The Best Economic Development Tool

Rick Noble

To optimize future economic growth, we don't have to resort to magic. We simply need to make high-quality early childhood education available to all of our youngsters.

Rick Noble is Executive Director of Richland County First Steps in Columbia, South Carolina. He is the former Executive Director of Communities in School-Midlands, and the former Director of Development for Midlands Technical College, both located in Columbia.

. . . these programs have a very high Return on Investment (ROI)—anywhere from $4 to $7 . . . for each dollar spent.
 

Can a University of Chicago economist and Nobel Laureate (James J. Heckman), leading researchers at the Federal Reserve Bank of Minneapolis, the distinguished members of the Business Roundtable, the Committee for Economic Development, and the Economic Policy Institute—just to mention a few—all agree on one specific economic development strategy that will, by itself, do more than any other strategy to optimize future economic growth in the United States?

The answer is yes, and the strategy is to invest significantly in quality early education/preschool programs. Why? Because there has always been a correlation between investing in early education and reducing retention, i.e., repeating a grade. Several recent studies have shown this to be true yet again, and have also found that high-quality early education brings a big payoff in the future. Plus, these programs have a very high Return on Investment (ROI)—anywhere from $4 to $7 ($17 if you look at the internal rate of return) for each dollar spent.

Early childhood education advocates Rick and Lynne Noble
at Shandon Presbyterian Church's early childhood facility in
Columbia, S.C. [Photo by Gary Zeigler.]

Perry Preschool Study

Take the longest study of them all, the High/Scope Perry Preschool Project in Ypsilanti, Michigan. This landmark, long-term study of the effects of high-quality early care and education on low-income three- and four-year-olds shows that “adults at age 40 who participated in a preschool program in their early years have higher earnings, are more likely to hold a job, have committed fewer crimes, and are more likely to have graduated from high school,” according to High/Scope. The Washington, D.C.-based educational research foundation released its latest update of this group in November 2004.

What makes this study unique, says the foundation, is that the 123 young black children in the study, who were living in poverty and considered to be at high risk of school failure, were randomly assigned in 1962 to receive the High/Scope Perry Preschool program or to receive no comparable program. They were then tracked throughout their lives to age 40. These same groups of children were also studied every year from ages 3 to 11, and again at ages 14, 15, 19, and 27.

Among the study's major findings in the educational area:

• More of the group who received high-quality early education graduated from high school than the non-program group (65 percent versus 45 percent), particularly females (84 percent versus 32 percent).

• Fewer females who received high-quality early education than non-program females required treatment for mental impairment (8 percent versus 36 percent) or had to repeat a grade (21 percent versus 41 percent).

• The group who received high-quality early education, on average, outperformed the non-program group on various intellectual and language tests during their early childhood years, on school achievement tests between ages 9 and 14, and on literacy tests at ages 19 and 27.

Among the study's major findings in the economic area:

• More of the group who received high-quality early education than the non-program group were employed at age 40 (76 percent versus 62 percent).

• The group who received high-quality early education had median annual earnings more than $5,000 higher than the non-program group ($20,800 versus $15,300).

• More of the group who received high-quality early education owned their own homes.

• More of the group who received high-quality early education had a savings account than the non-program group (76 percent versus 50 percent).

Among the study's major findings in the crime prevention area:

• The group who received high-quality early education had significantly fewer arrests than the non-program group (36 percent versus 55 percent arrested five times or more).

• Significantly fewer members of the group who received high-quality early care than the non-program group were ever arrested for violent crimes (32 percent versus 48 percent), property crimes (36 percent versus 58 percent), or drug crimes (14 percent versus 34 percent).

• Referring to the results of the Perry Preschool Study and similar studies, Nobel Laureate James Heckman observes: “The real question is how to use the available funds wisely. The best evidence supports the policy prescription: invest in the very young and improve basic learning and socialization skills.”

Other Studies

The literature is clear: dollars invested in early childhood development yield extraordinary public returns. . . . Yet early childhood education is rarely considered as an economic development measure.
 

• Federal Reserve Bank of Minneapolis (“Early Childhood Development: Economic Development with a High Public Return,” January 2003)

Investment in human capital breeds economic success, not only for those being educated but also for the overall economy, according to this study. Prior to 1983, the wages of a worker with an undergraduate degree exceeded a worker with a high school diploma by roughly 40 percent. Now, that difference is close to 60 percent. The wage premium for an advanced degree has grown even more. Prior to 1985, the wages of a worker with a graduate degree exceeded that of a worker with a high school diploma by roughly 60 percent. Today, that difference is more than 100 percent.

