Quality early education: Good for kids and the economy

November 2, 2009

Joan Wasser Gish– Joan Wasser Gish is a consultant in the Boston area. A former senior policy adviser to Senator John Kerry, she recently testified before the U.S. Senate Committee on Small Business & Entrepreneurship. The views expressed are her own. –

When the toys are put away and the last youngster is picked up for the day, early childhood education providers like all other entrepreneurs sit down to assess their revenues, account for expenses and make difficult business decisions. And though their services are rife with hugs and games and songs, their work has serious implications for the economy. The child-care sector is a critical driver of economic growth and workforce development. That is why financial leaders and policymakers should do more to support providers as both educators and small-business entrepreneurs.

There are more than 400,000 licensed child-care facilities across the country. They span the economic sectors, with the majority run as sole proprietorship home-based businesses, and the rest split between for-profit and non-profit centers offering early education and care. Most are run by women, and a significant proportion are owned and operated by members of minority groups. Because of the early education and care services they provide, they contribute to both short- and long-term economic growth.

Quality early childhood education is associated with improved worker availability and productivity. Early childhood education enables parents to participate in the labor force. Studies have shown that availability of good early childhood education can reduce employee turnover by 37 to 60 percent.

Conversely, breakdowns in child-care availability are associated with absenteeism, tardiness, and reduced concentration at work. One study estimates that unstable care arrangements leading to absences cost American businesses $3 billion annually.

Early childhood education establishments also contribute to the economy as employers and catalysts of community development. The Oakland-based Insight Center for Community Economic Development estimates that the child-care industry generates more than $50.6 billion in annual gross receipts and 1.85 million full-time equivalent jobs nationwide. When centers locate in low-income urban and rural communities, which many non-profits and some for-profits do, they hire from the local community, enable low- and moderate-income families to participate in the labor force, and purchase and renovate facilities.

But the greatest economic impact of high-quality early childhood education is its beneficial effect on enrolled children. Nobel Laureate economist James Heckman argues that high-quality early education provides “the advantage of an early start to their skill development improving their chances of successfully participating in the job market in later years.”

Longitudinal studies have demonstrated that children who attend first-class early education and care programs are 40 percent less likely to repeat a grade, 30 percent more likely to graduate from high school, and more than twice as likely to go to college. It is estimated that universal access to voluntary, quality early education would add 3 million jobs and almost $1 trillion annually to U.S. GDP over the long term.

In short, investing in high-quality early childhood education is an efficient way to build human capital and strengthen the overall economy.

Few of these economic benefits, however, are achieved by warehousing children in sub-standard programs so that parents can work. The key is quality. To realize the positive economic impacts of early childhood education providers must offer first-rate services, and that means that they have to succeed as both educators and small-business operators.

Legislation pending in Congress and supported by the Obama administration would incentivize states with eligibility for grant funds if they improve educational standards, raise teacher qualifications, and develop a rating system that would provide parents a tool for selecting quality early childhood education programs. These policies would build upon existing state-level initiatives designed to strengthen the educational quality of early learning programs, and present important changes and promising investments.

Economists at the Minneapolis Federal Reserve estimate that there is a 16 percent return on every public dollar invested in high quality early childhood education.

Yet scant attention is being paid by state and federal policymakers to strengthening early childhood education through the existing network of entrepreneurial supports. The U.S. Small Business Administration works with lenders to provide $28 billion in loan guarantees to small businesses, has a robust network of technical assistance and business development supports, and is dedicated to fostering women and minority entrepreneurship. Relatively few early education providers, however, are aware of these small business supports. The SBA should do more to reach early childhood education providers with these resources.

Today, solitary initiatives to forge connections between the vast network of small-business resources and child-care providers are sprouting up from California to Massachusetts and many places in between.

Congress is beginning to address the capital needs of early childhood education providers with proposed legislation from my old boss, Senator John Kerry of Massachusetts, and a separate bill from Senator Robert Casey of Pennsylvania and Representative Carolyn McCarthy of New York. These initiatives are designed to help early childhood programs purchase and renovate facilities, an important contributor to program safety and quality.

But if this is all policymakers do, the nation is missing an opportunity.

Coordinated outreach to early education providers by those with entrepreneurial expertise would have compound benefits to the economy and prove to be an efficient use of public funds. For example, Small Business Development Centers could collaborate with Child Care Resource and Referral Agencies and Family Child Care Systems to reach providers with technical assistance.

The federal government spends billions of dollars each year to both improve access to high-quality early childhood education and to support small businesses as engines of economic development.

Private-sector early childhood education providers are positioned to help our nation realize these goals simultaneously. If these providers are properly supported, the positive effects of early childhood education would grow, benefiting both our kids and our economy.


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