AMCHP 2006 ANNUAL CONFERENCE
EARLY CHILDHOOD: BUILDING THE FOUNDATION FOR LIFELONG HEALTH
March 4-8, 2006
ROB GRUNEWALD: Well, thank you. And good morning. My first duty is to point out, on your tour in Washington D.C. when you’re on the mall, the Federal Reserve Board Building is on Constitution Avenue, right near the Vietnam Memorial. I don’t have any information about tours. In fact, I don’t know if there is an actual building tour of the Federal Reserve Board. But when you’re walking the mall and you look up and you see this gorgeous building there, it’s very white, like all of many of the other buildings, that’s where the Federal Reserve meets. And so what does the Federal Reserve do?
Well, the Federal Reserve is the central bank of the United States. We’re responsible for managing the money supply in the economy in such a way that prices remain stable. If the Federal Reserve does its job well, we don’t have inflation creeping into the economy, nor do we have prices going down. And at the Federal Reserve Board building, a group called the Federal Open Market Committee meets, chaired now by Chairman Ben Bernanke.
You all know the outgoing Chair, Alan Greenspan, who served for many years as the Chair. And this group meets to decide what short-term interest rates are going to be and to really set the tone for money supply growth in the economy.
The Federal Reserve has 12 district banks. I’m from one of those 12 banks up in Minneapolis. And the Fed has other duties such as banking regulation, supervision. We oversee all the systems of payments. We issue Federal Reserve notes. Those are the green pieces of paper in your wallets and purses that you don’t have enough of but we’re regulating that supply well. Those are liabilities on the Federal Reserve. And lastly, we hold the checkbook for the federal government. We essentially provide fiscal services for Uncle Sam. So with that introduction about the Federal Reserve, I am sure you know why I’m here to talk about young children. Well maybe not yet.
Today what I’m going to talk about is a paper that Art Rolnick, who is director of research at the Federal Reserve Bank of Minneapolis and I wrote about three years ago. It’s titled “Early Childhood Development: Economic Development with a High Public Return.” And you might wonder, why is a paper like this coming from a Federal Reserve Bank? Well, the Federal Reserve is interested in a number of issues regarding economic growth and how economies grow and what the ingredients are that constitute a growing economy. One of the primary ingredients and the key ingredients of economic growth is human capital development. And so when we look at the work that you do in maternal and child health, we see that you are representing the beginnings of the future of our youngest citizens. When these citizens graduate from high school, go on to post secondary school, become part of the workforce, what happens in these early years is very important. And a growing number of economists are taking the early period between birth and before kindergarten very seriously as we think about human capital development.
So, what I hope I leave with you today is to think about how your programs fit into the ingredients of creating economic growth. And when we think of economic growth, I was recently told that if we use this frame, this understanding of economic growth, what comes to mind is people driving around BMWs. But when we think broadly about economic growth, we see that those economies that grow economically are those economies that can better deal with their social problems. If this economic growth is broad-based, reaches the broad sector of population over the long-term, we see that these are countries that have higher standards of living. And so when economists think about our models and our theories, and I’ll give you a couple economic concepts today, what makes the discipline exciting to us is that it really comes back to people, and how economics can help us understand how we can improve quality of life in an economy.
So with that, let me begin with some key economic concepts. Now I know I’m raising the bar pretty high for a talk like this. I am the opening plenary speaker for your conference, and I’m going to start with economic concepts. How many of you have taken economics? Hey, great. This is good. Human capital development. As I mentioned before, economic research has shown that developing human capital is key to economic growth. If we look at economic research that looks at those economies that have shown strong economic growth over the last 40 to 50 years, for example those Asian economies called the Asian Tiger Economy, Singapore, South Korea, Taiwan, these economies invested in their people, in their school systems, in their worker training programs. Also in Japan, after World War II, made key investments in human capital development. We look at the states in the United States that have a high percent of population, or high percent of population with a college degree, these are also the same states with high per capita income and high output per person. The private benefits to having more skills have also borne fruit in the economic literature. We see that there is a wage premium that is paid for those workers with a college degree relative to those workers with only a high school degree. Today that gap in wages stands at 70 percent. And if we look back in time about 25 years ago, we see that that gap was only about 40 percent.
This is an economy that is demanding workers with high levels of skills, with college education, with technical skills, or that they received from education and technical schools. This is not an economy that rewards workers with only a high school degree or those workers that have dropped out of high school. We have looked at our global label supply, and we see that we have an increased labor supply around the globe that can handle those jobs that require low level of skills. And so naturally if we look back at the wage rates adjusted for inflation in this economy over the last 15 years, we see growth in wages for those workers that have higher education and skills. Those workers with only a high school degree, particularly those that have dropped out of school, have shown decreases in inflation-adjusted wages.
