The fading and re-emergence of preschool’s effects

Posted on September 21, 2011 by timbartik

In some of my recent presentations, I have been using a slide that shows how preschool’s effects, even when they fade in test score effects as students progress in K-12, can re-emerge even stronger in effects on adult outcomes.  (For example, see slide number 4, “Re-Emergence of Pre-K’s Effects Suggests Importance of Soft Skills”, in my presentation to the American Chamber of Commerce Executives convention in August 2011.) I want to explain the research behind this slide, relate it to other research, and explain why this research result is important.

This slide uses results from the Chicago Child-Parent program, specifically research led by Art Reynolds. It also relies on research by Professor Raj Chetty of Harvard and his colleagues.

I use research by Reynolds on the “effect size” of the CPC pre-K program on test scores in early and later grades. “Effect size” is researcher jargon for measuring effects on test scores relative to how much test scores typically vary across individual students (the “standard deviation”), which roughly gauges the size of the program’s effects on test scores relative to how difficult it is to change test scores due to other influences. In summarizing test score effects from Reynolds’s research, I find that the average test score “effect size” of the CPC pre-K program fades by about 40%, when comparing averages across various tests in kindergarten and first grade versus averages in grades 2 through 6.  This fading of test score effects over time is consistent with meta-analysis of numerous preschool studies by Steve Barnett.

I then translate these effects on test scores into predicted effects on adult earnings. These predicted effects rely on research led by Chetty on how test score predict adult earnings. It turns out that Chetty’s results imply that a given increase in test scores in “effect size” units has somewhat greater effects when it occurs at later grades than at earlier ages. As a result, the predicted effects of the CPC preschool program on adult earnings based on 2nd through 6th grade test scores, versus kindergarten through 1st grade test scores, fades by somewhat less, by only one-third.

Specifically, based on the estimated effects of CPC’s pre-K program on kindergarten and 1st grade test scores, we would predict adult earnings to increase by 8.1%. Based on the estimated effects of CPC’s pre-K program on 2nd through 6th grade test scores, we would predict adult earnings would increase by 5.3%, which represents a fading in predicted effects by about one-third.

However, when we look at actual effects of CPC’s pre-K program on adult earnings, based on research by Reynolds and his colleagues, we find the percentage effect on adult earnings, based on actual adult earnings data, is estimated to be 7.3%. The initial test score effects in kindergarten and first grade are better predictors of the program’s long-run effects than the more faded test score effects in later elementary school.

This fading and re-emergence of early intervention’s effects is also found in other research.  For example, Chetty and his colleagues find a similar fading and re-emergence for the effects of something they call “kindergarten class quality”. For example, in Figure VI of their paper, a specified improvement in kindergarten class quality would be predicted to increase annual adult earnings by $600 per person based on end of kindergarten test scores, but effects fade to less than $200 per person based on later grades’ test scores. However, in adulthood, adult earnings effects of kindergarten class quality are close to what was predicted based on end-of-kindergarten test scores.

Deming’s research finds a similar fading and re-emergence of Head Start’s effects.  (See his 2009 paper on Head Start, linked to on his home page.) His research finds significant effects of Head Start on test scores at ages 5 and 6. These test score effects decay by two-thirds, in effect size units, by ages 11 to 14, and are no longer statistically significant at these later ages.  However, effects on young adult outcomes, at ages 19+, are even greater in effect size units than was estimated at ages 5 and 6. (See panel A of his table 4 in his 2009 Head Start paper.)

What’s going on here? One plausible hypothesis is that this re-emergence of early intervention’s effects is related to these programs’ effects on “soft skills”. By “soft skills” I mean skills such as how well a student relates to fellow students and to the teacher, the student’s ability to plan and persevere and exert self-control, and the student’s self-confidence. These soft skills, as well as hard skills, may be developed in preschool and other early interventions. These soft skills may then lead to further soft skills and hard skills development later on in K-12, and lead to greater success in adulthood.

