 21, 2012 by timbartik

Nancy Folbre, an economist at the University of Massachusetts-Amherst, has a good on-line column at the New York Times on the recent controversy over the Obama campaign’s online ad about an imaginary woman named Julia. The Obama ad tried to argue that the Obama Administration’s policies would be more helpful to this particular person’s life course than would be true for a Romney Administration.  The ad highlighted various government assistance programs such as Head Start, public education, financial aid for college, health care reform, small business assistance, Social Security, and Medicare.

The ad in turn led to some strong attacks  from various conservative commentators. William Bennett, for example, formerly Secretary of Education under President Reagan, argued that:

“Julia’s entire life is defined by her interactions with the state. Government is everywhere and each step of her life is tied to a government program. Notably absent in her story is any relationship with a husband, family, church or community, except a “community” garden where she works post-retirement. Instead, the state has taken their place and is her primary relationship.”

But I think it is fair to say that many of these comments distort the nature of this imaginary Julia’s relationship to government.  As Nancy Folbre points out, if preschool, K-12 education, and college student aid are working effectively, they lead to an adult who has more skills and productivity. As an adult, this more productive person will be less dependent on government welfare and other assistance. With higher skills, “Julia” will be more able to choose from a variety of better-paying jobs, which is an important dimension of human freedom.

This higher productivity benefits not only “Julia”, but the broader American community. If these programs work well, they provide fiscal benefits for the community in higher tax revenues from Julia’s higher tax payments and lower receipt of social assistance. Julia’s higher skills not only increase her wages, but also encourage more productive business growth that will benefit the wages of other workers.

We could equally well argue that government is pervasive even if one’s vision is that government should only provide national defense, police protection, and a court system enforcing the rule of law.  Even in such a limited vision of government’s role, everywhere one goes, the rule of law is pervasive, with traffic lights, a police car that you pass, and the courthouse in the town square.  The relevant question is, does this greater rule of law on net enhance human freedom and capabilities, or detract from it?

We can certainly raise legitimate issues about whether a particular investment in human capital works as effectively as it should, or provides sufficient flexibility to respect human freedom. For example certainly it is legitimate to debate how to make Head Start more effective and more flexible to address child developmental needs. We can also debate the degree to which there should be federal versus local control over the design of early childhood programs.

However, if a human capital investment program works, in the sense of effectively increasing a person’s adult life capabilities beyond what they would be otherwise, it seems a strange view to argue that this time-limited intervention is a government restriction on freedom.

Human freedom is not synonymous with zero government. Rather, greater human freedom requires a government that is smart, flexible, democratically controlled, and targeted at where its intervention can effectively expand human capabilities.

Posted in Economic development, National vs. state vs. local | Comments Off on Different views of “investing in Julia”

Universal pre-K and the Presidential campaign

Posted on May 1, 2012 by timbartik

Prominent bloggers Kevin Drum and Matt Yglesias have both linked to Dana Goldstein’s brief blog post suggesting that universal pre-K be a key issue in the Presidential campaign.

Dana Goldstein advocates for high-quality universal pre-K and child care for all 3-year-olds and 4-year-olds. Although she doesn’t provide a price tag for her proposal, I estimate that a full-day school-year program that was available for free to all 3-year-olds and 4-year-olds would probably have a net budgetary cost of at least $60 billion annually. The exact amount would depend upon assumptions about take-up rates, student-teacher ratios, and teacher salaries.

Ms. Goldstein’s argument, which is similar to arguments made in this blog, and by many others, is that universal pre-K would:  develop both academic skills and social skills of many children; increase these children’s future educational attainment and adult skills; provide needed child care for parents; and create hundreds of thousands of jobs for teachers and other staff for these pre-K programs.

Matt Yglesias’s blog post agrees that universal pre-K is a good idea, but argues that it won’t happen. Why? There is no public appetite for higher federal taxes, even for worthy programs, and there are looming federal deficits and financial commitments to programs such as Medicare and Medicaid.