The literature is clear: dollars invested in early childhood development yield extraordinary public returns. These returns are especially high when placed next to other spending by governments made in the name of economic development. Yet early childhood education is rarely considered as an economic development measure.

• Business Roundtable (“Early Childhood Education: A Call to Action from the Business Community,” May 2003)

In today’s world, where education and skill levels determine future earnings, the economic and social costs to individuals, communities, and the nation of not taking action on early childhood education are far too great to ignore, especially when the benefits far outweigh the costs, as is the case here. Estimates of the return on investment (ROI) of high-quality programs for low-income children range from $4 to $17 for every dollar spent. But the research is clear: the ROI is linked to quality. Simply increasing participation without ensuring program quality will not produce positive results.

• Committee on Economic Development (“Preschool for All: Investing in a Productive and Just Society,” February 2002)

Research increasingly indicates that prekindergarten children have a much greater capacity to learn than was previously recognized. Too many of these youngsters, however, spend their time in child-care settings that don’t expose them to activities that take full advantage of their learning capacity. For too long, the United States has paid lip service to the importance of preschool opportunities that prepare children for school without undertaking the level of investment needed to turn that promise into reality.

• Economic Policy Institute (“Exceptional Returns: Economic, Fiscal and Social Benefits of Investment in Early Childhood Development,” October 2004)

This study by Robert G. Lynch demonstrates for the first time that providing all 20 percent of the nation’s three- and four-year-olds who live in poverty with a high-quality early childhood education program would have a substantial payoff for governments and taxpayers in the future. If such a nationwide program were started in 2005, by 2030 the budget benefits would exceed costs by $31 billion (in 2004 dollars). By 2050, the net budget savings would reach $61 billion (in 2004 dollars).

Why It Matters

As developers of human brains, these caregivers and teachers, along with parents, hold the key to today's knowledge/ intelligence age. In a word, today's young people will be our competitive advantage.

So what does all this mean for South Carolina’s children—and for the state’s economy in the 21st century? Children begin learning at birth, and some of their most important learning takes place during the first three years of life. Youngsters who are not prepared to begin school, therefore, don’t do well in school. A recent study, conducted by the University of North Carolina-Chapel Hill, found that student retention costs taxpayers $170 million annually in grades 1-3. In South Carolina, preliminary estimates put the annual cost at $75 million.

There are even more costs of retention at the middle-school and high-school levels, not to mention the societal cost associated with our unacceptably high dropout rates.

School “readiness” is a relatively new buzzword, usually defined in terms of competence in: 1) physical development, 2) motor development, 3) social and emotional development, 4) approaches to learning, 5) language development and communication, and 6) cognition and general knowledge.

There are various measurements of school readiness. Currently, the mechanism for assessing school readiness in South Carolina is the SCRA (South Carolina Readiness Assessment), which uses a portfolio approach of observation and recording 14 tasks/characteristics related to human growth and development, and hence, school readiness.

South Carolina’s commitment to school readiness was demonstrated by the phase-in of statewide, full-day kindergarten by 1998 and the establishment of the state’s First Steps to School Readiness Program in 1999. Recently, however, the state’s commitment to making sure each child is ready for school has waned. In the last several years, a tight state budget meant statewide funding cutbacks for the state’s public schools and for the First Steps program, the latter cutbacks reaching up to 62 percent.

These cutbacks have been painful. According to the S.C. State Department of Education, South Carolina’s public schools absorbed six mid-year budget cuts from 2001 through 2003. This meant, among other things, that some 1,000 classroom teachers were laid off; summer school programs for students who needed extra help were reduced or eliminated; teacher training was reduced; class sizes were increased; after-school remedial programs were eliminated; and about 900 kindergarten slots for four-year-olds were eliminated statewide. There is a waiting list of about 3,000 for those slots today, according to Jim Foster, S.C. State Department of Education spokesman.

What Now?

When we were an agricultural society, our greatest resources were the land, the people, and the seeds we planted. As an industrial society, we depended on our vast natural resources, our workers, and the concept of standardized production. As a service society, we needed people, especially trained ones. In an information society, the emphasis is/was on technology, our use of computers, and the data they can assimilate.

Now as we enter the knowledge/intelligence age, our dependence shifts significantly. Today’s focus needs to be on early-education providers, those caregivers and teachers who will recruit and appropriately train our young people. As developers of human brains, these caregivers and teachers, along with parents, hold the key to today’s knowledge/intelligence age. In a word, today’s young people will be our competitive advantage.

If K-12 education is like a train ride, many children in South Carolina “get on board” without a ticket. They end up abandoned at way stations, unable to complete the trip. We owe them a better chance. We can give them that chance by investing in early education—now. o