However, this soft skills development may not be fully reflected in results on most tests, which tend to emphasize “hard skills”. (By “hard skills”, I mean whatever is measured by reading, math, and other academic tests.) This does not mean that how students do on hard skills is not important. It simply means that looking at effects on hard skills alone understates the long-run effects of early intervention.

The significance of this research is twofold. First, this research points to the importance of soft skills development in early intervention programs. Second, this research suggests that a complete evaluation of early interventions must go beyond effects on academic test scores to effects on life outcomes such as high school graduation, college attendance, and success in the workplace.

This research should not be interpreted as meaning that hard skills development in preschool is not important. I suspect that an attempt to divorce hard skills from soft skills is probably a mistake. Soft skills development helps encourage hard skills development. And hard skills development is one important way in which students actually develop the self-confidence and other soft skills that they need. A balanced curriculum must develop both hard skills and soft skills.

Posted in Early childhood program design issues, Early childhood programs | 1 Comment

Soft skills and educational reform

Posted on September 19, 2011 by timbartik

Paul Tough, who wrote the wonderful book “Whatever It Takes” about Geoffrey Canada and the Harlem Children’s Zone, has a good article in the September 18 New York Times magazine.  The article looks at how both a top private school and a KIPP school are trying to improve “character” as a way to improve students’ life success.

Essentially, the article is about “soft skills”, and their importance in life success. For example, Paul Tough talks about how both “grit” – the willingness to persevere to achieve goals – and self-control are important in determining educational attainment.

The importance of “soft skills” is something that everyone knows, yet our systems of child development and education do not fully act on this knowledge. What preschool does with “soft skills” is an essential part of preschool’s success in influencing long-run life success. Yet later education seems less holistic and less attuned to these important character traits. And educational reform seems to be moving education in a less holistic direction over time.

As Paul Tough points out, “character” is more than being a moral person. It also involves skills that allow one to actually succeed, not just aim for the stars. My mother’s favorite saying was that “the road to hell is paved with good intentions”. Even if good intentions don’t lead to hell, they don’t necessarily need to success. Character traits such as “grit” and self-control are also needed.

As someone trained in political philosophy, I find it interesting that we have to rediscover something that the ancient Greek philosophers already knew. The Greeks talked about “arête”, which is usually translated as “virtue”, but can also be translated as “excellence”. For the ancient Greeks, there was no sharp break between the various character traits that meant human excellence: wisdom, justice, courage, moderation. They were all part of what made a good person, both virtues that were more “moral” (e.g., justice, and to some extent moderation), and those that represented greater human capabilities to achieve some goal (e.g., wisdom and courage, and to some extent moderation).

In contrast, our society has a more impoverished view of what good character and human excellence means: we tend to think of it as some combination of literacy and math skills plus being a moral person. But there are many important character traits that are missing from that vision.

High-quality education needs to develop a balanced human excellence. Both soft skills and hard skills are needed. And “soft skills” means not only getting along well with fellow students and the teacher. It also includes the ability to plan, to defer gratification, and to pursue goals. These character traits can be developed in children from the earliest ages, including in preschool.

Posted in Early childhood programs, Uncategorized | Comments Off on Soft skills and educational reform

Top 5 reasons why investing in early childhood education can drive better local job creation

Posted on September 16, 2011 by timbartik

In understanding the connection between early childhood education and local economic development, I think that people intuitively get how early childhood programs can lead to a “better path” of skills acquisition. People intuitively understand from their own experiences, and those of people they know, that kids do much better if they start out on the right path in learning, rather than getting side-tracked. The notion that “skills beget skills”, as Nobel-prize-winning economist James Heckman has argued, makes intuitive sense.  We all know that if you get off to a good start in learning any set of skills, it is easier to learn more skills.

What is less intuitive, for most people, is the local economic development case for early childhood education. How does all of this skills development lead to more and better local jobs?

