Human Capital Development

It would be difficult to find a more timely report than Attracting, Developing, and Maintaining Human Capital: A New Model for Economic Development, from the Partnership for America’s Economic Success (a project of the Pew Center on the States).  At the same time American families fret over the continued economic doldrums and begin to worry about back-to-school shopping for their kids, the report connects high-quality early education to long-term economic success, pulling from the new book by economist Timothy Bartik.

Bartik’s research makes a strong case for both the short- and long-term benefits of quality early education programs for students, parents, employers, and taxpayers. Short-term, investing public dollars in early education can:

• Help attract skilled workers with young children, who prefer areas with high-quality education programs to those with low-quality or inaccessible programs;
• Provide peace of mind to local employees, allowing them to be more productive and fully present on the job; and
• Increase the demand for highly qualified teachers, who are likely to move to the area as well as spend their earnings locally.

These are essentially the same reasons parents are drawn to areas with good elementary and secondary schools. Businesses want to be in areas rich with highly qualified, happy employees, reflected in years of research showing that public services, including education systems, play more of a role in locating a company than does the business tax rate. Offering peace of mind to parents regarding the arrangements for their young learners has become more important throughout this economic downturn. A 2010 report from the National Association of Child Care Resource & Referral Agencies (NACCRRA) found that 51 percent of families with child under age 5 had their child care affected in some way by the recession, even as 57 percent of these families reported child care as an economic necessity.  Investing in high-quality early education could not only go beyond the needs of “just” child care but also alleviate the stress families feel regarding both the quality and cost of this care.

Some may ask, “What about the taxpayer?,” echoing the rallying cry of this age of austerity.  As noted above, quality early education can improve the environments for both families and businesses, improving local tax revenues and quality of life.  Bartik notes that the short- and long-term effects of pre-K include higher test scores. Looking further down the line, quality early learning experiences can reduce special education placements by up to 50 percent through second grade and reduce grade retention by up to 33 percent through eighth grade, both of which significantly reduce the cost of public education. All told, school systems can save up to $3,700 per child over the K-12 years, to say nothing of the crime-related savings of between $2 and $11 per each dollar invested in early education.

Bartik also calls up an interesting statistic in this age of globalization: 60 percent of American workers, including 45 percent of those with a college degree, continue to live and work in the state in which they were raised.  Thus, the investments states make during early childhood to prepare children for school and, eventually, work pay off in benefits to taxpayers of those same states later in life. As any real estate agent can attest, parents are attracted to areas with good schools. Bartik’s research find the testing score improvements attributed to pre-K can improve property values by $13 for every dollar invested.  Creating attracting education systems can also working parents to stay local, benefitting businesses and local tax bases.

Early childhood education does not need to be limited to state efforts. Bartik’s data indicates that as an economic development strategy, half-day pre-K for all 4-year-olds more than holds its own against business tax incentives. At the state level, pre-K benefits $2.78 for each dollar spent, not far behind the $3.14 benefitted by business incentives. At the national level, however, the $3.79 per dollar benefitted by pre-K far outstrips the $0.65 benefit-cost ratio of business tax incentives.  Tax incentives encourage businesses to play musical chairs throughout the country, seeking to cut overhead without necessarily producing more.  High-quality early education, though, starts children on an improved educational and social path that benefits workforce quality into the future.  It is not difficult to understand, then, the federal government’s current Race to the Top – Early Learning Challenge that seeks to develop these early learning programs.

As government at all levels continues its belt-tightening, there are those who claim pre-K is an unaffordable luxury, when in reality it is an astonishingly good investment for both the short- and long-term benefit of the nation. While pre-K has not traditionally been considered in the elementary education system supported by taxpayers, using public funds to provide such programs can actually spur current economic growth while preparing America for a prosperous future.  A recent NIEER brief examines current public financing of early learning as well as how the system can be improved.  Advocates of publicly-funded pre-K support early learning not only because it is the right thing for children, but also because it can mitigate some of the long-term deficit ills so recently brought to the national light.

– Megan Carolan, Policy Research Coordinator, NIEER