In the Nation's Interest

Economist James J. Heckman: Early Education Packs a High Return on Investment

New research from Nobel Laureate economist James J. Heckman finds that comprehensive, birth-to-age-5 early childhood programs can produce higher economic returns than those previously established for preschool programs serving 3- to 4-year-olds.

Professor James Heckman and colleagues from the University of Chicago and the University of Southern California's Schaeffer center released The Lifecyle Benefits of an Influential Early Childhood Program. The groundbreaking study shows that high-quality birth-to-five programs for disadvantaged children can deliver a 13% per child, per year return on investment through better outcomes in education, health, social behaviors and employment, reducing taxypayer costs down the line and preparing the country's workforce for a competitive future. 

The study analyzes the effects of two identical, randomized-­controlled preschool experiments conducted in North Carolina in the 1970’s: The Carolina Abecedarian Project (ABC) and the Carolina Approach to Responsive Education (CARE). They offered comprehensive developmental resources to disadvantaged African-­American children from birth to age five, including nutrition, access to health care and early learning. Given that many high-quality programs today include the components central to ABC/CARE, evidence from ABC/CARE is relevant today. About 19% of all African-American children would be eligible for the program today. And, research shows that the negative effects of a disadvantaged early childhood are similar across races.

Children who received treatment had significantly better life outcomes than those who did not receive center-based care or those who received lower quality care. The results for males show lower adult drug use and blood pressure, as well as positive effects on education and, later, labor income. The results for employment, hypertension, and blood pressure are higher when the treatment group is compared to the children who attended alternative childcare centers. Separation from the mother and being placed in relatively low-quality childcare centers have far more negative consequences for male subjects than for female ones – making the case that high-quality programs are necessary to generate quality outcomes.

ABC/CARE simultaneously improved the economic prospects of mothers. Mothers could enter the workforce and increase earnings while their children gained the foundational skills to make them more productive in the future workforce. ABC/CARE provided childcare to the parents of treated children for more than nine hours a day for five years. Only 27% of mothers of children lived with a partner and this status barely changed during the program, making employment critical for upward mobility. This model of high-­quality childcare generates positive effects in maternal education, labor force participation, and parental income.

While the costs of comprehensive early childhood education are high, the rate of return of programs like ABC/CARE shows that these costs are good investments. Every dollar spent on high-quality, birth-to-five programs for disadvantaged children delivers a 13% per annum return on investment, significantly higher than the 7-­10% return on investment found in preschool programs for three- and four-year-olds. These economically significant returns account for the welfare costs of taxation to finance the program and survive a battery of sensitivity analyses. The cost of ABC/CARE was $18,514 in 2014 U.S. dollars. The average cost of childcare alone in the United States ranges from $9,589 to a high of $23,354 with few assurances of the quality necessary to generate quality life outcomes for children.

Child poverty is growing in the United States; investing in comprehensive birth-to­-five early childhood education is a powerful and cost-­effective way to mitigate its negative consequences on child development and adult opportunity. Elements of the ABC/CARE program exist today through several often-­disjointed home visiting, child well-­being, nutrition, early learning, childcare and preschool programs. Policymakers would be wise to coordinate these early childhood resources into a scaffolding of developmental support for disadvantaged children and provide access to all in need. The gains are significant because quality programs pay for themselves many times over. The cost of inaction is a tragic loss of human and economic potential that we cannot afford.

To learn more about this research, visit heckmanequation.org.

James J. Heckman is the Henry Schultz Distinguished Service Professor of Economics at the University of Chicago, a Nobel Memorial Prize winner in economics and an expert in the economics of human development. Dr. Heckman has conducted groundbreaking work with a consortium of economists, developmental psychologists, sociologists, statisticians and neuroscientists showing that quality early childhood development heavily influences health, economic and social outcomes for individuals and society at large. CED has supported several working papers by leading experts and eminent economists including Dr. Heckman (see here).