The Economics of Investing in Universal Preschool Education in California: Executive Summary

The Economics of Investing in Universal Preschool Education in California
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Connecticut governor Dannel Malloy wants it in his state. The United States, in fact, has a near year history of funding early-childhood programs in the form of Head Start. The famous Abecedarian and Perry Preschool Projects, for example, are now more than 40 years old and involved no more than 60 children. Evaluations of social programs are built around lots of judgment calls—from deciding how the research is designed to figuring out how to analyze the data.

Similarly, David J. We need a science of early-childhood education, and we need it now. SB would create thousands of new teaching positions while keeping class sizes at 20 children or fewer.

Preschool, Childcare and Welfare Reform in the United States

But Steinberg insists that the legislation is about kids, not union jobs. More than 60 percent of voters rejected Proposition 82, a tax-the-rich scheme for funding universal preschool that Hollywood activist Rob Reiner fielded in Send a question or comment using the form below. This message may be routed through support staff. More detailed message would go here to provide context for the user and how to proceed.

City Journal search. City Journal is a publication of Manhattan Institute. Part-day State Preschool, for instance, operates only three hours per day, and two thirds of programs are housed in school districts and operate only days per year.

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Many families in part-day programs rely on multiple child care arrangements, suggesting public investment in full-day programs may offer superior coverage Stipek Studies on the effectiveness of ECE point to quality as a key driver in generating long-term benefits for children. Compared to participants in lower quality or informal ECE, children in high quality ECE programs went on to experience improved graduation rates, earnings, and health — with an additional reduction in interactions with the criminal justice system among male participants McCoy et al.

However, market forces in the ECE industry are unable to sustain a system that meets these qualifications without government investment. Among the 4. Figure 2 shows the distribution of annual ECE enrollments, including subsidized and unsubsidized care.

This leaves significant potential need for paid child care, including 1. Constraints in the supply of licensed providers limit overall access to ECE. Between and , the number of licensed providers and total capacity for enrollment were increasing; however, during the Great Recession, growth in center-based capacity slowed, while family child care saw a steep decline that has continued to the present day see Figure 3.

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Glasmeier, Amy K. Some parents who earn at or below 70 percent of state median income SMI are eligible for financial assistance, limiting their obligation to a copay of only a few hundred dollars per month. The infant brain has about billion cells at birth—roughly the same number as an adult brain—but with many fewer connections between cells. One common approach to approximating cost of care for ECE is to leverage the Regional Market Survey, which is used by some subsidy programs to determine reimbursement rates. An increase of this magnitude among women with young children in California would potentially bring in hundreds of thousands of additional workers into our labor force.

According to a survey of FCC providers, many have been unable to make ends meet since the Recession. Among programs that have stayed open, 20 percent of respondents reported low earnings as their greatest challenge. Meanwhile, among those that closed down, most ranked family circumstances, better employment options elsewhere, or housing costs as their primary concern DiMatteo and Nzewi As explained in the sections below, public investment will be necessary to reverse the decline in the supply of ECE providers.

The current levels of public spending per child are not sufficient to cover the true cost of high-quality care. Managing a center or family child care home comes with significant operating expenses.

Economics Investing Universal Preschool Education – csemi

In addition to purchasing materials and food to operate their businesses, programs must maintain sufficient staffing and space to meet the requirements of licensing. Workman Lower adult-to-child licensing ratios in infant care are a main driver of this expense: providers must have twice as many teachers for infant care. This study echoes the conclusions of cost modeling research on ECE businesses, which show that enrolling preschoolers is more financially viable for covering the cost of care Alliance for Early Childhood Finance After covering their basic expenses, ECE providers who care for children with subsidies are typically left with very low earnings, leaving many to finance quality improvements at the expense of their wages.

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Moreover, ECE providers typically experience fluctuations in their earnings, as they may not receive the full reimbursement rate each month if they are unable to keep up with reporting requirements or if children are absent Mitchell and Stoney Together, these factors create a strong incentive for providers to leave the industry and discourage new providers from entering.

