The Economic Rationale for Investing in Children: A Focus on Child Care. Policy Recommendations


Role of government in child care and preschool education. The substantial difference in the roles of government prior to and following the age of six has lessened over time and will likely continue to diminish. A number of questions arise over the appropriate role for government in the regulation, financing, provision, and other support for early education. The following are my recommendations.

  1. Long run outcomes should be emphasized and policies for all levels of schooling should be coordinated. Though the details of child care and early education provision may differ dramatically from elementary and secondary education, the objectives largely coincide. Therefore tradeoffs between support for older and younger children should be considered as a part of decisions over where to allocate resources. Institutions should be judged on their contribution to development rather than on the basis of behaviors that do not correlate with future success.
  2. Additional years of schooling for preschoolers should not simply be added on to the current structure of schools. In other words, universal public provision of early education by local monopolies does not constitute an appropriate policy. The innovations, experimentation, and critical evaluations currently taking place in the elementary and secondary school sector should lead to productive changes. As evidence on charter schools, voucher programs, school accountability, public and private competition, and other structural reforms accumulates, much more will be learned about effective provision of schooling(8). The mediocre quality of many schools that precipitated the widespread demand for reform should not be replicated for early education.
  3. Competition and choice should be encouraged, at least in pilot programs. While the appeal of competition in theory is quite clear and well stated by Friedman (1962) and many others, there is little solid evidence that competition actually improves outcomes. The literature on Catholic schools beginning with Coleman, Hoffman, and Kilgore (1982) finds that private school students outperform those in public schools, though questions remain concerning the ability of these researchers to separate causal effects from other factors that differ systematically between the sectors. The aforementioned preliminary evidence on merit schools, accountability programs, charter schools, vouchers, competition from other public schools and from private schools suggests that schools may respond to competition, but definitive answers have yet to emerge.
  4. Program evaluation requires extensive information to disentangle the contribution of families, teachers and institutions. One reason for the general resistance by elementary and secondary school administrators and teachers of incentive systems is a concern about what is rewarded. We know that families make a huge difference in the education of students. An implication of this is that we should not reward or punish pre-school personnel for the education they are not responsible for. If some children come to school better prepared than others, their teachers and administrators should not receive extra rewards. Similarly, if students come from disadvantaged backgrounds that leave them less well prepared for schools, we should not punish their teachers.
  5. Government should disseminate information about the quality of early education providers. Information on inputs including child/staff ratios, teacher qualifications and facilities are important and should be provided, but attempts should be made to develop measures of value added (the impact of the school on academic or other outcomes) despite the difficulty of measuring outcomes at early ages. Longer term outcomes might provide the best information for policy makers and parents alike. Evidence from elementary and secondary education demonstrates that resources and easily observable school and teacher characteristics do not explain the bulk of the variation in quality.
  6. The Federal Government has an important role to play in terms of research and development. Given the lack of knowledge of a single best practice, it is imperative that evaluation accompanies any expanded participation in early education. However, learning about reforms takes more than merely collecting data. There must be a stated commitment to evaluation of outcomes. Unfortunately, most past experience reveals little systematic learning about what programs do and do not work in elementary and secondary education as well as early education and child care. This slow learning has resulted both from a lack of commitment to evaluation and a failure to build evaluation into the design. The simple example of the California class size reduction program of 1997 illustrates the issue. The State of California instituted a program of fiscal incentives designed to bring down class sizes in early grades. This program was put in effect for all districts across the state and, at the time, there was limited measurement of student performance. As a result, even though California is currently spending some $1.5 billion annually on class size reduction, it is extremely difficult to discover whether or not the program has been beneficial in terms of student outcomes.
  7. The Perry Preschool evaluation provides a model that should be replicated in many different settings to learn much more about a variety of policies and pedagogies(9). Though it is quite difficult to measure outcomes and separate the contributions of elementary or high schools from other factors using statistical techniques, it is probably even more difficult in the case of early education. This increases the importance of undertaking well-structured random assignment experiments. Long as well as short term outcomes should be studied, and objective measures should be utilized wherever possible.

