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Early Education Yields High Return

Fed Official: Childhood Learning is Economic Development Issue

Karen Mracek

The Gazette

May 3, 2006

[Note: This material is copyright by The Gazette, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of The Gazette.]

    Children often develop the skills they need to be effective executives between the ages of 3 and 5.

    So says Federal Reserve Associate Economist Rob Grunewald, who spoke Tuesday in Iowa City at an event sponsored by Starting Smart, an initiative of United Way of Johnson County.

    Executive skills — including goaldirected persistence and initiating tasks — are learned very early on. ‘‘It’s not just the cognitive skills that are critical,’’ Grunewald said. ‘‘Just as important are the non-cognitive skills.’’

    The importance of early childhood development is an economic development issue, maintains Grunewald, co-author with Art Rolnick of ‘‘Early Childhood Development: Economic Development with a High Public Return.’’ The economic policy paper demonstrates the return on investment of early childhood development.

    ‘‘By age 3 or 4, 85 percent of the brain is formed,’’ said Grunewald. ‘‘But only half of children are prepared to succeed when they reach kindergarten.’’

    In his paper, Grunewald contends that investment in early childhood development yields an extraordinary rate of return that far exceeds the return on most investments.

    One of the projects he cited is the High/Scope study of the Perry Preschool in Ypsilanti, Mich., which Grunewald estimates providing a 16 percent real rate of return for dollars invested. As a benchmark, the stock market has an annual return of 5 percent to 7 percent, he said.

    Researchers observed a higher percentage of children in the Perry program graduating high school, owning homes and earning annual salaries of more than $20,000 than those not in the program. Cost savings for the community came in the form of fewer arrests before age 40 and less time in prison. The benefits-to-cost ratio was $17 to $1 overall.

    Grunewald also cited three other programs that generated 7 percent to 20 percent returns on investments.

    He said the success of programs like these depends on quality teachers, low teacher-student ratios and parental involvement. The Perry program cost $10,000 per child per year.

    Grunewald told the audience of 70 business leaders it is a mistake that early childhood development programs are rarely portrayed as economic development initiatives and are at the bottom of development lists for state and local governments.

    He cited the $50 billion that local and state organizations spend on tax incentives and subsidies to lure businesses away from other areas, and instead suggested that the money be spent ‘‘on the person power,’’ he said.

    ‘‘We have to focus on human capital development,’’ he said.