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Kindergartens as Engines of Economic Growth

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I was flicking through the OECD’s Education at a Glance 2014 to get a quick understanding of how Australia’s education system compares to the rest of the industrialised world. Australia mostly did well in the indicators compared to the OECD average, especially for university education. Although, it was a bit worrying to see that Australian school students’ educational scores stagnate. But there was one indicator that caught my eye, and that was the very low enrolment rates of Australian children in pre-school education (less than 20%) compared to around 75% for the OECD average. This places Australia the 5th lowest for pre-school enrolments in the OECD, with only Indonesia, Turkey, Switzerland and Greece being ranked lower. This caught me by surprise because there is pretty strong education and economic research that demonstrates the long-term benefits of early childhood education.

Why should we care about early childhood education? Children who are enrolled in pre-school education is associated with better school performance. Pre-school education also allows both parents to join paid employment which increases household and national income. Economic studies have shown that pre-school education has large impacts amongst disadvantaged communities. The Abecadarian project in the US tracks the educational and economic progress of disadvantaged African-American children who were enrolled in the Abecadarian program from 1972-77 to the age of 21. The Abecadarian project is an intensive pre-school education from infancy to the age of five years. The intention of this program is to create persistent improvements in educational performance. Participants in the Abecadarian project were found to have higher IQ (95 to 90), less likely to repeat a grade (34% to 65%), higher reading achievement (94% to 88%), higher maths achievement (93% to 82%) and more likely to attend college (36% to 13%). There was also other benefits to the participants such as higher lifetime income (by $37,531) and less likely to smoke (39% to 55%). Mothers of participants also benefit from being able to work and earn an income (over $67,000) and being able to access childcare (estimated at over $27,000). Was it worth it from a government or investors’ perspective? The benefit-cost ratio was estimated at $2.50 of benefits per $1 of costs at a 3% discount rate.

Not a bad investment, but other studies of similar program showed even higher benefit-cost ratios. The main reason why is the inclusion of lower crime. The Perry Preschool project had less persistent educational results but included the value of lower criminal involvement at nearly $174,000. Estimates for the Perry Preschool project’s benefit-cost ratio range from $9 to $17 of benefits per $1 of cost at a 3% discount rate. The findings of the Perry Preschool project suggests that targeting intensive pre-school education at disadvantaged communities would yield higher incomes and produce social benefits in the form of lower crime.

So could pre-school education become an engine of economic growth on the same scale as infrastructure? It would seem that the benefit-cost ratios are higher than many major infrastructure projects in Australia but rigorous economic studies should be undertaken before governments and investors start throwing money at kindergartens. It would seem the impact would be highest in disadvantaged communities such as remote Indigenous, regional areas and pockets of poverty within major cities. The design of the pre-school program should aim to produce persistent results. The Perry Preschool project was actually not a huge improvement on the educational status quo whereas the Abecadarian project was successful in producing durable educational and behavioural change. This may suggest that long-term, committed funding would give intensive pre-school programs the best chance of creating long-term benefits for participating children and their families. So the next time a politician gets up and say that the answer to all our economic problems is to build an expensive piece of infrastructure, maybe you can ask them their opinions on increasing enrolments in kindergartens.