In some sense this entire blog is devoted to answering this question. But in the interests of brevity, here are the top five reasons why investing in early childhood education can drive better local job creation:

  1. Human capital is the key local competitive factor for businesses that is not readily portable. In a global economy, most factors of production are readily transportable, such as capital, energy, information, etc. Labor is not so portable. You can’t just put your business anywhere and expect to get the labor skills you need.
  2. Human capital matters not just to my individual business, but to building regional clusters of businesses. The importance of a local area’s job skills is not just the workers I recruit for my business, but also the skills of workers working in similar businesses in my local industry cluster, as well as workers in the suppliers that are part of that cluster. Regional clusters of industries, such as in Silicon Valley, steal ideas and workers from one another. Therefore, any individual business’s productivity depends in part of the skills of its local competitors. In addition, the competitiveness of a cluster depends in part on the productivity of local suppliers, which depends on the skills of these suppliers’ workers.
  3. Early childhood education is one of the most cost-effective methods of developing better local worker skills. If a local area is going to seek prosperity through developing better local job skills, early intervention will do more local skills enhancement at lower costs than alternative policies.
  4. Early childhood education is particularly good at increasing soft skills, which are of great importance to businesses. Much of early childhood education’s long-run effects depend upon its benefits for the development of soft skills, such as the ability to get along with others and with authority figures, and the ability to plan, to defer gratification, and to be self-confident and proactive. Most businesses will tell you that such soft skills are at least as important as literacy and math skills in determining the success of their workforce, as workers need these skills to deal with co-workers, supervisors, and customers, and to work in teams and exert leadership.
  5. A large percentage of early childhood education participants will stay in the same local economy as working adults. Over 60% will stay in the same state, and over 50% will stay in the same metropolitan area. This is important because it means that early childhood education can enhance the local area’s workforce quality. Americans are not as hyper-mobile as sometimes supposed. People will stay due to the familiar places and people of their home.  The percentage staying is not much lower in economically distressed areas, as slow growth reduces in-migration more than it increases out-migration.      
Posted in Early childhood programs, Economic development | 3 Comments

Preschool teachers and President Obama’s jobs proposal

Posted on September 13, 2011 by timbartik

There have been some blog posts about making sure that early childhood programs are included in any new jobs legislation.  It is therefore important that the just-released (on September 12) text of the “American Jobs Act” proposed by President Obama does include early childhood educators in the bill.

More specifically, in section 206, states are authorized to “reserve [up to] 10 percent of their [teacher stabilization] grants for State-funded preschool programs”. (This quotation comes from the “Sectional Analysis” provided by the White House for the actual legal text of the bill.)  Section 212 provides $30 billion for such teacher stabilization grants to states, so potentially up to $3 billion could go to state-funded preschool programs.

The funds are proposed to be appropriated by the federal government by the end of fiscal year 2012, but states have until the end of fiscal year 2013 to actually obligate the funds. Therefore, the potential extra preschool funding over the two fiscal years of fiscal year 2012 and fiscal year 2013 averages about $1.5 billion. This is still a very large amount compared to what states currently spend on preschool, which is estimated to be $5.4 billion annually. It is so much larger that I doubt whether most states would want to expand preschool to that extent with temporary federal dollars, so the amount that would actually go to preschool would probably be considerably less. However, these funds would clearly make a significant difference.

Section 208 clarifies that these preschool funds must go to preserve or increase the number of early childhood educator jobs: “This section limits the use of funds by State-funded preschool programs to those necessary to retain early childhood educators, recall or rehire former early childhood educators, or hire new early childhood educators to provide early learning services, and requires the funds to be obligated by September 30, 2013.” (Quotation from Sectional Analysis of the bill)  As the text of the bill clarifies, this means that funds must go to compensation of early childhood educators, or support services needed to rehire or retain early childhood educators.

The definition of “early childhood educator” in section 211 of the bill text also adds some important detail. Early childhood educators must work directly with children in low-income communities. This might restrict the use of these funds in universal pre-K programs. Early childhood educators are also required to have “completed a baccalaureate or advanced degree in early childhood development or early childhood education, or in a field related to early childhood education.” (This quotation comes from the actual bill text.) This provision may add impetus to efforts to require additional educational credentials for preschool teachers.

