Presentation made during the last 11th Annual Meeting of the OECD LEED Forum on Partnerships and Local Development where local and national leaders, policy makers and practitioners discussed how inclusive growth can be built from the ground up.

1. Economic Benefits of
Early Childhood Programs
Randall W. Eberts
W.E. Upjohn Institute for Employment Research
11th Annual OECD LEED Forum
June 24-26, 2015
Manchester, UK

2. Purpose
• What does research tell us about the
economic benefits of early childhood
programs
• What are the promising practices in the US
that we can learn from?
• Most of my comments are based on work of
colleague Tim Bartik and his two books that
the Upjohn Institute recently published
2

3. Definitions
• Local economic development is defined as the
“increase in local earnings per capita” (Bartik)
– Often defined as growth in employment, output, or
population
• Bartik argues that this definition focuses on the well-
being of an individual
– Growth in population or employment without an increase
in per capita earnings does not necessarily increase
individual well-being (except for those not employed and
living in the area)
• Also argues that an increase in per capita income
improves the quality of life in a community
3

4. Definitions
• Early childhood programs
– Child participants between the ages of 0 and 4
– Direct, quality developmental and instructional
time for child participants (small student staff
ratios; structured time)
– Child care – frees parents’ time for their own
development (education and work experience)
– Direct support for parents, such as instruction on
caring for newborns and interacting with their
children
4

5. Three U.S. Programs
Program Child
participant
Child care Child
development/
instruction
Parent
Universal Pre-K
(Chicago Child-
Parent Center;
Perry Preschool)
Only 4 year olds Limited (3 hrs/day
for one year
during school
year)
Staff-student ratio
20-2 (certified
teacher and
parapro)
Perry included
1½ hour weekly
home visit
Abecedarian 6 weeks of age
until
kindergarten;
Disadvantaged
families
5 days a week, 50
weeks a year
Educational goals
from beginning;
6-2 staff ratio to
14-2, depending on
age
Nurse-Family
Partnership
Disadvantaged
first-time mothers
Mother
provided with 2
½ years of nurse
visits (total of 45
hours);
1-1 meetings
with parents
5

6. Possible Effects of Early Childhood
Programs on Local Economies
• Spending on child care providers direct earnings and
employment in local area
• Child care—increased education and/or labor supply of
parents increased employment and higher earnings of
parents
• Child participants—increased adult education,
employment, and occupational attainment of former child
participants higher earnings when they reach
employment age
• Estimates of benefits are based on rigorous evaluations of
various early childhood programs
– James Heckman and students, as well as others, have evaluated
the effects of several programs
6

7. Increase in Present Value of State Residents’
Earnings Per Dollar of Cost
0
0.5
1
1.5
2
2.5
3
Universal
Pre-K
Abecedarian NFP
Former Child Participants
Parents
Spending
2.25
2.78
1.85
Business incentives: 3.14
Bartik (2011), Investing in Kids, Figure 4.1, p. 81. 7

8. Short Run/Long Run Effects
• Business incentives act quickly
– Benefit-cost ratio greater than one in first year
• Benefits of early childhood programs don’t exceed
costs at least until 12 years later when former child
participant reach age 16 and employment effects take
effect
– Largest effects occur when former child participants reach
prime earnings age—30 to 40
• Conservative estimates--these estimate do not take
into account the benefits of foregoing social assistance
programs, including foregoing the cost of incarceration,
nor spillover or peer effects
8

9. Scaling Up
Program Possible #
Participants for
full scale
implementation in
all states
(millions)
PV of costs per
annual cohort
(billions $)
% effect on state residents’
earnings as % of state earnings
Of early
childhood
program
Of business
incentives of
similar cost
Universal Pre-K 2.892 $14.3 1.24 1.02
Abecedarian 0.619 $39.8 2.62 2.85
Nurse Family
Partnership
0.373 $3.7 0.21 0.27
Bartik (2011), Investing in Kids, Table 4.1 and 4.3, p. 86 and p. 88
9

10. Best Practice Design
• Bartik (2015) recommends combining the elements of all three programs
considered here
– Universal all day pre-school for 4 year olds with student to staff ratio no
greater than 15 to 2 (patterned after Chicago Child Parent Center)
– Targeted all day, year round child care and pre-K for children birth to 5 from
targeted, economically disadvantaged families (patterned after Abecedarian)
– Targeted services to parents from birth to age 2 (patterned after Nurse Family
Partnership)
• Sufficient rigorous empirical evidence to support investing in such a
program
• 40 states have state-funded pre-school programs of various types serving
1.3 million children at a cost of $6 billion a year, with several providing
universal pre-school
• Federal Head Start program services over a million children at a cost of $4
billion a year
• However, to reap the benefits outlined here, coverage needs to expand
and quality improve, leaving a price tag of $79 billion a year (2% of taxes),
according to Bartik (2015)
10