Kevin Drum also agrees that universal pre-K is a good idea, but wants to extend the argument to other early childhood programs, such as nurse home visitation programs and child care at earlier ages. Drum also particularly stresses the importance of these programs’ effects on “non-cognitive skills”, sometimes called “soft skills”, and sometimes called “social skills”.  Drum argues that if we can’t get more revenue, we should be willing to take $100 billion out of K-12 and redirect these funds to early childhood programs.

My reaction to these arguments is that a large-scale, effectively-run federal commitment to universal pre-K is unlikely in at least the short-run and medium-run. I agree with Yglesias that the federal government has a lot else on its plate. Also, with federal funding, it is very hard to get the public to understand the link between the taxes they pay and the benefits they receive. Systems of federal funding under which general tax revenue then is redistributed via states and local governments to local programs tend to become so convoluted that no one understands how they work except policy wonks.  This undermines public support for the programs and for the needed taxation to support these programs, which leads to programs being under-funded.

As for Drum’s argument, I think trying to fund early childhood programs by cutting K-12 is political suicide. To develop political support for early childhood programs, we need to build a broad coalition for programs that will increase labor skills. K-12 is a natural part of that coalition.

What then, can be done? First, at the federal level, we can have a smart, more targeted intervention to support early childhood programs. For example, we could have a federal commitment to provide flexible block grants to states for the following purposes:

  • Capital costs for new preschool centers;
  • Transportation costs for access to preschool;
  • Costs of developing and purchasing pre-K curriculum materials;
  • Teacher training costs;
  • Technical assistance and evaluation based on classroom process evaluations to improve the quality of pre-K programs;
  • A variety of costs related to evaluation of effects of pre-K programs on students, including paying for student assessments and paying for evaluations.

It would still be up to state and local governments and school districts to figure out how to come up with the operating costs for these programs. This would require state and local leaders to build community support for these programs, and explain how increases in state and local taxes would be linked to providing the public with the benefits from expanding these programs.  I think developing such public support would help build long-run sustainability of such programs.

However, if $5 billion annually in flexible federal grants were provided to states for the above purposes, which pay for some of the infrastructure costs, training costs, and evaluation costs of high-quality programs, this would not only help pay for these programs, but encourage the resulting programs to be higher quality.  The federal government would be focused on encouraging higher quality programs, and higher quality evaluations, which is an appropriate federal role, as better information on what works and what doesn’t work has national benefits.

Such a program has some resemblance to the Race to the Top Early Learning Challenge, but would differ in several respects. First, I think for such a program to be successful, it has to be on a much larger scale than is true for RTT-ELC. Second, I would urge that such a program be more focused specifically on training, development, and evaluation of pre-K programs than is true for RTT-ELC. Finally, I think such a program should be designed as an ongoing commitment for at least a ten-year period.

Second, what if even such a limited federal commitment is politically infeasible? Then I think we go back to the state and local case for universal pre-K. State and local governments have good reasons to do universal pre-K using local resources, without federal funding. These programs pay off for the state and local areas that fund them.  More extensive access to higher-quality pre-K not only benefits the participants in these programs, but also has broad local benefits. The entire local economy benefits from higher skills of former child participants in these programs, which helps attract more and better jobs to the local economy. Furthermore, state and local governments benefit from the higher taxes due to higher earnings per capita, as well as reduced need for spending on special education, the criminal justice system, and welfare programs.

Massive federal spending is not a necessary condition for high-quality universal pre-K.  Given that massive federal spending on universal pre-K is politically unlikely, we need to figure out other ways to get to the goal of universal access to high-quality pre-K programs. Smart but limited federal intervention can help, as can state and local initiatives.

Posted in Early childhood program design issues, Early childhood programs, National vs. state vs. local | Comments Off on Universal pre-K and the Presidential campaign