Increased public funding would enable ECE providers to not only meet the basic requirements of daily operations and earn a sustainable income, but also to invest in high-quality training and materials. Currently, state subsidies provide varying levels of funding. Correspondingly, there are disparities in reimbursement by age and setting.

Even among full-day programs serving preschool-age children, however, there are differences in reimbursement see Figure 4 : some programs receive the standard reimbursement rate SRR , while others receive the regional market rate RMR or State Preschool rate EdBudget By design, the RMR fluctuates by county to adjust for the cost of living, based on the Regional Market Survey of providers.

An updated survey is scheduled for to refresh the rate DiMatteo and Nzewi The SRR, meanwhile, remains uniform statewide. The SRR and State Preschool funding, however, require developmentally appropriate curriculum and higher staff qualifications — meaning some preschool programs must meet a higher level of quality with a lower level of funding Taylor This misalignment creates a provider disincentive to accept subsidies with the SRR or State Preschool rate. As a result, programs fail to take up all of the funding.

Within State Preschool appropriations, for instance, nearly 12 percent of the budget goes unused. Providers may prefer to enroll unsubsidized children, since the state does not impose quality standards on their care Melnick et al. Legislators have proposed reforming reimbursement rates to create a single payment structure, eliminating the disincentive to meet higher standards Levya , 1. However, even raising all rates to the current upper bound would be insufficient to cover the cost of high-quality delivery.

Paying for high-quality care, meanwhile, would support lower teacher-child ratios, higher staff salaries, greater space, and more resources. The City and County of San Francisco has developed a local funding model that attempts to simultaneously increase supply and improve quality of ECE. In , they launched the Early Learning Scholarship, a system combining local and state funding streams. According to San Francisco Fiscal Strategies Manager Tony Tyson, a more advanced version of the funding model would include increases for the higher quality rankings Tyson To ensure providers can cover both basic operating expenses and quality improvements while still earning a sustainable income, California could adopt a similar model to San Francisco.

By increasing the base level of reimbursements and linking it to a quality rating or standard, the state government would make running an ECE program economically feasible.

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A wide range of studies has established a connection between low wages and high turnover, including within ECE occupations specifically Whitebook and Sakai We estimate that approximately 85, individuals are employed in ECE as child care workers, preschool or kindergarten teachers, or teacher assistants in California Austin, Edwards, and Whitebook This suggests that wages are currently too low to retain sufficient numbers of qualified ECE teachers Porter The persistence of low wages means 58 percent of the ECE workforce takes up one or more forms of public assistance like MediCal or CalFresh, and some even take on a second job to make ends meet Whitebook et al.

In order to expand the ECE workforce, raising wages will be necessary. With increased public investment, teachers could also begin earning a living wage — potentially reducing enrollment in social safety net programs like MediCal or CalFresh. Higher wages would also reduce churn in the workforce. Differences in tenure and educational attainment play a role: inexperienced teachers, for example, lack specialized training, so they are very responsive to small wage increases or improved working conditions in other professions; in contrast, as teachers advance their education, they may be able to gain employment as a salaried kindergarten teacher, thus leaving ECE centers or homes for school districts National Research Council According to a national report, low compensation deters ECE teachers from seeking higher levels of education, and professional development opportunities do not translate to higher pay.

Public investment in wages would not only increase retention rates, but also encourage teachers to continue their education and training Institute of Medicine and National Research Council Several studies have demonstrated that wage parity with kindergarten teachers creates a strong and high-quality workforce. For example, Abbott School Districts in New Jersey created a scholarship program to increase the educational attainment of preschool teachers, ultimately allowing pay parity with kindergarten U.

Department of Health and Human Services Not only do providers struggle to bring in enough revenue to earn a sustainable income and provide quality care, but families also struggle to afford the cost of ECE. California ranks as one of the least affordable states for licensed care for parents Child Care Aware High costs are especially burdensome for low-income families. Some parents who earn at or below 70 percent of state median income SMI are eligible for financial assistance, limiting their obligation to a copay of only a few hundred dollars per month.

