How Policymakers Should Deal with the Delayed Benefits of Early Childhood Programs

This chapter is a draft of Chapter 7 of a planned book, Preschool and Jobs: Human Development as Economic Development, and Vice Versa. This book analyzes early childhood programs’ effects on regional economic development. Four early childhood programs are considered: 1) universally accessible preschool for four-year-olds of similar quality to the Chicago Child Parent Center program; 2) the Abecedarian program, which provides disadvantaged children with high-quality child care and preschool from infancy to age five; 3) the Nurse Family Partnership, which provides low-income first-time mothers with nurse home visitors from the prenatal period until the child is age two; and 4) the Parent Child-Home program, which provides home visits and educational toys and books to disadvantaged families when the child is between the ages of 2 and 3. The book considers the main benefit of state economic development to be the resulting increase in earnings of the original residents who stay in that state. Early childhood programs increase residents’ earnings largely by increasing the quantity and quality of local labor supply. These programs will increase the employability and wages of former child participants in these programs. The book compares the effects on local earnings of early childhood programs with the effects of business incentives (e.g., property tax abatements). Business incentives increase local residents’ earnings by increasing the quantity and/or quality of local labor demand. This chapter considers a problem with early childhood programs: their effects on earnings are mostly long-delayed. The delay occurs because most earnings effects are on former child participants. The chapter considers appropriate discounting of benefits. The chapter considers how the upfront costs of early childhood programs can be delayed or reduced. The chapter considers how the long-run benefits of early childhood programs can be moved up or increased. JEL Classification Codes: J13, J24, I21, R23, R31, R30 I thank Wei-Jang Huang, Claire Black, and Linda Richer for assistance with this book. I also thank the Pew Charitable Trusts for financial assistance for some of the research that led to this book. The findings and opinions of this book are those of the author, and should not be construed as reflecting official views of Pew or the Upjohn Institute. 1 As discussed in Chapter 4, early childhood education programs have a different timing of economic development benefits than business incentives. Business incentives deliver sizable economic development benefits almost immediately. Jobs are attracted, which immediately increases employment rates and upgrades many state residents to better jobs. In contrast, most benefits of early childhood programs are long delayed. There are some economic development benefits in the short term. Free child care and other services to parents increase parental labor supply. Spending more money stimulates the state economy. But these short-term economic development benefits are modest. During the years right after these programs are begun, earnings of state residents go up by only 20 to 30 percent of program costs. Annual earnings effects of these programs do not exceed annual costs until at least 20 years later. (Figure 7.1, which reproduces Figure 4.2, shows the time pattern of effects.) These delays in benefits occur because so much of the benefits are due to the improved the adult labor supply of former child participants. Better child development’s benefits are only achieved in the long run. The delayed benefits from early childhood programs raise two issues. First, how should policymakers weight future benefits versus current costs? I will argue that policymakers should not discount future benefits too much. However, policymakers often do drastically discount or disregard social benefits that are in the future. This leads to the second issue. Given that policymakers discount the future too much, what can be done to encourage policymakers to adopt early childhood programs? How can we get policymakers to adopt programs that are socially beneficial but politically unattractive because their benefits are delayed? Various approaches will be discussed to making such programs more attractive. We can work on costs. Short-run costs can be postponed or reduced. Alternatively, we can work on benefits. Long-run benefits can be shifted towards the present. Short-run benefits can be increased.