An Economic Perspective on Preschool for All

Most high-income countries aspire to “preschool for all.”[1] Many have enacted it into law and funded it. Not the United States. No federal law mandates universal access to preschool, and attempts to move in this direction have failed, most recently the proposed Build Back Better Act in 2021. While most states fund prekindergarten or preschool programs, fewer than half aim for universal coverage, and those that have articulated such a goal generally have not committed the funds necessary to achieve it.[2] Thus, most U.S. public funding for preschool is targeted to children from low-income families. On the grounds of both economic efficiency and equity, the case for continuing to do so is strong.

Head Start is the leading example of targeted preschool. There were 863,000 children enrolled in 2019–20, most of whom come from families with incomes at or below the federal poverty level (FPL). State-funded preschool programs enrolled 1.63 million children in 2019–20, the majority of whom were from families with incomes at or below 185 percent of the FPL.[3]

Children from low-income families face many social and economic disadvantages, and high-quality preschool can help to alleviate some of them. Yet many children from disadvantaged families are unserved by existing preschool programs.

Is “preschool for all” the best way to extend preschool subsidies to unserved disadvantaged children? Fully funding such a policy would be costly, and it is likely that a significant minority of beneficiaries would be from relatively high-income families. A crucial policy issue is whether public resources ought to fund a universal or a targeted approach focused on extending coverage to unserved disadvantaged children. Here, I discuss this question from an economic perspective, focusing on two key conceptual issues: efficiency and equity.

Efficiency is about bang for the buck: What are the benefits of high-quality preschool programs to enrollees and their families and to society at large, and how do the benefits compare to the cost of providing the service? High-quality preschool stimulates child development, leading to tangible improvements in school performance, educational attainment, and subsequent gains in employment, earnings, health, and reduced crime. For disadvantaged children, the alternatives to publicly subsidized preschool are usually less developmentally stimulating than a high-quality subsidized preschool. In contrast, more advantaged children often have good alternatives to publicly subsidized preschool, including a stimulating home environment and unsubsidized preschool that their families pay for themselves.

A preschool program is efficient if its lifetime benefits for children exceed the costs. The benefits may include intangible outcomes, such as an improved sense of well-being, in addition to the tangible benefits listed above. These are potentially important but difficult to measure and are not included in typical cost-benefit calculations. A given publicly subsidized preschool program may be efficient for disadvantaged children but not for more advantaged children.

Society at large benefits from the improved outcomes for disadvantaged children generated by high-quality preschool: It could see lower expenditures on special education, increased taxes on higher earnings these children will earn as adults, lower outlays on public assistance, lower public health care expenditure, lower costs of policing, and less crime victimization. If the long-run benefits to society at large exceed the costs, then public preschool subsidies for disadvantaged children pay for themselves with no net cost to taxpayers. In this case, subsidized preschool is a good use of public funds even if policymakers do not take the direct benefits to children into account.

Equity is about fairness: Lower income children face many early life disadvantages and lag their higher income peers in cognitive and socioemotional development as early as age 3, with lifelong consequences for social and economic outcomes.[4] It is unfair for a child to be burdened for life by the circumstances of birth, so equity concerns imply that lower-income children should receive help overcoming early disadvantages, irrespective of any benefits to society and even if the benefits to children are less than the cost, as long as there are some benefits.

Two clarifications are necessary. First, the benefits preschool provides depend on the quality of the program.[5] Quality is defined by the extent to which a program stimulates child development. Unless otherwise noted, I consider only high-quality programs, which typically use a well-vetted curriculum and employ well-educated and trained staff.

Second, most government subsidies for child care—as opposed to preschool—require parents to engage in work or work-related activities. These subsidies do not require developmentally stimulating care.[6] The main benefit of a childcare subsidy is to enable parents of young children to participate in the labor force. Some child-care subsidies may be used for high-quality care, but most are probably not because the subsidy is too small to cover the cost of high-quality preschool. I do not discuss them here.

