August 7, 2022

Economix: Will Business Buy In to Early Childhood Education?

Republicans are pushing to reduce many programs that provide for young children, such as the Kids Central Incorporated Head Start Center in Norton, Va., where Angel Hall helps a child.Shawn Poynter for The New York TimesRepublicans are pushing to cut funding for many programs that provide for young children, such as the Kids Central Incorporated Headstart Center in Norton, Va., where Angel Hall helped a child earlier in the year.
Today's Economist

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

Economists disagree about a lot of things, but many agree that public investments in early childhood education pay off. The social benefits far exceed the social costs.

A recently released study of 1,000 poor children who benefited from Chicago’s Child-Parent Center Education Program (which includes intensive preschool, parent training and support for students through third grade), suggests that every dollar spent on the program yielded nearly $11 to society, including increased tax revenue and reduced spending on child welfare, special education and grade retention.

Many other detailed cost-benefit analyses, ably summarized in Timothy Bartik’s new book, “Investing in Kids,” document a high social rate of return, with the potential to encourage local economic development as well as improve productive skills.

Enthusiasm crosses the political spectrum. James Heckman of the University of Chicago, a Nobel laureate who is hardly a big advocate of government spending, is famously insistent on the benefits of early childhood education. Ben Bernanke, the chairman of the Federal Reserve Board, is another strong supporter.

Last year, the U.S. Chamber of Commerce published a report, “Why Business Should Support Early-Childhood Education,” that includes a summary of efforts by some chamber groups to promote early childhood education on the state and local level.

Such efforts go beyond charitable giving and on-site learning centers for employees with children to strong political commitments to expand our educational system significantly.

Public support could take many different forms, including the voucher-based systems advocated by two Federal Reserve economists, Arthur J. Rolnick and Rob Grunewald.

Why, then, hasn’t the business community thrown more of its political weight behind increased public support for early childhood education?

In the push to cut all social spending, both federal and state programs have gone on the chopping block. Republicans in the House of Representatives have mounted a major effort to reduce Head Start, Early Head Start and the Child Care Development Block Grant, as well as many other programs directed at young children.

State preschool spending per child declined last year to a level below that of 2001-2 and is likely to decline further as federal stimulus money peters out.

None of the candidates for the Republican presidential nomination has expressed interest in the issue. As governor of Massachusetts, Mitt Romney vetoed a bill that would have required the state to develop prekindergarten education programs for every child 2 to 4.

While many Democrats staunchly defend the principle of early childhood education, their willingness to fight for it has been dissipated by deficit anxieties.

Maybe information about the payoff on investments in early childhood education just hasn’t sunk in. Maybe appreciation of the benefits requires a longer time horizon than most politicians or business leaders can reach for.

Or perhaps those in the best position to pay the costs are not interested in the benefits. Broader global horizons make businesses less dependent on the labor force in the United States than they have been in the past. A growing number of businesses have the potential to take their operations elsewhere to find the skilled labor they need at the price they want to pay.

Businesses that rely on American workers are not facing labor shortages. They see a large reserve army of the unemployed, especially among workers in their 20s.

So why should businesses invest in early childhood education when there are more direct ways to reduce public spending related to crime, child welfare and education? Budget cuts across the board can shift costs back to low-income families and communities in the form of reduced opportunities and lower living standards.

In economic terminology, incentives are misaligned.

While the social rate of return on public investments in children is high for taxpayers, businesses may not be able to capture a significant share of that return. They may be tempted by more profitable investments — contributions to candidates and elected officials whose top priority is to lower the cost of doing business.

On the other hand, many business owners are citizens and taxpayers who care about the well-being of the next generation. Those are the ones who will buy in to early childhood education. They had better do it soon.

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