The law also includes maintenance of effort requirement. These maintenance of effort requirements are complicated, and are only detailed in the full text of the bill (see section 209).These MOE requirements appear to require that states in fiscal years 2012 and 2013 cannot reduce BOTH total nominal spending for all educational programs (early education, K-12, and higher education) from their previous year’s  level AND also reduce the percentage of their available revenue that goes to education from the previous year’s level. It will require further analysis to see how binding these MOE requirements will be for some states.  The Secretary of Education can waive the MOE requirement.

If these provisions survive the legislative process, they could make a significant difference to state-funded pre-K programs in fiscal years 2012 and 2013.

Posted in Early childhood program design issues, Early childhood programs, National vs. state vs. local | 2 Comments

Interpreting the conflicting evidence on Head Start effectiveness

Posted on September 12, 2011 by timbartik

The evidence on the effectiveness of Head Start is mixed. On the one hand, the recent random assignment study of Head Start found that test score effects of Head Start mostly disappeared by the end of first grade. On the other hand, several well-done long-term studies of Head Start have found significant effects many years later on young adult outcomes.

How can we best interpret such contradictory evidence? One possible interpretation is that the random assignment evidence should be regarded as the “gold standard” evidence. Under this interpretation, the well-done studies that have found long-term effects of Head Start should be regarded as providing spurious evidence due to happenstance.  If many researchers do studies, some are bound simply by chance to find positive effects. It is possible for academic journal reviewers to be more enthusiastic about papers that report statistically significant positive effects compared to papers that report insignificant results or negative results that don’t make sense.  (For an example of this interpretation, see the recent paper in Science by Steve Barnett.)

Another interpretation of this evidence is that the relative effects of Head Start, compared to other preschool and child care options available to potential Head Start participants, have declined over time. Long-term studies of Head Start are by necessity studying the effects of Head Start as it was some years ago. And all studies of any preschool program are studying the effect of that preschool program compared to whatever mix of preschool, child care, parental care, and relative care is utilized by the control or comparison group.

One factor that has changed over time is that the alternatives to Head Start have probably improved in quality. Many states have set up high-quality preschool programs. It is also possible that many private child care and preschool programs have become more educational in focus.

Therefore, the alternative interpretation of the evidence is that Head Start was at one time considerably better than the alternative available to low-income families, but that today, Head Start on average is not much better than the alternatives available to low-income families.  Under this interpretation, the problem is that Head Start has not improved its effectiveness sufficiently to keep superior to its competition. This is a problem because Head Start requires considerable resources.

Finally, it should be noted that under either interpretation of the Head Start research evidence, we are only making statements about the effectiveness of Head Start on average. There is some evidence that some Head Start Centers are considerably more effective than average.

Under either interpretation of the evidence, it makes more sense to improve the effectiveness of Head Start rather than to defund it.  The evidence for the effectiveness of some preschool programs, such as many state-funded pre-K programs, is strong. We know that high-quality pre-K programs can work, and can work on a large scale. The question is what reforms in Head Start quality standards, staff training, curriculum, and funding approaches, will best increase the average effectiveness of Head Start.

Posted in Early childhood program design issues, Early childhood programs, Local variation in benefits, National vs. state vs. local | Comments Off on Interpreting the conflicting evidence on Head Start effectiveness

Obama’s jobs plan

Posted on September 9, 2011 by timbartik

President Obama proposed a $450 billion jobs plan in his address to Congress on September 8. Several reporters have asked me for my opinion on this plan.

I think this plan is best described as an ambitious, “kitchen sink” approach to the challenge of creating jobs. The plan encompasses most of the proposals that have been made to spur job creation. Such proposals include extending (and expanding) the worker-side payroll tax cut and extended unemployment benefits, more infrastructure spending, more support for retaining teachers and other public sector employees, a payroll tax cut for small business employers, a special tax credit for small business employers that expand payroll, encouragement for work sharing, tax credits for hiring the long-term unemployed and veterans, some tax breaks for business investment, and encouragement of state and local flexibility in devising plans to help the long-term unemployed.

From the perspective of a purist policy wonk, who believes that he or she has figured out the ideal most cost-effective approach to encouraging job creation, the jobs plan might be disappointing. Rather than embracing one theory of how to encourage job creation, President Obama has embraced all theories.