Efficiency

Several recent reviews of evidence on the effects of high-quality public preschool programs for disadvantaged children in the United States conclude that the benefits to children outweigh the cost of these programs. The most convincing evidence is from randomized controlled trials evaluating small, very high-quality demonstration programs targeted at extremely disadvantaged children from the 1960s through the 1980s.[7] A key strength of several of these evaluations is that they have followed the enrolled children, as well as the control group who were not offered enrollment, for several decades of adulthood, allowing measurement of long-run outcomes. The demonstration programs typically resulted in short-run gains in IQ, achievement test scores, and conscientiousness during early childhood.[8] In some cases, the cognitive effects faded with age, but the programs nevertheless had substantial beneficial effects on later-life outcomes such as educational attainment, employment, earnings, health, reduced criminal activity, and lower welfare dependence. The fact that there are long-run benefits despite the lack of persistent effects on cognitive skills suggests that the mechanisms through which the programs affected outcomes were not well measured during the programs’ early years.[9]

The programs that researchers have followed the longest reported benefit-cost ratios of at least 3:1 and as much as 6:1.[10] Thus, every dollar of public investment in such programs resulted in $3 to $6 of tangible benefits to children over their lifetimes.[11] To compute these benefit-cost ratios, benefits are discounted according to how far in the future they are realized, using an appropriate interest rate. Despite heavily discounting benefits that are realized long after early childhood, the benefits to children far outweighed the high costs of the programs. Furthermore, they more than pay for themselves, considering only tangible benefits to society. In fact, they are among the highest-value investments of public funds.[12]

Reviews of evidence on the effects of Head Start find similar results: positive short-run effects on cognitive achievement and socioemotional outcomes, some of which fade over time, and beneficial long-run effects on important life outcomes. The internal rate of return for Head Start for early participants who enrolled in the 1960s and 1970s is estimated to be 13.6 percent. These findings are based on statistical comparisons of later life outcomes of cohorts of children who were age-eligible for Head Start when it was initially rolled out to cohorts that were just above the eligibility age. The results also use comparisons of children in early adopting counties to children in counties that initiated Head Start programs later.[13] A more recent randomized controlled trial of Head Start showed a lower benefit-cost ratio but has followed children only through third grade.[14]

The programs discussed above were targeted at disadvantaged children, so they provide no evidence on the effects of preschool on more advantaged children. Evidence on the effects of universal high-quality preschool programs is scarce for the U.S. As noted above, there is no universal federal preschool program, and state preschool programs vary considerably in size, quality, and years in existence, making generalizations difficult.

The most reliable evidence is from evaluations of the Georgia, Oklahoma, and Boston universal pre-K programs. They have characteristics associated with high quality (small group size and child-staff ratio and well-educated teachers) and have been in existence for more than 20 years. The evidence on the effects of these programs is not from randomized controlled trials but rather from quasi-experimental methods. When used appropriately, these methods can approximate a randomized controlled trial.[15] However, these evaluations have to date followed children only through teenage and early adult years. Hence, lifetime benefit-cost calculations are unavailable.

A study of the Georgia and Oklahoma public preschool programs reported substantial positive impacts on fourth grade reading and math scores for children with family incomes less than 185 percent of the FPL. The reading effects faded out by eighth grade, but the math effects remained moderately large. In contrast, there were no statistically significant beneficial effects for children from families with incomes above the 185 percent FPL threshold.[16]

A study of the Boston public preschool program revealed substantial positive effects of preschool enrollment on high school graduation and college enrollment, as well as gains in SAT scores and reductions in school disciplinary incidents. There were no statistically significant differences in effects for children from lower and higher income families, but despite being open to children of all income levels, most of the children in the program were from lower-income families, so this study is not informative about differential effects by income level.[17]

In contrast to the United States, universal national preschool programs are the norm in Western Europe, where countries impose uniform high-quality standards and have high coverage rates. A review of recent quasi-experimental evaluations of these programs showed that they have many short- and long-run beneficial effects for disadvantaged children but not for more advantaged children in most cases.[18] There are many differences in European and U.S. policy environments, so it is risky to extrapolate from the results in Europe. Nevertheless, those results are qualitatively similar to those for the U.S.

The explanation for why there are benefits for disadvantaged children but not for others is straightforward: More advantaged children have access to other resources even in the absence of a public program. These include high-quality private preschools, well-educated parents, and good neighborhoods, characterized by ready access to healthy food, parks, and playgrounds and low exposure to environmental and other health hazards. Disadvantaged children often lack access to such alternatives when publicly subsidized preschool is unavailable.[19] It is always important when evaluating program benefits to ask, “Compared to what?” A subsidy that simply replaces one form of developmental stimulation for advantaged children with another is in effect an income transfer to high-income families.

Equity

The equity argument for preschool subsidies for disadvantaged children is straightforward. Children in low-income families suffer from lifelong disadvantages through no fault of their own. Fairness requires public investment at early ages to mitigate these disadvantages. However, in contrast to a pattern that would be consistent with equity considerations, disadvantaged children receive less nonparental care and lower quality care on average than their more advantaged peers, despite the existence of Head Start and state public preschools, which are underfunded and serve only a moderate fraction of eligible children.[20]

Implications for Policy

The case for preschool subsidies targeted to disadvantaged children is strong on both efficiency and equity grounds. The case for preschool subsidies for advantaged children is weak on both criteria. Most of the evidence shows minimal benefits of high-quality preschool for more advantaged children, thanks to the resources available to their families in the absence of subsidies.