So, the policy implications for this research seem to be clear, that is, to invest in our K through 12 system. To invest in colleges and universities. But as I mentioned before, we became very interested, for those of us here at the Federal Reserve, Art Rolnick and myself, in early childhood about four years ago when, to be honest, we just got exposed to the research about how important this time period is to healthy development of young children. And also when we got exposed to the literature that has looked at the cost benefit analysis of early childhood development. Let me show you one slide though before I look into those studies. This here is a slide that shows the educational characteristics of our labor force, 1980, 2000, and 2020. You’ll note that the bars between 1980 and 2000 have grown significantly. But they grow a little bit slower moving into 2020, as the baby-boom generation retires. You’ll see that the bars for college degree or more increase. Proportionally they increase about the same amount as the total increase in population or workforce projected over the next 20 years. We see a decrease in the rate of growth among those workers with some schooling beyond high school. Continued growth in high school degree only, and after seeing a decrease in dropouts in high school from 1980 to 2000, there’s actually expected to be an increase in the number of high school dropouts over the next 20 years.
So looking forward, we’re looking for where that key investment is to improve the quality of our workforce going forward. So, when we look at human capital development and economic growth, prenatal to age five is the optimal time to invest. And this comes from, as I mentioned before, being exposed to the neuroscience and the development of psychological research about early childhood, there’s an economist at the University of Chicago, James Heckman, who won the Nobel prize in economics in 2000, who spent many years investigating the returns on human capital investments over the lifetime of the worker, including job retraining programs in adult age, college and university education, K through 12, and he identified early childhood as the optimal time to invest. He uses a phrase, that I think is very instructive, and that is that skill begets skill. That is, when a child starts off on the right foot early, and gathers those skills at a very early age, they multiply. They build on each other going forward.
And so human capital investments down the line, in our school systems, in colleges and universities have a high returns for those children who started out in the right at. For those children who are at risk for developmental delays, for school failure, for committing crime later on in adult life, human capital investments in this group of workers, of students, tend to be very low. Sometimes even negative. So what the second concept that I’m going to bring forward is cost benefit analysis. Now this is the economic tool that economists use to look at programs and be able to identify what the costs are of the programs, relative to the benefits. And it becomes a tricky business sometimes, identifying what those benefits are and translating those benefits into monetary values. Now when we can translate those benefits of programs into monetary values, we essentially put all of those benefits into one common metric. And then we can evaluate what is the size of those benefits relative to the cost. If we take the ratio of benefits to cost, and we find that they’re over one, that means that this expenditure, this investment, has paid for itself. And you have benefits coming in that are higher than costs. If it’s lower than one, then we see that the benefits are not as high as costs. So this is a tool that’s used in private business to help determine basically what projects business leaders should invest in for their own companies. It’s also a tool that’s instructive to look at what the benefits are for public programs that are supported.
And what I’m going to do now is walk you through four key studies of early childhood interventions that look particularly at those children who are at risk for developmental delays, and look at what those cost benefit analyses are. Now I’m going to guess that many of you are familiar with much of this research. How many of you are familiar with the Perry Preschool Study. Okay, so, some but not all. But let me walk you through this key study. This is basically on a preschool study, it’s looking at the education effects of the programs. I will be looking particularly at a maternal and child health program at the back end, but if I can begin by saying that as you all know, the literature shows that education, health, parent support, all these supports move together and work together to help the developing child. If we look at brain development, brain development is very complex. It’s very integrated, and all of these supports are needed at the same time.
This study was started in the early-1960s. A hundred and 23 children from low-income families in Ypsilanti, Michigan, which was a socially economically distressed community just outside of Detroit, Michigan, were selected. Children were then randomly assigned to attend the Perry Preschool Program, or to be in the control group for comparison. The children who attended Perry received a daily classroom session. And then once a week, the teacher would visit that child’s home to work with the mother on parenting skills. This research program was able to track the participants and the control group over a 40-year period. And what’s remarkable about this study is that the attrition rate of this program was very low. At age 40, they were able to interview 95 percent of participants in this study. So this slide shows some of the educational effects of this program. They found significant differences in achievement scores while the children were in school, between those who attended Perry and the control group. They found significant differences in graduation rates. Sixty-five percent for the children who attended the Perry Preschool Program relative to 45 percent for the control group. Now at 65 percent, there are school districts out there of course that beat that level. Of course, there are some school districts that on the average have a graduation rate quite lower than 65 percent. The children also were less likely to require special education, which is a more expensive remedial effort in the school system.