However, given the urgency of the jobs needs of the U.S., and given that we probably do not have perfect knowledge or a political consensus about how to best create jobs, it is arguable that a diverse portfolio of job creation policies makes sense. The jobs plan can be seen as a frankly experimental approach to job creation.  The philosophy is, let’s try a wide variety of job creation proposals, and hopefully some combination of the proposals will address our diverse employment needs.

Given what I have said before on the topic of jobs creation, I would hope that if the proposal is enacted, that the legislation’s details would make it possible to pursue job creation proposals that I think are particularly cost-effective.  I would argue for making the payroll tax credit for expanding payrolls far more generous than in the President’s proposal, increasing the subsidy rate to at least 15% for expanded payrolls, and preferably even higher subsidy rates of up to 40%. Tax credits for hiring the long-term unemployed would be far more effective if at least some portion of them could be administered and managed by local job training agencies that could match the long-term unemployed with employers interested in hiring the long-term unemployed.  I would hope that the promise of flexible state approaches to helping the long-term unemployed could include programs such as MEED that actually create jobs for the long-term unemployed, rather than just programs such as Georgia Works that at best fill existing job vacancies.

I think that if the proposal is enacted, it probably would create jobs at a cost of around $100,000 per “job-year” created. (A job year is one job persisting for one year.) So the plan could create 4 million “job-years” compared to what would happen if none of the plan was enacted. (My assessment of job creation impacts is a little more optimistic than other analysts, who seem to be projecting impacts of 2.6 million job years or 2.1 million job years.)Of course, it is unclear how rapidly the proposal would be enacted, or if enacted, how rapidly the spending programs would get underway. Finally, job impacts of demand-side policies tend to lag a bit.  But I certainly think it is quite possible that the plan could lower unemployment in 2012 by over 1% compared to current projections. Other analysts agree with that assessment.

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Job creation policies: Minnesota’s MEED program vs. Georgia Works

Posted on September 2, 2011 by timbartik

There is a huge need for job creation in the U.S. Given the length and severity of the recession, we are short around 12 million jobs compared to what would be needed to be at pre-recession labor market conditions.

I’ve been asked in recent days by several journalists about Georgia Works, because there are rumors that there is some interest by the White House in this program as a model for helping the long-term unemployed. Georgia Works is a program under which workers receiving unemployment benefits are provided the opportunity of on-the-job-training/work experience at participating local employers.  The OJT/work experience is 24 hours per week for 6 weeks. The worker receives some extra stipend, intended to reimburse work-related expenses; this stipend over the program’s history has varied from $40 to $100 per week. The employer is not required to hire the worker at the end of the 6 weeks, although the employer is supposed to have a job vacancy. Other states have similar programs, for example New Hampshire has a program called “Return to Work””, although that program does not pay workers a stipend.

The question is: are programs such as Georgia Works a good way to create better job opportunities for the unemployed? I am probably being asked such questions because I have written about job creation programs for the unemployed. In particular, I have praised the MEED program, which Minnesota used in the 1980s, which also subsidizes employers to help the unemployed.

Under MEED, employers received up to a $10 per hour wage subsidy (adjusted to today’s price level) to hire targeted disadvantaged workers for six months for a full-time job slot. The targeted workers under MEED were any unemployed worker who was NOT receiving unemployment benefits.  The subsidized jobs had to be newly created jobs, and the employers had to pay the usual wage they paid for that type of job. (For example, if the job paid $9, the employer would pay $9 and receive a wage subsidy of $9; if the job usually paid $12 per hour, the employer would pay $12 and receive a wage subsidy capped at $10 per hour.) Employers had to make a good faith effort to retain the subsidized worker for one year after the six-month subsidy period. In theory, if employers did not make such a good faith effort, they could be required to repay the MEED subsidy they received; in practice, employers either were asked to hire another MEED worker, or were excluded from future participation in the program.