However, researchers know little about the relationship between family income and the developmental benefits of preschool beyond the finding that low-income children receive relatively large benefits and higher income children do not. The benefits may decline smoothly as family income rises, or there might be an income threshold beyond which the benefits drop sharply. This makes it difficult to recommend a specific income threshold for eligibility. Rather than impose an arbitrary income cutoff for eligibility, publicly funded preschool could be made available to all families regardless of income, with cost sharing that increases with income, allowing voluntary participation by higher income families.

State policymakers can usefully ask several questions about their state’s plans for preschool expansion. What fraction of children are currently served by pre-K and Head Start by income group? Where are the underserved children concentrated? Are teacher salaries high enough to attract and retain well-qualified staff? How does pre-K quality compare with that in other states and against recommended standards? A good data source for answering these questions is the National Institute for Early Education Research, which produces detailed annual reports on pre-K by state. Another good source is the federal National Survey of Early Care and Education.[21]

Counterarguments and Other Considerations

It is often claimed that political support for universal programs is stronger than for targeted programs. Theda Skocpol argues that initiating a broadly based program to gain political support paves the way for subsequent extensions to provide additional, more targeted benefits to disadvantaged families.[22] Robert Greenstein responds that there are politically popular targeted programs, including Head Start.[23] This support stems from the in-kind nature of the program’s benefits, the fact that the benefits are mainly for children, and that the programs are perceived as effective. A program for which all children are eligible but with cost sharing at higher income levels could combine high political support with the efficiency and equity benefits of a targeted program.

Greenstein also argues that proponents of universal programs have not adequately considered the cost implications. To illustrate, I calculate the additional public funding that would be required to provide preschool for all 3- and 4-year-olds who were not enrolled in Head Start or state preschool in 2019–20. There were 5.78 million such children in the United States in 2019, although some received childcare subsidies through other federal programs.[24]

The average 2019–20 cost of Head Start is $11,065 per child; the average per-child cost of state preschool is $6,399. Because state preschool programs are very heterogenous in quality, presumably their lower cost reflects lower average quality than Head Start. The total annual cost of covering the 5.78m unserved children using the Head Start per-child cost is $64 billion. Using the state average cost of preschool, the total is $37 billion. Subtracting the approximately $5 billion cost of all federal childcare subsidies for three- and four-year-olds yields a net cost of $59 billion and $32 billion, respectively.[25]

These are rough calculations, but they give a sense of the order of magnitude. The universal preschool provision of the Build Back Better Act in 2021 proposed to allocate $6 billion annually for the first three years. Even if my estimates are high by a factor of two, the proposed funding was highly inadequate. Any further efforts at universal pre-K will have to confront the reality of its high cost. Yet some unknown number of those 5.78 million uncovered children are from relatively high-income families. The evidence indicates little developmental benefit to those children from public preschool, given their available alternatives.

Notes

[1] “The Council of the EU Member States have agreed a target of at least 96% of children between 3 years old and the starting age for compulsory primary education participating in early childhood education and care by 2030.” European Commission, European Education Area, “Early Childhood Education and Care Initiatives,” web page.

[2] Allison Friedman-Krauss et al., The State of Preschool 2019 (National Institute of Early Education Research, Rutgers Graduate School of Education, 2020). Data from the most recent pre-pandemic academic year indicate that 34 percent of four-year-olds (6 percent of three-year-olds) were enrolled in state-funded preschool in the U.S., compared with 90 percent of four-year-olds and 70 percent of three-year-olds on average in OECD countries. OECD, Starting Strong 2017: Key OECD Indicators on Early Childhood Care and Education (Paris: OECD Publishing, 2017), 12, http://dx.doi.org/10.1787/9789264276116-en.

[3] See the 2019 edition of Friedman-Krauss et al., The State of Preschool 2018, 205.

[4] Greg J. Duncan and Katherine Magnuson, “Investing in Preschool Programs,” Journal of Economic Perspectives 27 (2013): 109–32.

[5] See NAEYC, “What Does a High-Quality Preschool Program Look Like?” web page.