Next, the program was able to interview the participants. At age 40, they found there was a significant difference in homeownership, the amount of earnings acquired in the workforce. Again, this correlated with higher levels of education among the children who attended the Perry Preschool Program. And of course, I had to put this last one in here. Coming from the Federal Reserve, find out that an early childhood program has an effect on banking behavior. Children were more likely to have a savings account. The children who attended Perry were less likely to commit crime. If we look at crime rates among all types of crime from felonies, down to misdemeanors, we see that the crime rates were essentially cut in half. And this translates into a reduction in the number of months spent in prison. On average, the children who attended the Perry Preschool Program spent about a year and a half less in prison.
So the researchers were then able to go back and to evaluate the benefits of this program, put those benefits into monetary values, and evaluate them relative to the cost of the program. In today’s dollars, the Perry Preschool Program cost about $10,000 per child. On average, the children attended for a year and a half. First, we see the savings in the K-12 system. As I mentioned before, there’s reductions in special education. There was also reductions in grade retention. Then we see higher participant earnings. Most of this is a private benefit that accrues to the child. But some comes back in the form of a public benefit, the form of higher tax revenue. Then we see the reductions to the cost of crime, and for the Perry program, this is where we find most of the economic savings. We see reduced use of the criminal justice system, including reduced need for police protection, reduction in court costs, and incarceration costs. Then we see also the reductions in the costs of crime to the victims themselves. So now we take those benefits and we divide by cost and get a ratio of the benefit cost ratio for this program is $17 returned for every dollar that’s invested in the program.
Now, business leaders like to look not only at the benefit cost ratio, but also the annual rate of return. It’s called the internal rate of return. It’s an interest rate. And it basically answers the question, well, what is my annual rate of return on this expenditure? We find that the annual rate of return adjusted for inflation is 18 percent. Most of the benefit accrues to the public. So the public rate of return we estimate at 16 percent. So very high rates of return. If we compare this rate of return even to investments in the private sector, we turn to the stock market. The stock market over the last 25 to 30 years has returned five to 7 percent per year, adjusted for inflation. So here we see that indeed an ounce of prevention is worth that pound of cure. Well, 16 percent, you know, we didn’t accidentally come up with that number, but you know, ounces to pounds and so on.
The next program is the Abecedarian Educational Childcare program, a full-day year-round program in the community just outside of Chapel Hill, North Carolina. Again, children from low-income families were selected, randomly selected to attend the Abecedarian Childcare Program or to be in a control group for comparison. Here are some of the significant effects this program found. They found improvements in the performance of these children as they attended school, reductions in grade retention. The researchers looked for health benefits to this program.
To the aside, I would say that all of these, the Perry Program and the Abecedarian Program have attempted to look at physical health benefits to the child, but the tools used were not very strong. So actually, there’s an open area of research here for you all to look at preventative child health programs, use cost benefit analyses to determine what the benefits are relative to cost. But just using smoking as a proxy for unhealthy behavior relative to healthy behavior, they found a reduction in smoking at age 21. And then a very important statistic for human capital development going forward, that children who attended the early childhood program were three times more likely to attend college as an adult.
The third program is the Chicago Child Parents Center Program. This is a half-day large-scale program in Chicago. The comparison group for this program was constructed after the fact. They looked at 100 graduates, or 500 graduates of this program, compared them to 1,000 comparable children living in the Chicago area, nearby neighborhoods. They found significant differences in the need for special education, also grade retention. They found that high school completion rates were higher among those children who attended the Chicago Program. The results were reduction in juvenile arrests and also adult crime. Then lastly, a program that you all might, many of you I’m sure are familiar with, it’s the early research to the nurse family partnership in Elmira, New York, a prenatal early infancy project, looking at those cohort of young women who were single, living in poverty. They were considered the high-risk families. This home visiting program that began prenatally lasted until the child was about age two. These, this slide just shows percent differences between the two groups. We see significant differences in child emergency room visits. We see that among child outcomes, that there is reduction in child arrests and both for mother and child, there’s a reduction in the need for welfare.
So if we look at the benefits of all these programs, evaluated, again, monetary values, the Abecedarian Program, four to one, Chicago child parent program, seven to one. Well, I think I’m hung up here. Maybe I’ll let you all advance it back in the back. You’ll see the Elmira Program is five to one. All of these are well above the breakeven point, which is one to one. And if we convert these to internalize returns, they range from 7 percent out to the early 20s. So, again, very high rates of return to these programs. So, this type of analysis has been helpful to illustrate the type of returns that are available to these early prevention programs, focusing on, you know, on child outcomes. The question to be asked next is, I can’t, I’m not advancing this anymore. So you can advance it back there. I don’t need the slides. That’s no problem.
