12/17/2012 05:42 pm ET Updated Feb 16, 2013

A Smart Investment: Skilled Early Childhood Workforce

This blog was co-authored by Rob Grunewald of the Federal Reserve Bank of Minneapolis. It is the second in a series of BBA blogs on early childhood education that explain the benefits of a comprehensive approach to early childhood and highlight effective efforts in specific states.

As the school year begins and election season kicks into high gear, we are focused on getting our struggling schools and our economy back on track. There is one set of policies that can help with both. Investments in early childhood education can have a substantial impact on the future success of children as students, workers, and citizens in a democratic society. That is, one of the most efficient means to improve our schools and boost the productivity of the workforce 15 to 20 years down the road is to invest in today's youngest children. Furthermore, these investments rely on a workforce of skilled, nurturing adults.

Four key studies demonstrate that high-quality early childhood education programs can have a positive, long-term impact on young children from low-income families. Three of these studies pertain to center-based education combined with parent education. The fourth long-term study looks at the impact of a nurse-based home visiting program for at-risk expectant mothers, now known as the Nurse Family Partnership.

Across these programs, benefits include higher education attainment, lower crime rates, and more financial stability as adults. Rates of return reach as high as 20 percent, adjusted for inflation, and compare favorably with the U.S. stock market, which on average earned between 5 and 7 percent, adjusted for inflation, over the past few decades. Finally, while children and their families benefit in the studies, the majority of benefits accrue to the rest of society. That is, taxpayers receive proportionally more benefits than the participants in early childhood programs.

Much of the labor productivity gains and government cost reductions occur 10 to 20 years down the road; however, there are substantial economic development benefits that accrue in the near term.

Child care is a key component of economic development infrastructure alongside other important infrastructure, such as transportation and communication systems. Nationally, 65 percent of children under six have all their parents in the workforce. A high-quality child care system helps parents enter the workforce, and once they find a job, makes it less likely that they will be absent or less productive due to unreliable child care arrangements. Research shows that parent absenteeism and productivity reductions due to child care breakdowns cost U.S. businesses more than $3 billion annually. A high-quality child care system can help mitigate these costs.

The child care industry is a large employer with almost two million workers in the United States. Furthermore, relative to many other industries, child care providers tend to buy services and materials from local businesses, and child care workers tend to spend their earnings locally.
However, for these near- and long-term economic benefits from investments in early childhood development to pay for themselves, they must be of high quality. This quality is contingent on the skills and experience of the program directors, teachers, classroom aides, home visitors, and other staff who deliver services to children and families. For example, the four aforementioned long-term studies assessed outcomes from programs with highly qualified staff.

The current patchwork of early childhood education programs is of spotty quality, with low pay and few career opportunities -- all barriers to developing, attracting, and retaining great workers. Building a better system will require more competitive compensation packages, as well as development among universities and community college systems of strong professional development programs to enhance the skills of the current early childhood education workforce and to train the future workforce.

In addition, early childhood education workers who operate nonprofit or for-profit businesses will benefit from training in business practices, such as accounting, budgeting, and personnel management, which many currently lack.

At a time of fiscal uncertainty and the need to reexamine our public investment priorities, investments by government and public-private partnerships in the early childhood education workforce are a smart choice. Doing so supports the high public returns we can expect from early childhood education investments. Ultimately, more children will arrive at kindergarten prepared to succeed in school and in life -- a benefit to all.

As an associate economist for the Federal Reserve Bank of Minneapolis, Rob Grunewald conducts regional economic research and co-authors the Minneapolis Fed's "Beige Book" report on current economic conditions. Grunewald serves on the board of directors for the Minnesota Visiting Nurse Agency, Resources for Child Caring, the advisory board for First Children's Finance Growth Fund and as secretary for the Minnesota Economic Association.