Session Date: August 16, 2005
Annual Meeting Session Summary: Breakthroughs in Early Learning, Advances in Science, Economics and State Policy
By Guy Bergstrom
Communications Specialist, Washington House Democratic Caucus
This summary is provided for information purposes only. NCSL does not endorse any views it contains.
SEATTLE – Early education helps create jobs, and gives taxpayers the best return for their investment, Federal Reserve economist Arthur Rolnick told state legislators and legislative staff at a half-day seminar on early learning at the National Conference of State Legislatures' 2005 Annual Meeting.
There’s a right way and a wrong way to create jobs, said Rolnick, senior vice president and director of research for the Federal Reserve Bank of Minneapolis, Minnesota.
Most taxpayer money is spent the wrong way, he believes, on, for example, bidding wars between states to entice companies to relocate, or stay, on their soil. The tax breaks and bidding wars are zero-sum games, Rolnick said. They don't create any real new jobs, but instead spend millions of taxpayer dollars moving jobs from one place to another.
The right way to create jobs is to invest in something that will last, he contends. Before studying early learning, Rolnick would have said the best way to create jobs would be to invest in education generally, in K-12 or college. But now, the author of the paper "The Economics of Early Learning," believe spending funds on early education gives an even higher return.
Rolnick said if you look around the world, it’s clear that investing in education is the path to prosperity. It’s what rebuilt the Japanese economy after the country was in ruins after World War II and it’s the secret to the success of other countries worldwide.
His home state of Minnesota is no different. Before the 1950s, Minnesota was rated below average for education. Then the state invested heavily in schools and colleges. Minnesota now has one of the highest-educated workforces in the nation – and a strong economy.
“The market wants an educated workforce,” Rolnick said.
Early education pays off year after year in multiple ways, said Rolnick. If at-risk children and their parents get intensive programs from birth to five, the rate of return is 16 percent every year, inflation-adjusted.
“That’s as high as you get,” he said.
Rolnick explained why the return is so high. Education costs are lower because the kids are ready to learn and don’t need more special services, he said. States spend less on social programs like welfare. And the crime rate goes down.
So taxpayers get a 12 percent return on their investment every year. And the child gets a 4 percent return because he or she does better in life, getting better jobs that pay more.
Rolnick said there are two independent lines of research that show why the years from birth to five are so important. It is believed that:
- A child’s brain doesn’t develop normally if that child is in a high stress environment; and
- High-quality programs putting at-risk kids in early education programs and mentoring parents reaps huge rewards compared to control groups of similar children and their families who don't have access to such programs.
So what would it cost to cover every at-risk child in Minnesota? Rolnick ran the numbers. An endowment of $1.5 billion would do it. Rolnick concedes that the figure may sound large to some, but he pointed out that Minnesota’s economy produces more than $200 billion a year in goods.
Instead of top-down programs that have failed elsewhere, Rolnick said it’s best to work from the bottom up to put a good early education system in place.
“I want to use the market and empower the consumer,” he said. “We don’t need a lot of bureaucracy.”
A good system would work like this: At-risk children would be identified at birth and their parents would be sent a letter saying, "Your child has earned a scholarship, and here are some local places you can use it." Then a few weeks later, a parent-mentor would come to visit the family. The scholarships would pay for performance, Rolnick said. The kids would be tracked to make sure they are ready for school. And they would receive a bonus for good performance.
A pilot program in Minnesota is taking this approach.
NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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