[6] The main federal programs are the Childcare and Development Fund (CCDF) and the Child and Dependent Care Credit (CDCC). Providers receiving subsidies under CCDF must meet minimum state standards for group size, child-staff ratio, and teacher training, but many states have relatively low standards. There are no quality standards for receiving a tax credit under the CCDC.

[7] The demonstration programs are the Perry Preschool Project, Carolina Abecedarian program, Infant Health and Development Program, and the Early Training Project.

[8] Sneha Elango et al., “Early Childhood Education,” In R. A. Moffitt, ed., Economics of Means-Tested Transfer Programs in the United States, Volume 2 (Chicago: University of Chicago Press, 2016), table 4.4. “Conscientiousness” here represents a summary index of noncognitive skills constructed from a battery of behavior inventories, teacher ratings, and other questionnaires.

[9] For analysis of this issue, see James J. Heckman, Rodrigo Pinto, and Peter Savelyev, “Understanding the Mechanisms through Which an Influential Early Childhood Program Boosted Adult Outcomes,” American Economic Review 103, no. 6 (2013): 2052–86.

[10] Elango et al., “Early Childhood Education,” table 4.8.

[11] In addition, parents benefited because they could work longer hours, and there were intergenerational benefits to participants’ children. See Jorge Luis García, James J. Heckman, and Victor Ronda, “The Lasting Effects of Early-Childhood Education on Promoting the Skills and Social Mobility of Disadvantaged African Americans and Their Children,” Journal of Political Economy 131, no. 6 (2023): 1477–1506.

[12] Nathaniel Hendren and Ben Sprung-Keyser, “A Unified Welfare Analysis of Government Policies,” Quarterly Journal of Economics, 135 (2020): 1209–1318.

[13] Martha J. Bailey, Shuqiao Sun, and Brendan Timpe, “Prep School for Poor Kids: The Long-Run Impacts of Head Start on Human Capital and Economic Self-Sufficiency,” American Economic Review 111 (2021): 3963–4001. The internal rate of return uses the same benefit and cost data as the benefit-cost ratio, expressed in a different way. A program is efficient if the internal rate of return exceeds the benchmark interest rate used in the benefit-cost calculation.

[14] Patrick Kline and Christopher R. Walters, “Evaluating Public Programs with Close Substitutes: The Case of Head Start,” Quarterly Journal of Economics 141 (2016): 1795–848. Head Start Impact Study Final Report. web page.

[15] For example, some oversubscribed programs allocate slots by lottery, creating a form of randomization. In other cases, cohorts who were age-eligible when the program was rolled out are compared with cohorts who were just above the age threshold, as in the Head Start example mentioned above.

[16] Elizabeth Cascio and Diane Whitmore Schanzenbach, “The Impacts of Expanding Access to High-Quality Preschool Education,” Brookings Papers on Economic Activity (Fall 2013): 127–78.

[17] Guthrie Gray-Lobe, Parag A. Parthak, and Christopher R. Walters, “The Long-Term Effects of Universal Preschool in Boston,” Quarterly Journal of Economics 138 (2023): 363-411.

[18] David M. Blau, “The Effects of Universal Preschool on Child and Adult Outcomes: A Review of Recent Evidence from Europe with Implications for the United States,” Early Childhood Research Quarterly 55 (2021): 52–63.

[19] See Kline and Walters, “Evaluating Public Programs,” for insightful analysis of this point.

[20] Sarah Flood et al., “Inequality in Early Care Experienced by U.S. Children,” Journal of Economic Perspectives 36, no. 2 (2022): 199–222.

[21] Friedman-Krauss et al., The State of Preschool 2020; U.S. Department of Health and Human Services, Office of Planning, Research, and Evaluation, National Survey of Early Care and Education 2019, web page.

[22] Theda Skocpol, “Targeting within Universalism: Politically Viable Policies to Combat Poverty in the United States,” in Christopher Jencks and Paul E. Peterson, eds., The Urban Underclass (Washington, DC: Brookings, 1991). For a fuller development of the case for universal preschool, see Jill E. Yavorsky and Leah Ruppanner, “An Argument for Universal Preschool and Childcare in the U.S.,” Journal of Policy Analysis and Management 41, no. 3 (2022): 921–29.

[23] Robert Greenstein, “Universal and Targeted Approaches to Alleviating Poverty: An Alternative View,” In Jencks and Peterson, eds., The Urban Underclass.

[24] For sources and documentation of the calculations, see David M. Blau, “The Case for Targeted Preschool and Childcare Subsidies,” Journal of Policy Analysis and Management 41, no. 3 (2022): 929–37.

[25] See Friedman-Krauss et al., The State of Preschool 2020, 12–16, for a similar analysis.