But when we look back at these programs, there are several lessons that can be learned from this research. You know, what is consistent across these programs so that we can look at program development going forward, the type of ingredients that we would want to include. The first is quality. The qualifications of the teacher in the center of each program is very important. Those teachers that are, have more qualifications, more education have more quality interactions with children, and their outputs tend to be better. For those home visiting programs, they found that the Elmira Program, as I mentioned before, having well-trained nurses was a key ingredient to the success of that program too. Relatively small ratios of children, two teachers in the center of these programs, and then consistent across all of these programs is the involvement of the parent, getting the parent involved in the education and health of their children.
Reaching children who are at risk is where we’re going to find the highest public return to these programs. And this is our high rate of return opportunity. But, there are public returns to ensuring that all children reach kindergarten ready to succeed. And in fact, most metrics of school readiness among states that have evaluations that evaluate children at kindergarten age finding that really only about half of those children are ready to succeed in kindergarten, measured on a whole range of domains, but particularly in emerging literacy and emerging math skills.
Now, this is true even in Minnesota. So among Minnesotans this is very disconcerting because as Garrison Keillor says about the children in Minnesota, they’re supposed to be above average. So, ensuring that all children already to succeed at kindergarten is important.
Next, teaching not only the cognitive skills, where we find that children tend to be behind, but also non-cognitive, the social, emotional skills for any development is highly integrated. And there’s not a differentiation in the brain between those skills that are learned that are on the cognitive side, such as numbers and letters and shapes and colors and so on, and on the social, emotional side, the ability to socialize with other kids. The folks, the ability to be motivated and to focus on tasks. So, having a broad mix of cognitive and non-cognitive skills taught in center-based programs and through home visiting programs is key. And then last, finding ways to bring these programs to scale reaching a large number of children with high-quality interventions, not just a few programs, a few children in programs. So what are the next steps, broadly speaking, looking at the early childhood arena? Now there are some broad-based measures that seem to picking up in several states that focus on the needs of all children, not just those children who are at risk. I’ll mention them briefly.
The first is just the awareness about school readiness. And here I’ll use myself as an example. Up until four years ago, if I was asked about the importance of the early years in a young child’s health and development and education and so on, I would probably guess that they were important, but I wasn’t aware as to how important these early periods are. Providing awareness to parents about the skills, the health, the education young children need before kindergarten seems to be very important. And broad public awareness in order to provide the type of support that’s needed to improve the funding of publicly supported programs in early childhood.
One low-hanging fruit that I always include when I’m talking to two groups of business leaders is to ensure that businesses have employer childcare spending accounts so that pretax dollars can be placed in these accounts and used for childcare. Insuring the quality of early childhood screening programs. This is key to finding those children who do have developmental delays, so that they can be reached as early as possible. And as you know, once these mental health issues or physical developmental health issues are addressed early, the odds of success are much higher than if they were dealt with later on.
Incentives to improve childcare quality. Broad measures of childcare quality show that in most states throughout the country, we find that childcare quality is not high. It is not at the level that we would hope for. And there are a number of measures in several states to encourage incentives so that childcare programs might improve their quality and also provide information to parents about the type of quality that’s available in childcare programs, such as providing rating systems to describe the type of childcare opportunities and their quality that are available. And last are broad incentives to improve access to preschool, so that children can afford preschool, or their parents can afford to send their children to some preschool before they reach kindergarten. For those children who are at risk, prenatal home visiting programs for at risk mothers. The research shows that this is a very useful model to reach mothers who are at risk, and insuring that they have the skills, the knowledge about the health, and the education opportunities for their young children. Connecting our child protection system with early childhood interventions in early child mental health programs. This one here seems like an easy one to be able to pull off. Often is conducted at the county level, ensuring that those, when a child is taken out of the home, if there is some child protection measure that’s in place, that those referrals are made into the child mental health system.
And then last, providing scholarships for at risk children to attend high-quality early childhood programs. Now here, I want to remind us when we look at actually the price of childcare, childcare costs rival those of tuition. In fact, at a public university or college, tend to be higher. Yet we have a very few mechanisms to help families afford childcare. Because we’re not envisioning the childcare as early education. And yet everything that happens before kindergarten is early education. So, what Art Rolnick and I have done is we have written a second paper on this issue. We have essentially argued that what we should do is think about how we finance higher education and bring those lessons down into early education. Also, we were very convinced that the mentoring programs were, we, high qualifying professionals and nurses are working with families one-on-one seem to be very effective at delivering early education and health information. So providing scholarships and mentors with parents for children who are at risk. These scholarships are designed to reward those programs that improve their quality to the level they can really meet the needs of children who are at risk. And then finance this program with an endowed fund. Just like we have endowments to provide scholarships for children to attend college, create an endowment to provide scholarships so that children can attend these programs.
