Timothy Bartik: The economic case for preschool

32,753 views ・ 2013-05-06

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Translator: Joseph Geni Reviewer: Morton Bast
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In this talk today, I want to present a different idea
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for why investing in early childhood education
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makes sense as a public investment.
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It's a different idea, because usually,
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when people talk about early childhood programs,
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they talk about all the wonderful benefits for participants
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in terms of former participants, in preschool,
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they have better K-12 test scores,
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better adult earnings.
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Now that's all very important,
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but what I want to talk about is what preschool does
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for state economies
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and for promoting state economic development.
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And that's actually crucial
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because if we're going to get increased investment
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in early childhood programs,
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we need to interest state governments in this.
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The federal government has a lot on its plate,
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and state governments are going to have to step up.
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So we have to appeal to them,
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the legislators in the state government,
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and turn to something they understand,
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that they have to promote the economic development
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of their state economy.
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Now, by promoting economic development,
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I don't mean anything magical.
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All I mean is, is that early childhood education
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can bring more and better jobs to a state
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and can thereby promote higher per capita earnings
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for the state's residents.
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Now, I think it's fair to say that when people think about
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state and local economic development,
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they don't generally think first about what they're doing
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about childcare and early childhood programs.
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I know this. I've spent most of my career researching these programs.
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I've talked to a lot of directors
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of state economic development agencies about these issues,
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a lot of legislators about these issues.
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When legislators and others think about economic development,
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what they first of all think about are business tax incentives,
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property tax abatements, job creation tax credits,
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you know, there are a million of these programs all over the place.
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So for example, states compete very vigorously
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to attract new auto plants or expanded auto plants.
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They hand out all kinds of business tax breaks.
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Now, those programs can make sense
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if they in fact induce new location decisions,
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and the way they can make sense is,
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by creating more and better jobs,
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they raise employment rates, raise per capita earnings of state residents.
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So there is a benefit to state residents
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that corresponds to the costs that they're paying
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by paying for these business tax breaks.
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My argument is essentially that early childhood programs
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can do exactly the same thing,
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create more and better jobs, but in a different way.
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It's a somewhat more indirect way.
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These programs can promote more and better jobs by,
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you build it, you invest in high-quality preschool,
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it develops the skills of your local workforce
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if enough of them stick around, and, in turn,
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that higher-quality local workforce
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will be a key driver of creating jobs and creating
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higher earnings per capita in the local community.
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Now, let me turn to some numbers on this.
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Okay. If you look at the research evidence --
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that's extensive -- on how much early childhood programs
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affect the educational attainment, wages and skills
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of former participants in preschool as adults,
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you take those known effects,
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you take how many of those folks will be expected
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to stick around the state or local economy and not move out,
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and you take research on how much skills
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drive job creation, you will conclude,
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from these three separate lines of research,
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that for every dollar invested in early childhood programs,
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the per capita earnings of state residents
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go up by two dollars and 78 cents,
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so that's a three-to-one return.
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Now you can get much higher returns,
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of up to 16-to-one, if you include anti-crime benefits,
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if you include benefits to former preschool participants
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who move to some other state,
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but there's a good reason for focusing on these three dollars
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because this is salient and important
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to state legislators and state policy makers,
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and it's the states that are going to have to act.
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So there is this key benefit that is relevant
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to state policy makers in terms of economic development.
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Now, one objection you often hear,
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or maybe you don't hear it because people are too polite to say it, is,
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why should I pay more taxes
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to invest in other people's children?
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What's in it for me?
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And the trouble with that objection,
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it reflects a total misunderstanding
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of how much local economies
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involve everyone being interdependent.
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Specifically, the interdependency here is, is that
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there are huge spillovers of skills --
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that when other people's children get more skills,
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that actually increases the prosperity of everyone,
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including people whose skills don't change.
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So for example, numerous research studies have shown
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if you look at what really drives
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the growth rate of metropolitan areas,
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it's not so much low taxes, low cost, low wages;
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it's the skills of the area. Particularly, the proxy for skills
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that people use is percentage of college graduates in the area.
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So when you look, for example, at metropolitan areas
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such as the Boston area, Minneapolis-St. Paul,
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Silicon Valley, these areas are not doing well economically
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because they're low-cost.
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I don't know if you ever tried to buy a house in Silicon Valley.
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It's not exactly a low-cost proposition.
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They are growing because they have high levels of skills.
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So when we invest in other people's children,
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and build up those skills, we increase the overall job growth
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of a metro area.
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As another example, if we look
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at what determines an individual's wages,
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and we do statistical exploration of that, what determines wages,
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we know that the individual's wages will depend, in part,
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on that individual's education,
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for example whether or not they have a college degree.
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One of the very interesting facts is that, in addition,
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we find that even once we hold constant, statistically,
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the effect of your own education,
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the education of everyone else in your metropolitan area
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also affects your wages.
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So specifically, if you hold constant your education,
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you stick in percentage of college graduates in your metro area,
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you will find that has a significant positive effect on your wages
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without changing your education at all.
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In fact, this effect is so strong
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that when someone gets a college degree,
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the spillover effects of this on the wages
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of others in the metropolitan area
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are actually greater than the direct effects.
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So if someone gets a college degree, their lifetime earnings
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go up by a huge amount, over 700,000 dollars.
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There's an effect on everyone else in the metro area
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of driving up the percentage of college graduates in the metro area,
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and if you add that up -- it's a small effect for each person,
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but if you add that up across all the people in the metro area,
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you actually get that the increase in wages for everyone else
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in the metropolitan area adds up to almost a million dollars.
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That's actually greater than the direct benefits
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of the person choosing to get education.
