THE COST OFEVERYTHING AND THE VALUE OF

NOTHING

HOW LITTLE ECONOMICS CAN TELL US ABOUT THE VALUE OF EARLY CHILDHOOD EDUCATION

Children enrolled in early childhood education

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20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009at July

Nu

mb

er

of

child

ren

en

rolle

d (

00

0s)

Between 2000 and 2009 the number of children enrolled in an early childhood centre increased by 17% to 180,100 places. Over the same period the population of children aged under 5

year increased just 7% to 306,000. The availability of ECE places increased from 54% of the

Under 5 population to 59%

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

Over the period 2000-10 Government spending on early childhood education operating subsidies increased 269% and

by nearly 190% if these costs are adjusted for inflation

Early Childhood Education operating subsidies

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200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Year ending June

$ m

illio

ns

(no

min

al)

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

This has meant that the taxpayer subsidy per student attending ECE rose 143% in inflation adjusted terms from $2,630 per child

per year in 2000 to $6,373 per child per year in 2009Even allowing for the fact that the average length of attendance

at ECE has increased 40% over this period, the per child subsidy has increased 73% in real terms

Government subsidy per ECE student in June 2010 $'s

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

July years

Co

st p

er

stu

de

nt

(Ju

ne

20

10

$s)

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

These are startling increases which really need to be explained in terms of what extra

benefits the taxpayers and citizens are getting for this increased expenditure

However in looking for such an explanation we need to be mindful of three things

We should not assume that everything about the funding of the sector was acceptable before the increases – some of this new expenditure might be catch-up spending

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

We need to think about the distributional issues around the new expenditure – who wins and who pays and do they deserve to or are they happy to?

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THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

2

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING HOW MIGHT THE BENEFITS ARISE?

EARLY CHILDHOOD EDUCATION

EDUCATIONCHILD CARE

HIGHER INCOMES

HIGHER TAXES

Increased labour force participation

At risk studentsNot at risk students

Improved educational achievement

Reduced rates of educational failure

Higher productivity

REDUCED SOCIAL COSTS

REDUCED TAX BURDEN

ECONOMIC GROWTH

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

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THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING INCREASED LABOUR MARKET PARTICIPATION

EARLY CHILDHOOD EDUCATION

CHILD CARE

HIGHER INCOMES

HIGHER TAXES

Increased labour force participation

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

2

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING INCREASED LABOUR MARKET PARTICIPATIONFemale employment 2002-09

0

200

400

600

800

1,000

1,200

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10

Quarters

Num

ber

of w

omen

em

ploy

ed (

000s

) B

AR

S

56

57

58

59

60

61

62

63

64

Par

ticip

atio

n ra

te L

INE

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

2

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING INCREASED LABOUR MARKET PARTICIPATION

Female labour force participation 59.4% 62.9%Female employment rose by 124,00 workers

Female average hours worked = 36.5hrsAverage hourly rate = $23.50 hr

Annual income = $44,000Total income for all workers - $5.5 billion

Tax revenue at 15% tax rate - $825 million

Additional tax revenue if half increased participation is attributable to subsidized child care = $412 million

Early Childhood Education operating subsidies

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200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Year ending June

$ m

illio

ns

(no

min

al)

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

$412 million

Expected increase through population growth & inflation

It is a lot easier to count and to attribute costs than it is benefits – so costs often dominate the conversation

2

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING THE TRICK IS IN THE CAUSALITY

To make a credible case for the economic value of publicly subsidised ECE we need to be able to establish the interdependency and causality described by the arrows in the benefits diagram

In some cases this can be done fairly well using various social research techniques – in other cases the links and causality are more hypothetical because of the existence of other causal factors in any social outcome

The benefits add up very quickly however in dollar terms and there are a variety of benefit streams from ECE which could make the additional expenditure justifiable in economic terms

THE COST OFEVERYTHING

AND THE VALUE OF

NOTHING

But is the case for continued spending of ECE even an economic one?

Economic analysis should support decision-making and not constrain it or conclude it – decisions should be based on sound moral arguments although these will be laced with pragmatism

Decisions around ECE investments should be made in the context of the wider priorities of the society and not be based on narrow perspectives such as those of tax impacts

Ideally decisions around the priority given to ECE and other social priorities should be based on notions of citizenship and the rights and responsibilities which stem from these.

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