Rob Grunewald

Federal Reserve Bank of Minneapolis

Investments in Young Children:

The Economic Case and

How to Fund

July 18, 2011

CCSSO Summer Institute

Investments in Young Children:

Economic Case and

How to Fund

• Early childhood development is economic development

• Early investments yield a high public return

• States use a variety of funding sources

• Education chiefs play key role in moving agenda forward

Investments in Young Children:

Economic Case and

How to Fund

• Early childhood development is economic development

• Early investments yield a high public return

• States use a variety of funding sources

• Education chiefs play key role in moving agenda forward

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2000-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50

Avera

ge a

nnual perc

ent

change

U.S. Population Projections,

Ages 15 to 64

Source: U.S. Census Bureau, Population Division

0.0 0.5 1.0 1.5 2.0

Short-term OTJ training

Moderate-term OTJtraining

Long-term OTJ training

Work experience inrelated occupation

Postsecondary vocationalaward

Associate degree

Bachelor's degree orhigher

Average annual percent change

Occupation Growth by Primary Source of

Education and Training, 2008 to 2018

Source: U.S. Bureau of Labor Statistics, Employment Projections Program

$0 $20,000 $40,000 $60,000 $80,000

Short-term OTJ training

Moderate-term OTJ training

Long-term OTJ training

Work experience in related occupation

Postsecondary vocational award

Associate degree

Bachelor's degree or higher

Average annual wages of new jobs based on median 2008 wages

Average Annual Wages of New Jobs by Primary

Source of Education and Training, 2008 to 2018

Source: U.S. Bureau of Labor Statistics, Employment Projections Program

Investments in Young Children:

Economic Case and

How to Fund

• Early childhood development is economic development

• Early investments yield a high public return

• States use a variety of funding sources

• Education chiefs play key role in moving agenda forward

Human Brain Development Synapse Formation Dependent on Early Experiences

FIRST YEAR

-8 -7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Birth (Months) (Years)

Sensory Pathways (Vision, Hearing)

Language Higher Cognitive Function

Source: Nelson (2000)

Human

Brain

at Birth 6 Years Old

14 Years

Old

Source: Chugani, Phelps & Mazziotta (1987)

Barriers to Social Mobility Emerge at a Very Young Age

16 mos. 24 mos. 36 mos.

Cu

mu

lati

ve V

ocab

ula

ry (

Word

s)

College Educated Parents

Very Low-Income Parents

Child’s Age (Months)

200

600

1200

Source: Hart & Risley (1995)

High/Scope Study of Perry Preschool

• In early 1960s, 123 children from low-income families in Ypsilanti, Mich.

• Children randomly selected to attend Perry or control group.

• High-quality program with well-trained teachers, daily classroom sessions and weekly home visits.

• Tracked participants and control group through age 40.

Perry: Educational Effects

0% 25% 50% 75% 100%

Didn't require special education

Graduated from high school on time

Age 14 achievement at 10th percentile+

Program group No-program group

Source: Schweinhart, et al. (2005)

Perry Preschool

Costs and Benefits Over 62 Years

-$20,0

00

$20,0

00

$60,0

00

$100,0

00

$140,0

00

Welfare Payments

Crime Victims

Justice System

Higher Participants' Earnings

K-12 Ed

Program Cost

For Public For Participant

Source: Schweinhart, et al. (2005)

Perry Preschool —

Estimated Return on Investment

• Benefit-Cost Ratio = $16 to $1

• Annual Rate of Return = 18%

• Public Rate of Return = 16%

• Heckman Reanalysis = 10%

Sources: Schweinhart, et al. (2005); Author’s calculations; Heckman, Moon,

Pinto, Savelyez, & Yavitz (2010)

Benefit-Cost Ratios for

Other Longitudinal Studies

• Abecedarian Educational Child Care

– $4 to $1

• Chicago-Child Parent

– $7 to $1

• Elmira Prenatal/Early Infancy Project

– $5 to $1

Sources: Masse & Barnett (2002); Reynolds, Temple, Robertson, & Mann (2002);

Karoly, et al. (1998)

Five-State Pre-K Evaluation Estimated size of intent-to-treat effect

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Michigan New Jersey South Carolina

