EDU001 High-quality early childhood education (ECE) programs leading to lifetime earnings

Number of participants: Reported by program.

Percentage of participants who would not have enrolled in any other ECE program of similar quality: [47%]. Estimated as the inverse of the share of the population ages 3 to 5 and under 185% of the federal poverty line who are enrolled in pre-K programs in the Twin Cities metropolitan area. The Constellation Fund staff computes this rate at [53%] using ACS data (U.S. Census Bureau, 2016).

Total value of ECE per child: [$43,014]. Estimated by the Constellation Fund staff. Benefits per child include additional benefits to participants from the following outcomes:

A.    Academic progress: [$18,550]

B.    Health: [$12,179]

C.    Child welfare: [$12,285].

Benefits are discounted to present value based on the average age of participation through age 65. These benefits come from the following estimations:

A.    Benefits from academic progress

A.1. High school: First, we estimate the impact of high-quality pre-kindergarten programs on high school graduation rates among students who do not pursue further higher education. We assume that high-quality pre-kindergarten programs boost the odds that students eventually graduate from high school by [18%]. This impact emerges from sophisticated meta-analysis conducted by McCoy et al. (2017). We assume a counterfactual high school graduation rate for low-income children of [65%] (Minnesota Compass, 2018). Thus, the net effect of ECE on high school graduation is [12%] (65% x 18% = 12%).

We multiply this net effect by the percentage of students who do not enroll in college [57%]. In Minnesota, 51 percent of high school graduates enroll in college (Minnesota Department of Education, 2018). The Constellation Fund staff adjusts this number by a factor of 0.85 to account for the reduced rate of college enrollment of low-income students targeted by programs funded by the Constellation Fund. Since we do not know the difference in college enrollment rates by income in Minnesota we use national data from the National Student Clearing House (2016), that indicates that high school students from low-income schools are only 0.85 times as likely to enroll in college as students from an average school. (Low-income schools have more than 50% of students eligible for free or reduced priced lunch). The resulting percentage of low-income youth who graduate from high school but do not enroll in college is [57%] ((100% – (51% x 0.85)) = 57%). We then multiply this percentage by the difference in lifetime earnings between individuals in the Twin Cities with a high school diploma and those without a diploma [$198,729]. Finally, we multiply the resulting benefit by a high school graduation causal factor, which measures the degree to which the observed difference in earnings between high school graduates and individuals who have not graduated from high school is causal [.5] (WSIPP, 2019).

(12% x 57% x $198,729 x 0.5 = $6,797).

A.2. Some college: First, we estimate the impact of high-quality pre-kindergarten programs on high school graduation rates as estimated above. We multiply this net effect by the percentage of students who enroll in college [43%], as explained above. Since we do not know the difference in college graduation rates by income in Minnesota, we use the national 6-year graduation rate for student from low-income schools of 48% (National Student Clearing House, 2016). This is the average rate for 2 and 4-year colleges. The percentage of students who enroll in college but do not graduate is [52%] (100% – 48% = 52%). We then multiply this percent by the difference in lifetime earnings between individuals with some college and those who do not have a high school diploma in the Twin Cities [$311,199]. Finally, we multiply the resulting benefit by a college participation causal factor, which measures the degree to which the observed difference in earnings between individuals with some college and high school graduates with no further education is causal [.56] (WSIPP, 2019).

(12% x 43% x 52% x $311,199 x 0.56 = $4,676).

A.3. Associate degree: First, we estimate the impact of high-quality pre-kindergarten programs on high school graduation rates as estimated above. We multiply this net effect by the percentage of students who enroll in college [43%], as explained above. We then multiply by the proportion of low-income students who enroll in 2-year institutions [30%] (National Student Clearing House, 2016). We then multiply this by the percentage of low-income students who earn a 2-year college degree [29%] (National Student Clearing House, 2016). We then multiply this by the difference in lifetime earnings between individuals with an associate degree and those who do not have a degree in the Twin Cities [$311,051].  Finally, we multiply the resulting benefit by a college graduation causal factor, which measures the degree to which the observed difference in earnings between college graduates and high school graduates with no further education is causal [.56] (WSIPP, 2019).

