Study: Pre-School Investments Increase GDP And Pay For Themselves

ap090419014056.jpgWe’ve been arguing that the Obama administration should seriously consider investments in human capital, not only to reverse America’s falling educational attainment, but also because it makes sense economically.

While most of the administration’s focus in this area has been on college accessibility and retention, that shouldn’t be the only avenue for investment. According to a study from the Center on Children and Families, an investment in preschool education would provide a desperately needed boost to our human capital supply while also causing the economy to grow. As the study’s authors noted, “well-educated individuals are more likely to be employed at all points in their lives and live longer than those who are less educated which in turn increases labor supply and thus GDP“:

As GDP increases, federal, state and local tax revenues are assumed to increase in proportion to their ratio to GDP if tax rates were held constant. This is the primary source of net revenue gains, but there are also several costs that are avoided due to having had more children in pre-kindergarten programs. With more graduates, fewer children will need special education or be retained in grade. If fewer students are held back, fewer resources are used to produce the same number of students with any ultimate level of achievement.

Here are the long-term GDP and human capital effects of preschool investments:


The study’s authors also found that, if lawmakers are patient enough, the program will eventually pay for itself — though we are talking decades before that effect is seen. “This may sound like a long time,” the authors note, “but the vast majority of government expenditures are undertaken with no hope of ever recovering their costs. That preschool education holds out hope of doing so, while promising large social returns in the short and medium run, makes it an outstanding investment.” And in any case, America can hardly afford to prolong its tumble from the summit of educational attainment any longer.