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Growing Dividends: Early investments in education yield long term benefits

By Adrian Bissdorf | April 17, 2017



Though many economic comparisons focus on the size of the United States’ economy, what truly makes the American economy great is its dynamism. The United States is at the frontier of productivity and innovation for a reason. It encourages ventures through intellectual property protection, successfully connects the talent and ideas from its world-class research universities to a diverse consumer market, and generally exhibits low entry-barriers for start-ups.


However, it misses an opportunity when it comes to public investments in paid maternity leave, childcare, and early education. It is the only advanced industrialized economy without a national paid family leave policy (PFL). The out-of-pocket cost of childcare for a single child in America is equivalent to 40% of the average worker’s wage, according to the OECD, a club of mostly rich countries. Due to its high cost, preschool enrollment in the US is far below the OECD average. The lack of public investment in families hurts the American economy through foregone potential, lower productivity, and decreased social mobility.

Start with the lack of paid family leave. Eligible mothers only benefit from job protection and 12 weeks of unpaid leave under the Family and Medical Leave Act of 1993 (FMLA). In recent years, some states have begun offering paid leave, with California leading the pack with a maximum of 16 weeks. A 2013 study reports that California’s program doubled average maternity leave from three to six weeks and improved health outcomes for mothers and children.


According to the US Department of Labor, 1 in 4 American mothers return to work within 2 weeks of delivery because they cannot afford to take unpaid leave under FMLA. The lack of paid leave and the high cost of childcare is a financial burden that drives lower-income mothers out of the workforce, and negatively impacts children whose parents cannot afford unpaid leave. A national paid family leave program would lead to long-term economic benefits and spare families the choice between work and caring for a newborn.


Additionally, preschool enrollment is comparatively low in the United States due to its high cost. Only 54% of all 3- to 4-year olds in the US are in preschool, according to the National Center for Education Statistics. The OECD average is 81%. Research shows that children from low-income households benefit most from public investments in early education. The U.S. government should expand the eligibility for Head Start, a program providing access to early education to children from low-income families. This would level the playing field for children from poorer and richer households once they are in school.


A focus on early investment would improve the efficiency and quality of American schools and save money in the long-run. The savings happen as the greatest share of brain development happens in the first few years of life, when brains are most “plastic” or flexible. Scientists refer to this as a “use it or lose it” mechanism. If children do not receive adequate stimulation early in life, developmental windows start to close and unused synapses are pruned back. Early investments in education yield far greater returns than investments later in life. The OECD reports that the benefits for children enrolled in preschool are $7 for each dollar spent by age 21 and $16 at age 40, respectively.


Putting public resources into early childhood education and care provides significant economic and social payoffs, boosts female employment, and improves social mobility. Given the overwhelming evidence of the high returns on investment, the US should make it a priority to invest more in the youngest members of society. Although politically difficult, starting a debate about a possible national paid family leave program would move the conversation into the right direction. Such a policy would ensure that parenthood is less of a financial and professional liability and give especially lower-income families added security.


Overall, public investments in childcare and preschool would benefit children from financially vulnerable families most. Higher quality early education would reduce disparities between children from rich and poor backgrounds and reduce skill gaps that cause inefficiencies in teaching. More generous family policies would significantly improve educational and professional outcomes and have positive effects on the long-term competitiveness of the American economy. Now is the time to start the conversation if our goal is to provide the next generation with the adequate tools to succeed in the global economy.


Adrian Bissdorf is studying International Economics and Latin America at GPS with a focus on corporate social responsibility, environmental policy, clean technology, and health care policy. He has conducted academic research in Germany and the US, speaks five languages and has worked in marketing, operations, brand management, and business development.

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