Now, what I want to do is back up a little bit and talk about one of the influences on our thinking about this issue is the title of our paper, “Early Childhood Development: Economic Development with a High Public Return”. Because, when we typically think about economic development policies, what doesn’t first come to mind are human capital development policies. It’s usually, “How do we get as many new jobs here to our county, to our city, and to our state?” And how can we use targeted subsidies, or preferential tax treatment to lure companies into local areas, or to expand their companies to a local area, influencing essentially the location decisions of companies? And in a given year, if we look at all of the subsidies and special tax treatment that is given to private companies, he we see that there’s about $50 billion that is tied up in these types of subsidies. And so the question that we ask is for these type of subsidies, that at net from a national perspective do not provide net new jobs, they’re just moving jobs from state to state, how can we put this money to a better use? We identified early childhood as a better place to put these resources.
And if we went back to Minnesota and we added up all of the subsidies that were awarded to companies in our own state to move from a city to another city, from one county to another county, and then we also added in the amount of dollars that were put up to build new stadiums in our state, which are private companies, and I enjoy going to sports events and all of that, but I think I should have to pay for that. I don’t think that should be public money. And we found that we have about $1.5 billion here.
We calculated that if we took that $1.5 billion, and instead of watching jobs move between our cities and our counties and our own state and in funding private companies in their new stadium ventures, that if we put that $1.5 billion into an endowed fund and used that for scholarships for children to attend early childhood programs when they’re three and four years of age, with a mentoring component that began at birth, or prenatal, that we could reach all at risk kids in the state of Minnesota, and really begin influencing that school readiness measure that we see at kindergarten to ensure that more of our kids are ready to succeed in school.
As this point no new stadiums have been built in Minnesota, but also we don’t have a new endowment yet either. See, in economics, they call economics the dismal science. That’s because we’re always saying, “You know, you can’t have a free lunch. You have to make choices. So we like to put all of these subsidies next to early childhood endowment that has research backing it that over the next five, 10,15 years, the amount of public resources we can provide with the same dollars that we have right now in our fund in Minnesota would be, we’d need less dollars to provide the same amount of public resources. Because we’re using the dollars more efficiently.
Well, this type of analysis has encouraged other business leaders not only in Minnesota, which is at the bottom here, its called Minnesota Business for Early Learning. It’s a group of business leaders in Minnesota that have come together around this issue. They have been encouraged, they have been convinced by this cost benefit analysis that early-chartered development is a place to put our dollars in the state. They have come together to advocate for this issue and also to discuss with the legislatures and our governor in our state on how better to provide early childhood resources. The other organizations that I have listed here, Community for Economic Development here in Washington D.C., has identified early childhood as part of their education reform research, Success by Six, which is in many communities, sponsored by United Way, has been effective in bringing business leaders to the table to look at this type of cost benefit analysis and also to discuss how to improve early childhood development offerings in their communities. And a private company of PNC Financial Services in Pittsburgh, PA, through it’s Great Program, has allocated $100 million to early learning initiatives over a 10-year period.
So these are examples of where business leaders have come in on this issue and we have learned that they have become interested in this issue because they can look at numbers such as a 16 percent annual rate of return, because of a cost benefit ratio where the benefits are $17 for every dollar that’s invested. They’re also concerned about their future workforce. When they look at the slide that I showed in the very beginning about the prospects for growth and equality in the labor supply, they’re not encouraged. Many of these companies cannot send their operations overseas to take advantage of the labor, and qualifications in other countries. Many of these businesses must find their labor here in the United States. And going forward, they have high hopes for funding programs such as yours and preschool programs and so on, to improve the future of our labor force.
Finally, I’ll leave you with our Website before we open up the opportunity for you to ask me some questions. This is minneapolisfed.org. And it’s all one word, Minneapolis Fed, write that all out, dot O-R-G. And you can go there to look at other resources that other economists have written about this issue, and also find the two papers that I mentioned, written by myself and Art Rolnick.
And at this point, I would like to encourage you to ask me some questions. I think there’s going to be some roaming microphones. There’s one in the back. And there’s one right over here. They’ll be coming upfront. This is your opportunity to stump the economist with the Federal Reserve. There is a question upfront here. Here comes the microphone. Oh, and there’s going to be one back here.
UNKNOWN SPEAKER: Thank you for that great presentation. Earlier last week, I had an opportunity to hear Dr. Heckman speak, and he had some discussion about that there was even greater return for programs focused on the zero to three population as opposed to interventions that were started with four-year-olds, and I was just wondering if you an opportunity to look at that at all.
