The Economic Rationale for Investing in Children: A Focus on Child Care. Implications for Child Care and Preschool


Many of the arguments in support of government intervention in the realm of elementary and secondary schooling also apply to earlier ages, though the details may differ somewhat. Consider first issues related to market failure. If readiness for first grade is a primary determinant of school performance, by definition it is an important determinant of the public aspects of schooling such as good citizenry, etc. Preschool may be a particularly good time to expose children to different religions, ethnic groups, etc., and to inculcate values of tolerance and a shared experience. There may also be inadequate information regarding day care quality, though measurement problems might be even more difficult at early ages. The final issue raised under market failure is the potential for monopoly power in low density areas. Particularly for a single parent who works irregular or odd hours, there may not be enough demand to justify the presence of a number of child care providers.

Perhaps the most compelling justification for government intervention in early education is equality of educational opportunity, and growing evidence suggests that schools may find it difficult if not virtually impossible to overcome severe disadvantages in early childhood. If substantial resources, expanded choice, remedial programs and other interventions do not significantly improve academic outcomes for economically or socially disadvantaged students, investments in early childhood care and schooling may be a far better investment. At this time, however, early education programs such as Head Start are not entitlements and they do not have a clear academic objective(4). The disparity between the universal support for elementary and secondary school years and the limited support for early education seems unjustified. Importantly, early childhood education should not be viewed as an entirely separate entity, and tradeoffs between investments in the quality and availability of early education and support for elementary and secondary schooling should be considered.

The final and certainly most difficult issue philosophically is the protection of minors. While parents would not have their three-year-old child work rather than attend school, neglect, either benign or not so benign, could severely harm academic development. Evidence from the Coleman Report (1966) and many other studies documents the importance of family background in the determination of academic outcomes. Yet such quantitative analyses do not capture much of the variation in family support for schooling, as parents with similar ages, family structures, education and income appear to provide very different levels of support.

Even if it were a simple matter to identify children likely to receive the least support at home (e.g., children with teenage mothers without a high school diploma and no father in the home), a requirement that only these children must attend day care or preschool would likely be unconstitutional. Yet work requirements for public assistance recipients and other regulations essentially require many single mothers to place their preschool age children in the care of others.

Currently public funding for day care has not kept pace with the growing demand, particularly for public assistance recipients. It is difficult to identify a potentially more damaging unfunded mandate than child care for mothers on public assistance, making a strong case for full government financing of child care and preschool education for children whose mothers are required to work. The amount of the funding should depend upon the return to additional investments in early education in the form of higher quality programs.

Yet just as previous Medicaid eligibility requirements discouraged exit from public assistance, child care subsidies strongly linked with welfare participation would also inhibit departure from the program. One argument in favor of a more far-reaching program of government support for all low income children or even all children is that it would reduce or even eliminate this problem of perverse incentives while expanding protection for minors. However, more generous child care benefits for families not receiving public assistance would lead some families to substitute paid day care for home care, perhaps to the detriment of some children. In addition, the expansion of benefits would simply provide a transfer of resources to many families already using child care in much the same way that private school vouchers would transfer resources to students already attending private school.