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Now, what's going on here?
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What can explain these huge spillover effects of education?
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Well, let's think about it this way.
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I can be the most skilled person in the world,
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but if everyone else at my firm lacks skills,
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my employer is going to find it more difficult
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to introduce new technology, new production techniques.
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So as a result, my employer is going to be less productive.
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They will not be able to afford to pay me as good wages.
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Even if everyone at my firm has good skills,
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if the workers at the suppliers to my firm
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do not have good skills,
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my firm is going to be less competitive
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competing in national and international markets.
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And again, the firm that's less competitive
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will not be able to pay as good wages,
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and then, particularly in high-tech businesses,
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they're constantly stealing ideas and workers from other businesses.
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So clearly the productivity of firms in Silicon Valley
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has a lot to do with the skills not only of the workers at their firm,
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but the workers at all the other firms in the metro area.
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So as a result, if we can invest in other people's children
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through preschool and other early childhood programs
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that are high-quality, we not only help those children,
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we help everyone in the metropolitan area
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gain in wages and we'll have the metropolitan area
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gain in job growth.
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Another objection used sometimes here
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to invest in early childhood programs
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is concern about people moving out.
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So, you know, maybe Ohio's thinking about investing
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in more preschool education
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for children in Columbus, Ohio,
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but they're worried that these little Buckeyes will,
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for some strange reason, decide to move to Ann Arbor, Michigan,
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and become Wolverines.
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And maybe Michigan will be thinking about investing
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in preschool in Ann Arbor, Michigan, and be worried
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these little Wolverines will end up moving to Ohio and becoming Buckeyes.
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And so they'll both underinvest because everyone's going to move out.
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Well, the reality is, if you look at the data,
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Americans aren't as hyper-mobile as people sometimes assume.
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The data is that over 60 percent of Americans
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spend most of their working careers
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in the state they were born in, over 60 percent.
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That percentage does not vary much from state to state.
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It doesn't vary much with the state's economy,
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whether it's depressed or booming,
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it doesn't vary much over time.
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So the reality is, if you invest in kids,
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they will stay.
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Or at least, enough of them will stay
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that it will pay off for your state economy.
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Okay, so to sum up, there is a lot of research evidence
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that early childhood programs, if run in a high-quality way,
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pay off in higher adult skills.
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There's a lot of research evidence
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that those folks will stick around the state economy,
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and there's a lot of evidence that having more workers
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with higher skills in your local economy
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pays off in higher wages and job growth for your local economy,
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and if you calculate the numbers for each dollar,
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we get about three dollars back
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in benefits for the state economy.
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So in my opinion, the research evidence is compelling
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and the logic of this is compelling.
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So what are the barriers to getting it done?
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Well, one obvious barrier is cost.
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So if you look at what it would cost
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if every state government invested
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in universal preschool at age four, full-day preschool at age four,
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the total annual national cost would be roughly
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30 billion dollars.
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So, 30 billion dollars is a lot of money.
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On the other hand, if you reflect on
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that the U.S.'s population is over 300 million,
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we're talking about an amount of money
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that amounts to 100 dollars per capita.
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Okay? A hundred dollars per capita, per person,
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is something that any state government can afford to do.
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It's just a simple matter of political will to do it.
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And, of course, as I mentioned,
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this cost has corresponding benefits.
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I mentioned there's a multiplier of about three,
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2.78, for the state economy,
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in terms of over 80 billion in extra earnings.
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And if we want to translate that from just billions of dollars
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to something that might mean something,
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what we're talking about is that, for the average low-income kid,
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that would increase earnings by about 10 percent
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over their whole career, just doing the preschool,
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not improving K-12 or anything else after that,
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not doing anything with college tuition or access,
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just directly improving preschool,
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and we would get five percent higher earnings
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for middle-class kids.
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So this is an investment
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that pays off in very concrete terms
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for a broad range of income groups in the state's population
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and produces large and tangible benefits.
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Now, that's one barrier.
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I actually think the more profound barrier
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is the long-term nature of the benefits from early childhood programs.
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So the argument I'm making is, is that we're increasing
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the quality of our local workforce,
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and thereby increasing economic development.
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Obviously if we have a preschool with four-year-olds,
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we're not sending these kids out at age five
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to work in the sweatshops, right? At least I hope not.
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So we're talking about an investment
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that in terms of impacts on the state economy
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is not going to really pay off for 15 or 20 years,
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and of course America is notorious for being
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a short term-oriented society.
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Now one response you can make to this,
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and I sometimes have done this in talks,
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is people can talk about, there are benefits for these programs
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in reducing special ed and remedial education costs,
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there are benefits, parents care about preschool,
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maybe we'll get some migration effects
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from parents seeking good preschool,
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and I think those are true,
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but in some sense they're missing the point.
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Ultimately, this is something
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we're investing in now for the future.
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And so what I want to leave you with is
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what I think is the ultimate question.
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I mean, I'm an economist, but this is ultimately
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not an economic question, it's a moral question:
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Are we willing, as Americans,
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are we as a society still capable
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of making the political choice to sacrifice now
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by paying more taxes
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in order to improve the long-term future
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of not only our kids, but our community?
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Are we still capable of that as a country?
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And that's something that each and every citizen
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and voter needs to ask themselves.
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Is that something that you are still invested in,
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that you still believe in the notion of investment?
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That is the notion of investment.
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You sacrifice now for a return later.
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So I think the research evidence
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on the benefits of early childhood programs
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for the local economy is extremely strong.
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However, the moral and political choice
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is still up to us, as citizens and as voters.
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Thank you very much. (Applause)
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