ROB GRUNEWALD: So, if when we do look at the neuroscience, the developmental psychology research, and so on, and really strategizes as to where we’re going to get the highest return, indeed the earlier the better. And Dr. Heckman has a wonderful chart that basically showed us when is the optimal time to invest and the estimated returns on investment. And it basically starts very high at the prenatal years in birth and gets a little bit lower and levels off, as that child grows older. So these are the high-return areas, particularly for those children who are at risk. Reaching them early through a home visiting program, through some parent education, in these very early years is where we expect to have the highest return. Now, if we look politically and what’s happening in many states is that there is strong support for four-year old preschool in several states. It’s interesting right now. It’s really a state-by-state experiment in early childhood development in preschool and so on, but there are a number of states that have strong universal for pre-K initiatives. And this relative to other investments in the human capital schema, targeting preschool for four-year-olds, particularly and for those who are at risk, is an effective investment. But we would hope that that investment in four-year-old pre-K would not take all of the resources away from birth to three. So that’s in talks, and states that have those initiatives, I remind them, you know, the sure to look at birth to three. We don’t want those dollars to be taken away. Okay, there’s a, over here?
UNKNOWN SPEAKER: When you look at, am I online?
ROB GRUNEWALD: You’re online.
UNKNOWN SPEAKER: Good, thank you. If you invest in early childhood in the zero to three, and your goal is to increase the education of the workforce, there’s about a 15 to 20 year period before you achieve the results of your investment.
When you look at the time to return on an investment and increasing the job market, from a political standpoint, that’s a much shorter period of return. How do we deal with that when we’re encouraging people to make the investment in early childhood education?
ROB GRUNEWALD: It’s a very good question. Because when we look at traditional economic development initiatives, those initiatives where you’re using a subsidy to bring your company to an area, you can have that company move into a local area, build the faculty, build an office tower. You can have those new workers working there within about a year or two. They’re also very tangible. Not only are they short-term, but they’re very tangible. You can see the buildings. You can see the people walking in and out of those buildings. Whereas investments in early childhood are first long-term, although some savings come very much in the short-term in terms of reductions in child abuse and neglect and improvements in the school system. But for the full effect of those programs, it does take about 15 to 20 years to find those results.
And then secondly, they’re intangible. Unless you’re dropping your childhood off at an early childhood program, or work at one, basically most people are not exposed to what’s happening in the brain. And you take it at a brain development level, it even becomes more intangible. So research like this increases the tangibility of the investment. You can look at hard numbers. You can look at these charts. You can look at the effect that these programs have, and not only the improvement in human capital development, but reductions in the costs in our public budgets. The research for economic development programs, particularly investments in stadiums from an economic growth are very weak. Again, economic development programs, we’re moving them from one location to another location. Those companies that do move to location, they tend to, they would have moved there anyway, and the subsidy that receive is only gravy on top of a location decision they would have made regardless. If they change their location decision because of the subsidy, we actually see inefficiency in that decision. So the economic research is very much on the side of investments done in early childhood. It is not on the side of these more traditional economic developments.
UNKNOWN SPEAKER: Thank you very much for your presentation. I think for many of us in the room it may have seemed a little strange starting out this conference with your presentation, the economics of it. But I think your presentation was right on the money for where we are.
ROB GRUNEWALD: Pun not intended, I’m sure.
UNKNOWN SPEAKER: That having been said, the Maternal Child Health Bureau’s has over the last three years, been very much involved in encouraging early childhood systems development or systems integration, encouraging the State MCH to reach out to other early childhood systems partners, encouraging them as a group to develop state plans, and as of last year, 22 states have finished their plans and are moving on to the implementation of those plans. They are hitting up against the issues that you mentioned today, the dwindling economic resources, not only on the health side but throughout. And my question is, what would you say would be the most effective mechanisms, now that states have come together in early childhood and identified implementation plans? What you advise as the most effective mechanism as trying to scale the barriers that put the plans and the partnerships somewhat at a loss?
ROB GRUNEWALD: Are you looking particularly at the financing barriers?
UNKNOWN SPEAKER: Financing is an extremely important part of this as we come to implementation and the need for partners to put and keep their dollars on the table.
ROB GRUNEWALD: Yeah, it’s a very good question. I don’t know if I can give you the best answer on what, sounds like a white paper is in order here to be able to sort all of this out. But looking at early childhood and maternal and child health programs and so on, and in developing those systems, coordinating those efforts, if you can come to me as a stakeholder and show me the type of efficiencies that you’re going to be gaining through this stem integration, I think that that is an effective means to award increased investment. Let’s say in that program, if through those system integration you can lower your overhead so that you can provide more services with the same dollars, show what type of effects that you’re having on families in the very short-term using those measures to show, you know, this is what we’ve been, these are the number of families we’ve been able to reach, these are the types of results that we’ve been able to show. For me as an economist, that would be an effective means to convince me to invest more in these programs.