West Virginia Oklahoma

Vocabulary (PPVT) Math Print Awareness

*Significant at 5% Source: Wong, V. C., Cook, T. D., Barnett, W. S., & Jung, K. (2008)

*

*

* *

*

*

*

* *

Lessons Learned from Research

• Invest in quality

• Involve parents

• Start early

• Reach at-risk population

• Bring to scale

Investments in Young Children:

Economic Case and

How to Fund

• Early childhood development is economic development

• Early investments yield a high public return

• States use a variety of funding sources

• Education chiefs play key role in moving agenda forward

Funding Pre-K

• General revenue

• School funding formula

– At least 11 states and D.C.

– Community programs can provide preschool

• Designated sales or excise tax

– South Carolina and Denver: Sales tax

– California and Arizona: Cigarette tax

• Lottery

– Georgia raises about $300 million

• Set aside Pre-K funds for ages 0 to 3

– Illinois and Kansas

• Endowment

– Nebraska, $60 million

• Public-Private Partnerships

– Smart Start (North Carolina)

– Smart Beginnings (Virginia)

– Minnesota Early Learning Foundation

Funding Prenatal to Age 3

Investments in Young Children:

Economic Case and

How to Fund

• Early childhood development is economic development

• Early investments yield a high public return

• States use a variety of funding sources

• Education chiefs play key role in moving agenda forward

Roles for Education Chiefs

• Advocate for early childhood funding

• Partner with Human Services and Health Departments

to improve program quality

• Encourage schools to partner with child care, Pre-K

and Head Start to improve transition to kindergarten

• Apply for Early Learning Challenge funds to build a

stronger state early learning system

• Promote partnerships with the private sector

Sources

Chugani, H.T., Phelps, M.E., & Mazziotta, J.C. (1987). Positron emission tomography study

of human brain functional development. Annals of Neurology 22, 487-497.

Hart, B., & Risley, T.R. (1995). Meaningful Differences in the Everyday Experience of Young American Children.

Baltimore: Paul H. Brooks Publishing Co.

Karoly, L.A., Greenwood, P.W., Everingham, S.S., Hoube, J., Kilburn, M.R., Rydell, C.P., et al. (1998). Investing in Our

Children: What We Know and Don’t Know About the Costs and Benefits of Early Childhood Interventions. Santa Monica,

Cal.: RAND Corporation.

Masse, L.N., & Barnett, W.S. (2002). A Benefit-Cost Analysis of the Abecedarian Early Childhood Intervention. New

Brunswick, N.J.: National Institute for Early Education Research.

Heckman, J. J., Moon, S.H., Pinto, R., Savelyez, P., & Yavitz, A. (2010). “The Rate of Return to the HighScope Perry

Preschool Program.” Journal of Public Economics 94(1-2), 114-28.

Minnesota Early Learning Foundation. www.melf.us.

Nelson, C.A. (2000). The Neurobiological Bases of Early Intervention. In J.P. Shonkoff & S.J. Meisels (Eds.), Handbook of

Early Childhood Intervention, second edition (204-227). Cambridge, Mass.: Cambridge University Press.

Reynolds, A.J., Temple, J.A., Robertson, D.L., & Mann, E.A. (2002) “Age 21 Cost-Benefit Analysis of the Title I Chicago

Child-Parent Centers.” Educational Evaluation and Policy Analysis 4(24), 267-303.

Schweinhart, L.J., Montie, J., Xiang, Z., Barnett, W.S., Belfield, C.R., & Nores, M. (2005) Lifetime Effects: The High/Scope

Perry Preschool Study Through Age 40. Ypsilanti, Mich.: High-Scope Press.

U.S. Census Bureau, Population Division. Population Projections. http://www.census.gov/population/www/projections/.

U.S. Bureau of Labor Statistics, Employment Projections Program. http://www.bls.gov/emp/.

Wong, V. C., Cook, T. D., Barnett, W. S., & Jung, K. (2008). “An Effectiveness-based Evaluation of Five State

Prekindergarten Programs. “Journal of Policy Analysis and Management, 27(1), 122-154.

minneapolisfed.org