"The commonwealth of Kentucky made great strides in its long struggle against poverty during the economic boom in the 1990s only to slip backwards in the last half decade. However, even with the 1990s gains against poverty, the absolute level remains stubbornly high — over 16 percent of Kentuckians were classified as poor in 2005 based on official U.S. Census statistics.
Recent research suggests that investments in education may provide the key to reducing persistent poverty in America and that some of the greatest returns to society come from investing in children beginning with pre-kindergarten (Pre-K) programs.
A vast body of economic research demonstrates the positive link between education attainment and the economic status of individuals, as well as regions and countries, and that this link is causal. Labor economists estimate that on average, each additional year of schooling translates into a 10 percent gain in earnings relative to what the person would have earned had they not made the investment. These returns are generally higher than the long-term return to equity capital in the economy. In other words, for most people, education will be the most lucrative investment they make in their lifetimes.
More impressive still, from a social perspective, are the results from rigorous evaluations by Dr. Lynn Karoly and colleagues of the Rand Corporation of several Pre-K intervention programs, such as the Perry Preschool Project in Michigan, the Carolina Abecedarian Project in North Carolina and the Chicago Child-Parent Center (Chicago's version of Head Start). Cost-benefit analyses of these programs generally point to the benefits outweighing the costs by a factor of three or more. Indeed, the age 40 follow-up of the children in Perry Preschool indicates that the general public reaped a benefit of upwards of $17 for every $1 invested in the program.
The Pre-K projects were controlled experiments and the evaluations revealed that participants were significantly more likely to complete high school, to work as adults, to have higher earnings as adults and to commit no crime. It has been estimated that the typical high school dropout costs society $243,000 to $388,000 over his or her lifetime through greater use of government transfers, lower productivity, lower tax payments and higher chance of criminal activity, and a typical criminal costs society $1.3 to $1.5 million. This implies that real money is on the table when discussing mechanisms to enhance high school and college completion. This is put in stark relief in many eastern Kentucky communities where drop-out rates are high and participation in disability programs like Supplemental Security Income reaches 20 percent or more compared to the national rate of 2.5 percent.
Although the returns to the experimental preschool programs were very large, with the exception of the Abecedarian Program, each of the other programs experienced cognitive gains that faded out over time relative to the control group (or, in the case of Head Start, relative to children from similar academic and family backgrounds who did not enroll in Head Start). That is, typically by the third grade, the reading and math achievement test scores between children with Pre-K and those without were no different. This has led many policymakers and commentators to declare programs such as Head Start a failure. However, this conclusion is ill-founded because it ignores the fact that human capital development involves both cognitive skills such as formal schooling, as well as non-cognitive skills such as self control, responsibility, initiative and charisma, and that the labor market values both. Indeed, a recent National Association of Manufacturers study found that 69 percent of businesses cited "inadequate basic employability skills" such as attendance, timeliness and work ethic as the most common reason for rejecting job applicants. These are what we would call non-cognitive skills.
The fact that the children of Head Start, Perry and Chicago Child-Parent Center are more likely to graduate from high school, to work as adults and to not commit crime points to the positive developmental role of non-cognitive skills.
Last year, the Prichard Committee for Academic Excellence here in Kentucky joined with the national advocacy group Pre-K Now to expand access to universal, but voluntary, preschool programs in the commonwealth.
Recently, Dr. Timothy Bartik of the Upjohn Institute compared the economic returns to universal preschool to the economic returns to the typical package of business subsidies offered by states to private businesses. His simulation showed that, between the years 2007 and 2080, the present discounted value of $1 invested in either a universal preschool program akin to the Perry Project or business subsidies yields about the same rate of return of $3 from the state's perspective.
Solving the problem of persistent poverty in Kentucky and in America is complex, but growing evidence suggests that for the state and nation to lower poverty in the long run, high school and college completion rates must rise.
One area that currently suffers from under-investment and yet offers the promise of higher high school completion and lower persistent poverty is Pre-K programs. Both as a means to control costs and because the returns are likely higher, one strategy for Kentucky is to initially target the programs to children from low socioeconomic status backgrounds. The programs should combine trained staff and low child-teacher ratios with both center-based care and home visits to secure parental/caregiver commitment to their children's education. The programs should be supplemented with an evaluation component so that the state can be well informed about which programs work most effectively.
The struggle against poverty continues, but early childhood investments offer one promising path to a brighter economic future of Kentucky.
James P. Ziliak is the Carol Martin Gatton Endowed Chair in the Microeconomics Department and director of the Center for Poverty Research at the University of Kentucky.