I think that what we’re also seeing across, what I’ve kind of bumping into as I travel around the country and discuss these issues with other communities is in the leveraging of nonprofit and the private sector with the public sector. There is a number of task forces around early education that have developed similar to the Minnesota Business for Early Learning. They have come to the state legislature and said, “Let’s create a public partnership, or public-private partnership, bring our resources together, and put those monies into key investments with the long-term goal of showing how these key investments can be the type of results that they show us, that you can come back to the Legislature in say, “You know, here is what we’ve done, here is how we argued that we should increase our investment going forward.”
UNKNOWN SPEAKER: Thank you very much for your talk this morning. One of the things that I wonder about is you were talking about our investments in prenatal care, and I think we’ve seen those pay off. But a lot of what we are starting to think about and look at is really what about preconception care, and the investments that we see there really may pay off, both for the mother and for the child, as did, you know, early development in pregnancy is incredibly important and if we’re not taking, you know, having the risks addressed at that point before when we get pregnant, we may miss some opportunities, both to improve the health of the mother and of the child so that both can contribute to the economy.
ROB GRUNEWALD: Yeah, I think that’s a, that’s a very good point. I don’t, the more, the more that we can look at the type of interventions as early as possible makes sense. So I’ll leave your comment to stand as it is.
UNKNOWN SPEAKER: I want to thank you too. I’d say that you really do recognize that all of these programs really of top quality. So my question is, to go to scale, as an economist, working with business folks, what would you recommend that daycare workers that we have today, or that education workers, public health workers, have some of the lowest salaries many times without health benefits. So how do you put all of that together to really get that kind of quality? In other words, do you see this as a free market kind of service as we go forward? There’s a role for government, and how are the business leaders you’re talking to responding to that?
ROB GRUNEWALD: Very good question. When we look at childcare, let’s say just take the childcare and preschool off-roots, and we look at that system, we see that it essentially is a market system, as it is right now, most of the dollars in that system coming from parents who are sending their kids to childcare, or to preschool. A smaller amount of money is actually coming from the public sector through programs such as yours, through Head Start, through state-funded preschool programs. And so there is an infrastructure that is available to provide this early education through childcare centers, through preschool centers, and it’s a very diverse mix. We have privately funded programs and we have publicly funded programs. We have many different types of offering, full-day programs, half-day programs, and so on. And so, how do we improve the infrastructure? One point that was noted is that the teachers are paid at very low salaries, and how do we improve their salaries?
Well, from an economics perspective, where I see the market failure is that we are not reaching all of the kids who need this service. And we’re not having high enough of a quality. So what I would argue is that we find resources such, through scholarships to provide to low-income families, and price those scholarships really at the level that they need to attend these programs at their high level. Notice I didn’t say voucher or subsidy. Because if we say scholarship, this known early education program. It’s not just a voucher so that a child can be in childcare or custodial care during the day, so that the parent can work. I mean, that’s an important aspect of this program. There is economic implications if we ensure that parents can work and that their children are in high-quality programs. But we need to include the early education aspects of childcare. So we provide these scholarships, price them at a level that really, you know, gives the programs the amount of money that they need to make a difference, and all children, particularly children who are at risk, and you are going to see that those wage rates are going to go higher, because we’re infusing more dollars into the system to improve access, because the requirements among programs to have higher quality will be needed to provide these scholarships that will provide the incentive to improve the quality. And it’s still a choice-based program. And parents get to choose where their kids go, and we don’t have a lot of overhead. It continues to be a market system, as it now exists.
UNKNOWN SPEAKER: A question.
ROB GRUNEWALD: Over here.
UNKNOWN SPEAKER: I just want to make a comment about, involving families. Going to get feedback here. I worked on a project for the last five years with parents and early intervention, and I think we covered about 25 states. And one of the things they were very concerned about—they had gotten services for their children—they were concerned about all the families who don’t learn about the programs and their value, and they were concerned about the disparities, about which families even find out about it. And some of the neediest families were the least likely. And many of them were very, became very active within their states. And you haven’t mentioned some of the kinds of advocacy that families who’ve received the services can help promote. They sometimes have the freedom to speak up more widely than other officials can.
ROB GRUNEWALD: Mm-hmm. Yeah, that’s a very good point. Providing information about early childhood programs. That’s why we think that for at-risk families, having one-on-one mentoring is key to provide information about the programs that are available. For middle and higher income class families that have more means, for example there’s quality rating systems in childcare programs, they’ll probably be more comfortable with just going on the Internet, looking at the information, and doing their own research. But for families that are, they’re off the grid, as we should say, and they need the help one-on-one to learn where they can provide the, or where to get these services. There’s one question way upfront. I’ll just, I couldn’t repeat your question, if you want to ask, ask it.