Personnel Policies. The findings from research on elementary education highlight both the importance of teacher quality in the determination of academic outcomes and the difficulty of predicting quality from observable characteristics such as degree earned, experience, college quality or even test scores. Though Ballou (1996) finds strong evidence that higher skilled applicants are not systematically preferred over other prospective teachers, even those administrators who utilize very thorough hiring procedures may find it difficult to consistently select those who turn out to be high quality teachers. The fact that teachers improve considerably in their first two years on the job makes it that much more difficult. I believe that the lack of predictive power of observable characteristics in combination with substantial within school variation in teacher quality supports a number of specific recommendations:

  1. Requirements for prospective teachers and staff including mandatory degrees and formal examinations should be adopted with great care  While a move to professionalize teaching or day care could improve the quality of applicants and training, it may also reduce the supply of teachers without a corresponding improvement in quality. All meaningful requirements increase the opportunity cost of becoming a pre-school or child care worker thereby reducing supply. Most are very blunt screening devices, eliminating some competent teachers. This includes education requirements such as a community college associates degree or even a high school diploma. There may be many immigrants or elderly workers who could provide quite good care, particularly for very young children. Even an examination that has fairly good predictive power will explain little of the variation in teacher quality. Claims that a particular training pedagogy teaches best practice' methods should be scrutinized closely. The belief that teachers learn by doing, respond to a variety of methods, and require very different skills depending upon characteristics of children likely provides a better framework for developing appropriate training and hiring policies. In general it is not possible to prescribe good teaching with specific teacher training pedagogy, magic in-service development programs, or a series of requirements that must be satisfied.
  2. Successful policies must take the substantial variation of skill and effort into consideration rather than attempt to eliminate it through a series of regulations. There is little reason to believe that any new regulations will reduce substantially the variation in the quality of teaching except possibly by discouraging high quality students from entering the profession. In fact it is the variation in teacher skill and effort, even among those with similar educational backgrounds, that is and will continue to be one of the most important characteristic of teachers and child care workers, just as it is an important characteristic of doctors, lawyers, and virtually all other occupations. Administrators must focus on individual performance in their hiring, retention and mentoring practices in order to select the best possible staff and encourage effort.
  3. Rigid salary structures that determine pay on the basis of education and experience are unlikely to attract and retain the best teachers. At the very least organizations should not link salaries with characteristics not significantly related to outcomes, and organizations should experiment with more flexible pay and promotion structures that reward superior performance. Most current pay structures lead teachers to invest in low cost programs in order to move up the pay scale. If performance rather than credentials were rewarded directly there would be a much stronger incentive to seek out more productive training programs. While the evidence does not provide strong support for merit pay (c.f. Cohen and Murnane (1986)), additional experimentation with alternative pay structures might prove to be quite rewarding. Recently, districts including the Cincinnati, Ohio, school district have adopted an alternative form of performance pay in which pay would depend on the teacher job classification. Teachers ranked quite highly by peers and administrators are classified in special, higher paying categories. To date there is little or no evidence on the effectiveness of this approach in raising teacher quality.
  4. College Scholarships that require recipients to teach a minimum number of years following graduation raise problems that should limit their use until pilot programs show them to be effective. Not only is the ability to enforce such contracts questionable, forcing someone who dislikes teaching to complete her obligation is unlikely to yield positive results in the classroom or day care center. While such scholarships enable the state to raise the compensation of new teachers without affecting that of current teachers, the costs may not justify the benefits. Alternatives such as two tier contracts that would pay new entrants (and existing teachers who wish to enter the program) higher salaries but also impose greater accountability may prove more effective at raising school quality. Such programs are more difficult to organize at the state level, however. Another alternative is the provision of in kind benefits such as housing assistance to new teachers, which may be particularly useful in high cost metropolitan areas.
  5. Reductions in the child/staff ratio should be undertaken with great caution. The hiring of additional teachers is quite costly, and any gains from more intense instruction might be offset by a dilution in average quality. A rapid expansion of the number of children enrolled in preschool or child care would likely exacerbate the negative impact on the quality of new hires. The aforementioned evidence suggested that reducing the pupil/staff ratio has a positive effect on achievement that is larger in earlier grades and for economically disadvantaged students. However, across the board class size reductions such as the California Class Size Reduction program have contributed to severe teacher shortages. The percentage of teachers with little or no experience more than doubled following the cut in average class size of roughly ten students for the early grades, while the percentage of teachers who lacked full certification rose by an order of magnitude. Importantly, economically disadvantaged and minority children appear to have born the brunt of the decline in teacher quality, as the creation of additional teaching jobs in middle class communities led to movement of teachers out of lower income areas and into those districts. Investments in smaller pupil/staff ratios should be targeted towards disadvantaged children who derive the most benefit from such expenditures.
  6. Pre-school or child care administrators play a crucial role in the determination of education quality, and institutional structures that reward good performance and hold administrators accountable should be the norm. Higher income families appear to have a number of child care alternatives, and that competition likely improves the quality of care. In contrast, the oversubscribed Head Start program provides little incentive for superior performance. Unless administrators maintain an important stake in the outcomes, as a group they are unlikely to make systematically the difficult choices necessary to achieve high quality outcomes. Moreover, some ambitious and effective administrators will choose not to work in child care if compensation and quality are not linked. Of course getting the incentives right is a far more difficult task than merely pointing out the fact that administrators and teachers respond to rewards and penalties.