For a family with earnings around the 70 percent SMI threshold, the copay would amount to only 10 percent of their monthly budget DiMatteo However, only a third of income-eligible children currently have access to subsidies Melnick et al. Without assistance, enrolling one child in a center would cost the same family 24 percent of their income.

Middle- and upper-income parents may be able to afford the market rate in a center or FCC more readily than their low-income peers. However, the median family with working parents would still devote 15 percent of their income to enroll one child in center-based care. Many take up license-exempt care, including nannies or nanny shares. For the median two-parent household, this expense would consume 28 percent of their earnings — and it may or may not lead to quality care.

Increasing public investment in high-quality ECE, by contrast, would stimulate growth.

One impact of more funding would be to generate greater revenues for providers, sending ripples of increased activity through the region through an economic multiplier effect. In this section, we explore the current impact of the ECE industry and discuss ways in which increased public investment could unlock these economic benefits. See Appendix II for our methodology. Increasing public investment in ECE — resulting in, for instance, increased teacher compensation and retention — would cause a similar ripple effect.

The net economic effect of additional spending on ECE would depend on how the state were to finance the programs. In California specifically, This labor force participation rate was growing in the years leading up to the Great Recession, where it stayed relatively constant until This trend reveals that California continues to lag in supporting its working mothers with young kids, leaving an untapped population of hundreds of thousands of potential workers. Public opinion polling, however, suggests many women would prefer to work.

Many of them pointed to part-time work as a preferred option for balancing family and career during the early childhood years Cohn et al. The estimates, however, point to a relationship between rising costs of care and reduced employment. A study took a different approach, simulating a life-cycle model of family decision-making and budgeting. The author estimated that the rise in prices for ECE since the s accounts for 13 percent of the decline in employment among American mothers with children under age five Cascio A national study of Census data compared regions before and after a pre-K expansion, finding labor force participation grew by 3.

In Washington, DC, an expansion of pre-K led to an increase in labor force participation on a much broader scale. In , the District rolled out full-day, universal pre-K in its public school district. By , 77 percent of three- and four-year-olds were enrolled. After controlling for changes in demographics, a study of the program found it generated a 10 percentage point increase in the maternal labor force participation rate since its inception, suggesting around 2, women gained employment.

An increase of this magnitude among women with young children in California could potentially result in hundreds of thousands of additional workers joining the labor force.

The participation rate for mothers with young children now matches the rate for those with school-age children in the region Malik Empirical evidence from other countries echoes these findings. In the s, Quebec invested in universal, low-cost ECE, beginning with preschool for 4-year-olds in and expanding to include infants and toddlers in The study suggests access to ECE not only benefited women who were not in the workforce — it also helped existing workers take up higher quality care Baker, Gruber, and Milligan Rising wages and labor force participation contributed to this trend Boushey and Vaghul However, women disproportionately take on low-wage jobs — particularly women of color see Figure 9.

Low-wage work is associated with inconsistent work schedules, non-traditional hours, and high stress. Maintaining a job with these characteristics establishes a clear need for consistent, high-quality ECE Entmacher et al. Not only do many women participate in low-wage jobs, but an increasing share of them rely on their earnings to support their families. In , approximately 35 percent of mothers in California were the primary or sole breadwinner for their household — a proportion that has more than tripled since Schumacher When mothers take on work without steady ECE, however, their earning potential is reduced — triggering a need for additional public assistance in the form of MediCal, CalFresh, and other social safety net programs.

Women already earn lower wages than men, but an additional gap persists between mothers and childless women. Explanations for the penalty typically include differences like experience and part- or full-time status, but controlling for these factors still leaves a residual of 5 to 10 percent motherhood penalty per child. Researchers have investigated this gap by measuring variation in human capital, childbearing age, employer discrimination, and other potential causes, with mixed results in explaining the difference between childless women and mothers.

Research in focused on gaps in employment, finding time out of work or school explained 60 percent of the wage penalty relative to childless women. Lack of ECE can trigger or extend these gaps. The data currently available, however, leave unanswered questions about other mechanisms that may depress wage growth for parents. Research points to a link between increasing access to quality ECE and greater earnings.