UNKNOWN SPEAKER: My question is that across the globe they have started using women’s education level as an indicator for, instead of the gross national product, for the wealth and the growth potential of state, several of the results and outcomes you showed from the Perry Study was actually measures where you can see they loved the man and the boys that they were mentoring, in terms of jail time, and those kind of things. Do you have any way of looking at if actually one of these things that we’re seeing is the lack of education, particularly in the future of others? And that’s one of the rationales for why we have to really invest in early childhood, because we need healthy, well-educated mothers to become pregnant to give healthy kids.
ROB GRUNEWALD: Yeah, so the point that is made in the question is that mother’s education level is a key indicator for the success of a young child in schooling graduating from school on time, going into the workforce, and so on. And on earnings. In fact, it’s a powerful predictor for future earnings just looking at the mother’s education. So is the father’s education, but mother’s education has a strong impact. And so as children receive these services early, we do see that as an adult, they have higher levels of education. Their children are going to be growing up in families in which that mother has more education. So here we’re seeing an intergenerational crossover. Once we can improve the trajectory of children who are at risk and those children, you know, no longer have that at risk category, they are more educated; their children are more likely to be better prepared, just based on that level of education that they received in the future. So that is a key component.
UNKNOWN SPEAKER: I have a question.
ROB GRUNEWALD: Go ahead.
UNKNOWN SPEAKER: Has the justice system been an open partner to embrace in any of this?
ROB GRUNEWALD: So, the question from up here is, has the justice system embraced this type of research? And there is a, it’s a group called Fight Crime, Invest in Kids, that is a group that represents the criminal justice system, police, county sheriffs and so one. And this group has been advocating for investments in early education. Of course, after school programs and so on, that they have particularly targeted, and investing in early education in order to help the criminal justice system going forward. Often when I give a talk like this, there is a judge from a local area who comes up front here and just makes a very simple point. And that is that if you could reduce his caseload for a child protection case, or later on a criminal case just by one or two a year, you’ll be saving thousands of dollars. And then often we look at that county budget and estimate how much money has been spent in parent education and early education services. And it’s very small. Probably, in a county level you can look at those dollars and all you need to do is to turn around one or two cases, and you’ve already made up your money. So I think you might have time for one more question. There’s, uh, there’s a hand in the back.
UNKNOWN SPEAKER: Just to comment, sorry about that. We had a conference on this very subject in West Virginia in October, and I believe you were there.
ROB GRUNEWALD: I was there.
UNKNOWN SPEAKER: Yeah, and the benefit of the presentation was that we got the governor and the First Lady involved, and it’s provided quite a bit of momentum for us to address this subject and keep a lot of support for early childhood programs. So I just wanted to thank you for coming to it.
ROB GRUNEWALD: Okay. Okay. We got one more, one more down in front here.
UNKNOWN SPEAKER: Yeah, thinking of the finding of capital, and I think your idea of the business of shuffling businesses from one county to another and maybe giving up a stadium in favor of a better investment is a good one. Another possibility, the upper end of our secondary education system is quite dysfunctional at the moment. From an economic point of view, and with, you know, the whole life trajectory of kids moving earlier with earlier puberty and the like, maybe we should trade in this last couple of years of secondary education and use the public funds to go from birth to five.
ROB GRUNEWALD: That’s a very good point. Let me just say, just to comment on the West Virginia comment, is that when you do expose your leadership at the state level, and this is where we’re finding most of the traction on this issue to early childhood research such as this, it has been effective in getting many leaders involved. And then this question here, looking at potentially trading in 12th grade for more resources on the early end, you know, actually just from a fixed budget standpoint, if the budgets were fixed, again we do have all these economic development dollars that we’re spending, you know, billions and billions of dollars, which has huge ramifications on local school budgets, but if we were to look at a fixed budget of expenditure on children, the answer would be yes, trading investments at the later end, job retraining, later years of high school and so one, trading those dollars to the front end would be an effective move. I don’t, but the caveat is that early investments need the complementarity of investments coming down the line. You don’t want to weaken your school system to the point that you’re spending all of your money upfront. But maybe some different concepts about how we use that last year or two, could we focus on sending kids to trade school earlier? We need many more construction workers with higher skills.
At the Federal Reserve we hear this all the time. Folks who are in plumbing, electronics, electricians and so one, building trades, they need some high-quality workers. If we could maybe focus that last year more on trades for those kids who are going that direction, that might be a better use of their time than just a curriculum that is primarily focused on sending kids on to college. So with this I thank you for your attention. I hope that this has helped contextualize the work that you do in the economy and economic growth, and I wish you well with your conference.