How many childcare programs have Nobel Laureate economists prove that their services continue to provide a large return on investment 20 years later?
Freaknomics recently featured a paper co-authored by luminaries such as Paul Gertler, Professor of Economics at the Haas School of Business at UC Berkeley, and Nobel Laureate James Heckman. The paper describes how the authors interviewed Jamaican adults to see if an early childhood program 20 years ago had an impact on their lives.
Twenty years ago, a random group of Jamaican toddlers stunted by living in poverty received weekly one-hour visits from community health workers. During the visits, the health workers taught the parents parenting skills and ways to interact with their kids to develop children’s cognitive and personality skills. The weekly visits went on for two years.
The recent interviews uncovered two huge impacts from this community health program:
- The children of poverty who benefited from the program earned on average 42 percent more income as adults than a control group of impoverished children who grew up without benefit of the program.
- The children of poverty who benefited from the program earned as much income as a comparison group who did not grow up in poverty.
To me, this shows several of the unique characteristics and benefits of program design in the public sector:
- Public sector programs can take a longer view than the private sector. Imagine your standard venture capitalist waiting 20 years for solid proof of benefit from a product.
- Public sector programs can price valuable services at a point where those who need them can afford them. There’s no doubt that these impoverished Jamaican families needed the services, and no doubt that they most likely couldn’t hire private providers for these services.
- Public sector programs can demonstrate compelling ROI for both the funder and the recipient of the service. The society at large who funded the program received a healthier and more affluent taxpayer; the individual received a standard of living that he or she otherwise would not have attained.
For the one-time investment of 104 hours of visitation plus whatever supplies and additional labor went into each visit, the program returned someone who earned, and presumably paid taxes on, 42 percent more income each year for their adulthood. That’s like adding nearly 600 hours of productive labor to the tax base every year, for a one-time investment of 104 hours.
One interesting note: the original program also included nutritional assistance for these children physically stunted by poverty’s poor diet. The paper noted no statistically significant outcome from the dietary aid.