(12% x 43% x 30% x 29% x $311,051 x 0.56= $782)

A.4. Bachelor’s degree: First, we estimate the impact of high-quality pre-kindergarten programs on high school graduation rates as estimated above. We multiply this net effect by the percentage of students who enroll in college [43%], as explained above. We then multiply by the proportion of low-income students who enroll in 4-year institutions [70%], (National Student Clearing House, 2016). We then multiply by the percent of low-income students who earn a 4-year college degree [57%], (National Student Clearing House, 2016). We then multiply this by the difference in lifetime earnings between individuals with a bachelor’s degree and those who have only completed high school in the Twin Cities [$664,609]. Finally, we multiply the resulting benefit by a college graduation causal factor, which measures the degree to which the observed difference in earnings between bachelor’s graduates and high school graduates with no further education is causal [.46] (WSIPP, 2019).

(12% x 43% x 70% x 57% x $664,609 x 0.46 = $6,295)

The total expected benefits from academic progress associated with ECE is:

$6,797 + $4,676 + $782 + $6,295 = $18,550

B.     Benefits from improved health

We assume that high-quality ECE results in 0.6 additional quality-adjusted years of life (QALY) to participants (Garcia et al., 2016). Constellation assigns a value of $50,000 per QALY. The undiscounted added value of ECE from improved health is estimated as [$29,000] (0.6 QALY x $50,000 = $29,000). We then discount this benefit to present value from the average age of participation through life expectancy.

C.    Benefits from reduced child abuse and neglect

We estimate a 39 percent reduction in out of home placements due to high-quality preschool, based on Reynolds, Rolnick, Englund & Temple (2010).

We estimate that the value of preventing child abuse (in terms of QALY losses) is about $350,000, based on the findings of Peterson, C., et al. (2018). To complete the calculation below, we assume a counterfactual rate of identified child abuse of [9%], based on incidence rate of 3% reported by the Minnesota Department of Human Services and adjusted for populations of color by a factor of three. (Minnesota Department of Human Services, 2018)

The benefit from reduced child abuse and neglect is [$12,285] (39% x $350,000 x 9% = $12,285).

Kent, A. (2009). Vulnerable youth and the transition to adulthood: Youth from low-income families. ASPE Research Brief. United States Department of Health and Human Services. Retrieved from https://aspe.hhs.gov/basic-report/vulnerable-youth-and-transition-adulthood-youth-low-income-families

McCoy, D. C., Yoshikawa, H., Ziol-Guest, K. M., Duncan, G. J., Schindler, H. S., Magnuson, K., … Shonkoff, J. P. (2017). Impacts of early childhood education on medium- and long-term educational outcomes. Educational Researcher, 46(8), 474–487. doi.org/10.3102/0013189X17737739

Minnesota Compass (2018). Education: High school graduation. High school students graduating on time by income. Retrieved from http://www.mncompass.org/education/high-school-graduation#7-6108-d

Minnesota Department of Education. (2018). Minnesota report card. Retrieved from http://rc.education.state.mn.us/#

Minnesota Department of Human Services (2018). Child protection in Minnesota: Keeping children safe. Retrieved from https://edocs.dhs.state.mn.us/lfserver/Public/DHS-4735-ENG

Peterson, C., Florence, C., & Klevens, J. (2018). The economic burden of child maltreatment in the United States, 2015. Child Abuse and Neglect, 86, 178–1. https://doi.org/10.1016/j.chiabu.2018.09.018

Reynolds, A., Rolnick, A., Englund, M. & Temple, J. (2010). Early childhood development and human capital. In A. Rolnick, A. Reynolds, M. Englund & J. Temple (Eds.), Childhood programs and practices in the first decade of life: A human capital integration. (pp. 1-27).

U.S. Census Bureau. (2016). American Community Survey 5-year estimates – public use microdata sample, 2012-2016. Generated using Public Use Microdata Area (PUMA) in the Seven-county Twin Cities Metropolitan Area.

Washington State Institute for Public Policy. (2019). Benefit-Cost Technical Documentation. Retrieved from: http://www.wsipp.wa.gov/TechnicalDocumentation/WsippBenefitCostTechnicalDocumentation.pdf