My summary comment is: In current economic circumstances, when the U.S. economy is short of jobs, programs such as Georgia Works or New Hampshire’s Return to Work do not do enough to deal with the key problem, which is lack of jobs.  I believe we would be better off with programs such as MEED, which cost a lot more because they provide much bigger subsidies to employers, but also expect employers to do a lot more, in particular they expect employers to create jobs, which is what we should be targeting at present. Because Georgia Works and New Hampshire’s Return to Work do not create new job slots, at best they redistribute who fills currently available job opportunities. Reshuffling scarce job opportunities among the unemployed has relatively modest benefits in current economic circumstances.  We need to induce employers to create new jobs, while targeting some of these new job opportunities to the long-term unemployed, and MEED targets these goals.

More detailed comments:

  1. In general, the idea of subsidizing employers to create new job opportunities for the long-term unemployed makes sense. We need to create new jobs in the current U.S. economy. And the long-term unemployed are particularly damaged by the current recession. The longer a spell of unemployment goes on, the more likely that spell will lead to permanently reduced earnings prospects for the worker.
  2. Georgia Works or New Hampshire’s Return to Work are far smaller subsidies to employers than was Minnesota’s MEED. The subsidy under MEED was up to $10,000 per hired worker ($10 per hour times 1000 work hours for those 6 months). The subsidy under the Georgia and New Hampshire programs is the value of the free labor. The employer gets 144 hours of free labor (24 hours per week times 6 weeks). The subsidy is reduced to the extent the employer provides training in excess of what they ordinarily would have provided. It is hard to imagine that the typical value of the free labor exceeds $10 per hour, so the employer subsidy is at most $1,440 per worker, reduced by the cost of any extra training.
  3. But Minnesota’s MEED program also expects a lot more. In particular, MEED expected employers to create a new job slot in addition to already existing jobs, whereas Georgia Works and New Hampshire’s Return to Work only expect the employer to consider a subsidized worker for an existing vacancy. The MEED program also has stronger pressure for the employer to continue employing the worker after the subsidy period.
  4. Of course, the fact that MEED jobs had to be new jobs doesn’t mean that they would not have been created “but for” the MEED program. We don’t have rigorous evidence from random assignment experiments of MEED’s experience in actually creating jobs. But surveys of private employers participating in MEED suggest 60% would not have expanded but for the MEED program subsidies. This percentage increases to 68% for the smallest private employers. There are good reasons why MEED might particularly affect job expansion decisions of smaller employers. When asked why the MEED program triggered an employment expansion, employers particularly referenced cash flow problems, which would be a bigger issue for smaller employers.
  5. MEED also seems to have much greater retention of subsidized workers. 78% of MEED workers completed the six month subsidy period plus at least 60 additional days.  Various reports cite figures ranging from 24% to 50% of workers participating in and completing Georgia Works were hired by the employer they were placed at. Because the Georgia Works figures are based on those who completed the program, the percentage hired by the subsidized employer would be even lower if calculated as a percentage of those starting the program, which would be a more comparable figure to the MEED statistics.
  6. MEED targets a needier group than Georgia Works or New Hampshire’s Return to Work. MEED targeted unemployed workers who either were not qualified for unemployment benefits, or who had exhausted such benefits. The Georgia and New Hampshire programs target unemployed workers receiving unemployment benefits.
  7. All of these programs to some extent reshuffle available job opportunities among the unemployed. But based on the survey evidence, 60% of the MEED subsidies also increase the total number of jobs.  I have calculated that MEED subsidies create new jobs at a cost of about $34,000 per job. This is about one-third of the typical $100,000 per job-year cost of traditional fiscal stimulus. In contrast, it is hard to see how Georgia Works or New Hampshire Return to Work create ANY jobs. These Georgia and New Hampshire programs may not cost much, but their cost per job created is probably infinite given that they don’t create any jobs.
  8. MEED also redistributes job opportunities to a needier group, that is those unemployed who are not receiving unemployment benefits. In the long-run, this redistribution may boost the overall employability of the labor force, as this needier group is more likely to have their skills adversely affected by the recession if something is not done to help retain those skills. After the economy fully recovers from this recession, this greater long-run employability may boost overall U.S. employment by boosting the effective labor supply.
  9. In contrast, it is hard to see what benefits there are from any success that Georgia Works and New Hampshire’s Return to Work have in increasing the employment of their clients. For example, as mentioned, 24% to 50% of the unemployed who entered and completed Georgia Works ended up being hired by that employer.  Reportedly, more than 60% of those in Georgia Works found work somewhere. Suppose for a moment that none of these Georgia Works clients would have found a job without the program, which is an extreme and unrealistic assumption. Even under this unrealistic assumption, because Georgia Works has not expanded the total number of jobs created, all that has happened is that available jobs have been reshuffled towards Georgia Work’s clients, and away from other workers. Because Georgia Works clients do not seem likely to be particularly needy compared to the average unemployed person, it is difficult to see large social benefits from this redistribution of available jobs.

