Early Childhood Programs and Economic Development

1. Early Childhood Programsand Economic Development Timothy J Bartik, Senior Economist March 11, 2010 W.E. Upjohn Institute for Employment Research 300 S. Westnedge Ave. Kalamazoo, MI 49007 bartik@upjohn.org Presentation to National Economic Forum on Early Childhood Investment: A Conference of the Partnership for America’s Economic Success

2. Early childhood programs are “economic development” programs because they affect state per capita income, largely by affecting quality of labor supply of former child participants Other economic development effects of early childhood programs: parental labor supply, taxing and spending locally.

3. Early Childhood Programs Have High Economic Development BenefitsCompared to Costs Ratio of Present Value of Earnings Increase to Present Value of Costs, State and National Perspective

4. Short-Run Benefits of Early Childhood Programs • Early childhood programs also have significant short-term economic development benefits, although they don’t fully cover costs in short-term • “Demand” effects of tax-financed hiring of more workers in these programs will increase state earnings immediately by about 17% of the spending • Immediate effects on parent earnings are nil for NFP, but are 5% of program costs for pre-K and 14% for Abecedarian program • Special ed. cost savings over next 13 years offset from 20 to 30% of the program costs for early childhood programs • Possible property value benefits

5. Possible Property Value Effects of Pre-K Ratio of Property Value Effects to Annual Program Costs Based solely on 3rd grade test scores Based on present value of earnings effects

6. The educational investments of the 19th century common school movement and the 20th century high school movement were justified by both immediate self-interest and long-term benefit. Iowa Department of Public Instruction, 1914: “The landlord who lives in town … may well be reminded that when he offers his farm for sale it will be to his advantage to advertise, ‘free transportation to a good graded school.’ Those who have no children … must of necessity rely upon someone, they know not whom, who is today in the public schools.” Note: Quoted in Claudia Goldin and Lawrence Katz, The Race Between Education and Technology.

7. The Kalamazoo Promise provides an interesting recent example of promoting educational investments as economic development: “Communities facing hard times have traditionally focused on such things as … business parks and [tax incentives] … [to] entic[e] new employers …. The Promise is different. The enticement of new residents … to take advantage of funding of their children’s college education is a strong one … [N]ew companies [will] consider Kalamazoo … as they see a rising population … [M]ore college graduates in the local labor force … is also a powerful incentive to … business.” Jeff Thredgold, economics consultant, Quoted in Michelle Miller-Adams, The Power of a Promise

8. Long-run economic development benefits can be made more salient through reframing (Example, Michigan ECIC) Source: January 2010 Report by Wilder Research for Early Childhood Investment Corporation.

9. Summary “Dos and Don’ts” of early childhood as economic development • Do cite high returns compared to costs • Do argue that balanced economic development strategy addresses both labor supply and demand, long-term and short-term • Do cite short-run benefits, but don’t lose credibility by overselling • Do frame long-run economic benefits to make them more salient