Early Childhood Programs and Economic Development

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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_at_upjohn.org Presentation to
National Economic Forum on Early Childhood
Investment A Conference of the Partnership for
Americas Economic Success
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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
State Per Capita Income State Per Capita Income State Per Capita Income State Per Capita Income
Creative class attraction Job training Higher ed. K-12 Early childhood programs Tax incentives/attraction Entrepreneurship Services to existing business Business services/taxes Overall services/taxes
Creative class attraction Job training Higher ed. K-12 Early childhood programs Tax incentives/attraction Entrepreneurship Services to existing business Business services/taxes Overall services/taxes
Creative class attraction Job training Higher ed. K-12 Early childhood programs Tax incentives/attraction Entrepreneurship Services to existing business Business services/taxes Overall services/taxes
Creative class attraction Job training Higher ed. K-12 Early childhood programs Tax incentives/attraction Entrepreneurship Services to existing business Business services/taxes Overall services/taxes
Creative class attraction Job training Higher ed. K-12 Early childhood programs Tax incentives/attraction Entrepreneurship Services to existing business Business services/taxes Overall services/taxes
Labor Supply Labor Demand
Other economic development effects of early
childhood programs parental labor supply,
taxing and spending locally.
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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
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Short-Run Benefits of Early Childhood Programs

• Early childhood programs also have significant
  short-term economic development benefits,
  although they dont 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

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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
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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.

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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 entice new employers .
  The Promise is different. The enticement of new
  residents to take advantage of funding of their
  childrens college education is a strong one
  New companies will consider Kalamazoo as
  they see a rising population More 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

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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.
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Summary Dos and Donts 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 dont lose
  credibility by overselling
• Do frame long-run economic benefits to make them
  more salient