For all these reasons, if we are going to have an employer subsidy to create job opportunities for the unemployed, I prefer a program similar to MEED over programs similar to Georgia Works.  As outlined in a previous blog post, I also think other job creation policies should be used.

One second-best option for helping the long-term unemployed is providing a grant program to states that would leave it to state discretion how to design the employer subsidies. If Minnesota wants to do a program similar to MEED, and Georgia wants to expand Georgia Works, each state would have that option. These state experiments with helping the long-term unemployed should then be rigorously evaluated.  I personally think we already know enough to suspect that the MEED approach works better than the Georgia Works approach, but obviously we could always use better evidence.

Posted in Business incentives, Economic development, Incentive design issues, National vs. state vs. local | 3 Comments

Synergies between early childhood programs and K-12 systems

Posted on August 31, 2011 by timbartik

One important issue is whether the rate of return to investing in high-quality early childhood programs varies with the quality of the subsequent K-12 system.

This is an important issue because if there are such synergies, such synergies potentially add to the benefits from investing in high-quality early childhood programs, or from investing in K-12 systems. We already know that high-quality pre-K can work, even in urban school districts such as Chicago, as exemplified by the Chicago Child-Parent Center program.  But if high-quality pre-K has a larger effect when the K-12 system is better, then we can increase the benefits of investing in pre-K by simultaneously investing in K-12. Such synergies also imply that we can increase the benefits of investing in K-12 by simultaneously investing in early childhood programs. Synergies imply greater benefits than looking at each type of program separately.

In theory, there must be SOME synergies of this type. No one thinks that high-quality early childhood programs would have much of a return if we eliminated K-12 education. But the policy-relevant question is where the returns to spending a little more on early childhood programs go up if we spend a little more on K-12, and vice versa.

An important recent paper by Professor Rucker Johnson of UC-Berkeley provides some new evidence of such synergies. Professor Johnson’s paper looks at how the benefits of Head Start vary with per-pupil spending in the K-12 system.  His baseline results find long-term benefits of Head Start for increasing educational attainment and male earnings. He finds that these benefits are greater when former Head Start students go to schools where per-pupil spending is higher from ages 12 to 17.

The notion of synergies lies behind such initiatives as the Harlem Children’s Zone, which seeks to intervene in children’s lives from birth through college. The promise of such comprehensive programs is that they can achieve higher returns than each separate program can do alone. If we do “whatever it takes” to help child development, from birth to adulthood, we may achieve more than running all our programs in separate silos.

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Steve Barnett’s powerpoint on recent findings from early childhood studies

Posted on August 26, 2011 by timbartik

Steve Barnett’s recent presentation, at the July 22nd National Business Leader Summit sponsored by the Partnership for America’s Economic Success, included some important summaries of recent research on early childhood programs. (Barnett is co-director of the National Institute for Early Education Research, at Rutgers.)

Among his findings:

We do have recent studies of state sponsored pre-K program that show strong effects of pre-K on student achievement. These effects are similar in magnitude to effects in the Chicago Child Parent Center program.  These CPC effects have been shown to lead to economic and social benefits that considerably exceed costs.

We also have results that show that although early childhood program effects on average tend to fade somewhat over time, long-term effects on student achievement are still about half the initial effects at kindergarten entrance.

