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Public Investments in Early Childhood Development have High Economic Returns

November 14, 2005
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LA County Mayors to Discuss Economic Impact at Historic City Leaders Summit Thursday

More than 100 mayors, councilmembers, and appointed officials will participate in a historic conference this Thursday—LA County's first City Leaders Summit on Building Blocks for Cities' Economic Success: Investing in Early Childhood Development, 8:30 a.m.-1 p.m. at the Downtown LA Sheraton.

The half-day conference, hosted by the Los Angeles County Children's Planning Council through a grant from First 5 LA, will focus on why early childhood development (ECD) programs are a sound investment for cities. LA Mayor Antonio Villaraigosa and LA County Supervisor Gloria Molina will open the conference at 8:30 a.m.

"Although early childhood programs are rarely portrayed as economic development initiatives, there is no other economic development effort I know of that has a higher return," says Rob Grunewald, a keynote speaker for the conference
As an economic analyst at the Federal Reserve Bank of Minneapolis, he has published and lectured widely on how early childhood programs benefit not only families, but also taxpayers and communities.

"Research has shown that government involvement in other types of economic development, such as subsidies to sports stadiums or businesses is, at best, a zero-sum game," Grunewald adds. "But studies have demonstrated that quality child development programs, such as preschool, bring real public return (adjusted for inflation) of 12 percent and a real total return (public and private) of 16 percent.

"Although the results of investing in ECD will be less visible and immediate than conventional economic development tools, there is no contest—the costs of NOT investing in early childhood education are just too great."

Grunewald's position is echoed by fellow keynote speaker, Robert G. Lynch, chair of the Department of Economics at Washington College in Maryland, who has, for 20 years, evaluated the effectiveness of state and local government economic policies.

"Assessments of well-designed and well-executed early childhood development programs have documented that participating children are more successful in school and in life," he notes.

"Besides academic success, these children also benefit from health and nutrition services provided by high quality ECD programs. They are also less likely to become teenage parents and more likely to have higher employment rates as adults, higher earnings, lower welfare dependency, lower rates of drug use, engage in fewer criminal acts both as juveniles and as adults, and have lower incarceration rates," he adds.

"Parents and families of children who participate in ECD programs also benefit. For example, mothers have fewer additional births, have better nutrition during pregnancy, are less likely to abuse or neglect their children, complete more years of schooling, have higher high-school graduation rates, are more likely to be employed, have higher earnings, engage in fewer criminal acts, have lower drug and alcohol abuse, and are less likely to use welfare," he says.

According to Lynch, longitudinal studies of four high quality ECD programs around the country have found benefit-cost ratios that varied from a minimum of 3.7-to-1 to a high of 8.7-to-1.

Both Lynch and Grunewald emphasize that government investments in ECD programs pay for themselves because the costs to government and taxpayers are outweighed by the budgetary benefits that the investments eventually produce.

Benefit-cost ratios for three ECD programs studied (assuming that all the costs are borne by government and taxpayers) show that budget savings for government vary from a low of 2.5-to-1 to a high of 4.1-to-1.

"The benefits to our nation, state and counties like Los Angeles are enormous," said Grunewald. "When we invest in high-quality early childhood development programs to improve the quality of life of millions of our children, we are also reducing crime, ensuring a more productive workforce, and strengthening our economy.

Lynch adds that ECD investments are more important now than ever before. "Because the retirement of baby boomer will put pressure on government budgets in coming decades, we should be investing in ECD programs now to provide future budget relief and to help fund some of the nation's most important programs such as Social Security, Medicare, and Medicaid. The bottom line is that the case for ECD investment is compelling," added Lynch.

First 5 LA is a unique child advocacy organization created by California voters that invests tobacco tax revenues for programs to improve the lives of children prenatal through 5 in Los Angeles County. First 5 LA champions health, education and safety issues benefiting young children and families.