December 2004

Economics is known as the “dismal science”, because it is based on cold, hard data.  According to the economists at the Federal Reserve, one cold, hard fact is this:  investing in kids pays extraordinary dividends to society.

Specifically, investments in early childhood development programs bring a real public return of 12 percent and a real total return, public and private, of 16 percent.  Rob Grunewald, economist with the Minneapolis Federal Reserve Bank, shared these statistics with Richmond area community leaders at a recent event called “ABCs and ROI:  What Economists Say about Investing in Pre-Schoolers”. 

“Early childhood education benefits taxpayers through reduced need for welfare assistance, increased income tax revenue, less burden on the criminal justice system and fewer children needing remedial education services,” said Grunewald.  He and coauthor Art Rolnick explain the case for investments in early childhood development in their paper, Early Childhood Development:  Economic Development with a High Public Return. 

The Greater Richmond Chamber of Commerce cosponsored the event.  “While many of us may have heard this message in social service, health or education circles, the difference in Grunewald’s and the Federal Reserve’s delivery of the information is the messenger itself,” said Jim Dunn, president of the Chamber.  “The Federal Reserve is our nation’s central bank, not a human services, child advocacy or education agency and Grunewald is an economist, not a medical professional, politician or social worker.  The truth is, the business community can’t afford to ignore his message.”

As an example of how these investments lead to such high returns, Grunewald cited education.  “Studies show that high levels of education are consistent with strong economic performance, and recent research on educational performance finds that the best way to invest in human capital is to start well before children reach kindergarten,” he said.  “During the first few years of life a child undergoes tremendous growth and change.  If this period of life includes support for growth in cognition, language, motor skills, adaptive skills and social-emotional functioning, the child is more likely to succeed in school and later contribute to society.”

The economic case for early childhood development is especially valuable for Youth Matters, which is sponsored by the Chamber.  Youth Matters’ overarching goal is to have all Richmond region children reading at grade level by third grade.  Among it’s strategies to achieve this are:

• Home Advantage: Helping Parents Become Their Child’s First Teacher:
  Youth Matters works with home visitors programs (for at-risk children) to expand program capacity and incorporate literacy efforts into their services, and to expand Reach Out & Read programs. Since 1999, Youth Matters has accessed or redirected $3,500,000 towards this strategy.
   

• Preschool Prep: Helping Childcare Providers Get Little Ones Ready to Read: Youth Matters helped create and continues to work with the Early Child Development Coalition (a consortium of 165 early care providers) to improve the quality of child care throughout the region. Since 1999, Youth Matters has accessed or redirected $3,455,000 towards this strategy.

Lynn McCashin, executive director for Youth Matters, believes the study will help Youth Matters make even greater inroads in the business community.  “The study has created a buzz both nationally and in the Richmond area,” she said.  “It’s given us additional evidence, and new language, to use to promote our strategies within the business community.  It was a real ‘A-ha!’ moment.”

In addition to the Richmond Chamber, other sponsors of the ABCs of ROI event were United Way of Greater Richmond and Petersburg, and Voices for Virginia’s Children.  The sponsors work together in conjunction with the Early Child Development Coalition.

(For additional information on this website about Youth Matters, click here.  For additional articles on this website about early childhood development, click here.)