Rob Grunewald Federal Reserve Bank of Minneapolis

The Economic Case for Investments in Young Children

Oklahoma CityOctober 15, 2014

Less than high school

High school diploma or equivalent

Postsecondary non-degree award

Associate's degree

Bachelor's degree

Master's degree or higher

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8

Average annual percent change

U.S. Job Growth by Typical EducationRequired for Job Entry, 2012 to 2022

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

Less than high school

High school diploma or equivalent

Postsecondary non-degree award

Associate's degree

Bachelor's degree

Master's degree or higher

$0 $20,000 $40,000 $60,000 $80,000 $100,000

Average Annual Wage by Typical Education Required for Job Entry, 2012*

*Average of median wages by occupation, weighted by employment size.Source: U.S. Bureau of Labor Statistics, Employment Projections Program

The Economic Case for Investments in Young Children

• First few years have life-long impact

• Early investments yield a high public return

• Key investments: Home visiting, preschool, quality child care, parent education and health care

The Economic Case for Investments in Young Children

• First few years have life-long impact

• Early investments yield a high public return

• Key investments: Home visiting, preschool, quality child care, parent education and health care

Human Brain DevelopmentSynapse 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)

LanguageHigher 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)

Risk Factors for Adult Heart Disease are Embedded in Adverse Childhood Experiences

ACEs

Od

ds R

ati

o

0 1 2 3 4 5,6 7,8

0.5

1

1.5

2

2.5

3

3.5

Source: Dong, Giles, Felitti, Dube, Williams, Chapman, & Anda (2004)

The Economic Case for Investments in Young Children

• First few years have life-long impact

• Early investments yield a high public return

• Key investments: Home visiting, preschool, quality child care, parent education and health care

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: Economic Effects at Age 40

0% 25% 50% 75% 100%

Have a savingsaccount

Earn $27,000+

Own home

Program group No-program group

Source: Schweinhart, et al. (2005)

Perry: Arrested 5 or More Times Before Age 40

Source: Schweinhart, et al. (2005)

0% 20% 40% 60%

No-program group

Program group

Perry PreschoolCosts and Benefits Over 62 Years

-$20

,000

$20,

000

$60,

000

$100

,000

$140

,000

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– $10 to $1

• Elmira Prenatal/Early Infancy Project – $5 to $1

Sources: Masse & Barnett (2002); Reynolds, Temple, White, Ou, & Robertson (2011); Karoly, et al (1998)    

Short-Run Benefits to Businesses

• Allow parents to enter workforce

• Reduce absenteeism and turnover

• Stronger local schools

Lessons Learned from Research

• Invest in quality

• Involve parents

• Start early

• Reach at-risk population

• Bring to scale

Key Investments

• Home visiting

• Preschool

• Quality child care

• Parent education

• Health care

Sources

Carneiro, P. and Ginja, R. (2009). "Preventing Behavior Problems in Childhood and Adolescence: Evidence from Head Start." University College London.

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.

Currie, J. and Thomas, D. (2000). "School Quality and The Longer-Term Effects Of Head Start," Journal of Human Resources 35:4, 755-774.

Deming, D. (2009). "Early Childhood Intervention and Life-Cycle Skill Development: Evidence from Head Start." American Economic Journal: Applied Economics 1:3, 111–134.

Dong, M., Giles, W., Felitti, V.J., Dube, S.R., Williams, J.E., Chapman, D.P., & Anda, R.F. (2004). “Insights into causal pathways for ischemic heart disease: Adverse Childhood Experiences Study.” Circulation 110, 1761–1766.

Hart, B., & Risley, T.R. (1995). Meaningful Differences in the Everyday Experience of Young American Children. Baltimore: Paul H. Brooks Publishing Co.

Heckman, J.J. & Masterov, D.V. (2007). "The Productivity Argument for Investing in Young Children," Review of Agricultural Economics, American Agricultural Economics Association 29(3), 446-493, 09.

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.

Hustedt , J.T., Barnett, W.S., Jung, K. & Friedman, A.H. (2010). The New Mexico PreK Evaluation: Impacts From the Fourth Year (2008-2009) of New Mexico’s State-Funded PreK Program. National Institute for Early Education Research.

Karoly, L.A., Greenwood, P.W., Everingham, S.S., Hoube, J., Kilburn, M.R., Rydell 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. 

  

Sources

  

Puma, M., Bell, S., Cook, R. Heid, C., Broene, P. Jenkins, F., Mashburn, A. and Downer, J. (2012). Third Grade Follow-up to the Head Start Impact Study Final Report, Executive Summary. OPRE Report # 2012-45b. Washington, DC: Office of Planning, Research and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services.

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.

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