These findings refute some of the “myths” about research on early childhood programs, specifically the myth that all the research on early childhood programs is from old studies of programs from 20 or more y ears ago, and the myth that all the student achievement effects from these programs fade out over time.

His powerpoint can be found here.

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Cost-effective short-term job creation policies

Posted on August 24, 2011 by timbartik

The U.S. economy is clearly in need of short-term job creation policies. The economy is short at least 12 million jobs, compared to what would be required to match pre-recession employment-to-population ratios. Unless something dramatic changes, these slack labor market conditions will continue for many years.

Many policy wonks are proposing a variety of fiscal stimulus measures, including proposals for a renewed payroll tax credit, a continued extension of unemployment benefits for the long-term unemployed, increased infrastructure spending, expanded assistance to state and local governments, and refinancing and debt relief for homeowners.

As I argued in a previous post, conventional fiscal stimulus proposals to boost demand for goods and services should include early childhood programs. Deficit-financed increases in spending for early childhood programs can create jobs at a cost of around $100,000 per job created, which is similar to other labor-intensive public spending. Tax-financed increases in spending for early childhood programs can create jobs at a cost of $175,000 per job created, which is a high cost if the only benefits were job creation, but is reasonable considering the other benefits of early childhood programs.

However, to really meet the large job creation needs of the U.S. economy will require the inclusion of job creation policies that are more cost-effective than conventional fiscal stimulus. Conventional fiscal stimulus proposals typically cost at least $100,000 per job-year created. At $100,000 per job created, and with the need for 12 million additional jobs, fully meeting the job need through fiscal stimulus would cost $1.2 trillion in fiscal stimulus. Even meeting one-third to one-half of the job creation need would require very large budgets for fiscal stimulus. In additional to questions of political feasibility, there are issues of whether fiscal stimulus proposals of that magnitude could actually be implemented in a timely manner.

As I argued in a newsletter article for the Upjohn Institute, more cost-effective job creation policies would explicitly target and incentive job creation by employers. These more cost-effective “targeted” job creation policies include:

(1)    A job creation tax credit that would provide refundable tax credits to employers that increase their net employment;

(2)    A work  sharing program that would provide payments to subsidize employers and workers for sharing reduced work rather than laying off employees;

(3)    A modernized form of the WPA, under which local job training agencies would provide small businesses and small non-profit organizations with generous wage subsidies for hiring the long-term unemployed for newly created jobs.

As I discuss in the newsletter article and in other research, the evidence suggests that these “targeted” job creation policies can create jobs at a gross cost of $30,000 per job created, and at a net cost (after considering the impact of job creation in generating tax revenue and reducing needed spending on unemployment benefits and social welfare benefits) of $12,000 per job created.  Targeted policies are more cost-effective in creating jobs because they encourage more labor-intensive production, provide greater help to more labor-intensive employers, and incentivize job creation with partial subsidies rather than paying for 100% of the job creation.

Although these job creation policies cannot be immediately implemented at some arbitrarily large scale, I believe it would be possible to implement these job creation proposals at a scale that would result in about 5 million additional jobs as of 1 year after implementation.  The gross costs would be about $150 billion annually, and the net costs about $60 billion annually.

There are press reports that the Obama Administration may propose a job creation package that will include some targeted job creation programs. However, in evaluating targeted job creation programs, the devil is in the details. Some designs are more likely to be cost effective than others. For example, in the past I have argued that hiring tax credits for the long-term unemployed are unlikely to be effective.

An ideal job creation package would combine targeted job creation proposals with the other fiscal stimulus proposals. Although job creation is one purpose of a fiscal stimulus package, there also are other goals, such as helping hard-pressed consumers and helping preserve state and local public services. The two types of proposals complement each other: fiscal stimulus boosts demand for goods and services, and targeted job creation policies encourage employers to increase jobs to fulfill that increased demand.

If the lack of jobs is a key economic and social need for the U.S., then policies that directly target job creation as a goal should be part of the policy mix.

Posted in Business incentives, Early childhood programs, Economic development, Timing of benefits | 1 Comment