vol 22 | no 3 | summer 2011

the of inequality: the value of early childhood education the economics of inequality The Economics of Inequality : The Value of Early Childhood Education James J. Heckman James J. Heckman is the Henry by James J. Heckman Schultz Distinguished Service Professor of Economics at the University of , a Nobel * The following article has also appeared in the Spring 2011 issue of American Educator, Prize winner in economics, and an expert in the economics of hu- the quarterly journal of the American Federation of Teachers, AFL-CIO. man development. He has held a joint appointment as an American Bar Foundation Research Profes- sor since 1991. Among other ABF research projects, Heckman has ducational equity is often Conversely, what is efficient may not investigated the economics and of capabilities with an discussed as a moral issue. be fair. Thus a cut in the tax rate on emphasis on self-control with a Another way to think about capital gains promotes economic ef- particular focus on the effects of Eequity is as a way to promote produc- ficiency by stimulating investment; it self-control on crime and health. He was co-organizer of the confer- tivity and economic efficiency. As an is not fair because it mainly benefits ence “Creating Capabilities: Sourc- economist, I focus on the economic the rich. es and Consequences for and value of equalizing educational op- What is remarkable is that there Social Policy,” which was held at the Law portunities and achievement in or- are some policies that both are fair— School in April 2010, and was der to identify the most effective way i.e., promote equity—and promote partially funded by the American to increase the productivity of the economic efficiency. Investing in the Bar Foundation. Heckman’s current research focuses American economy. We need a ca- early years of disadvantaged children’s on the economics of human devel- pable and productive workforce that lives is one such policy. opment and building theoretical will compete successfully in the glob- A large body of data from eco- and empirical models of human capacity formation, with an em- al economy. Underdeveloped human nomics, biology, and psychology phasis on the role of the family in potential burdens our economy and shows that educational equity is more producing capacities and the effects leaves us with a workforce that is less than a social justice imperative; it is of capacities on education, wages, health, crime, and other dimensions than it could be. an economic imperative that has far- of lifetime achievement. The article Traditionally, equity and ef- reaching implications for our nation. that follows is based on “Schools, ficiency are viewed as competing My work has focused on the economic Skills, and Synapses,” which Heck- man wrote for the July 2008 issue goals. One can be fair in devising a value of human capital development, of Economic Inquiry, available at policy, but it often happens that what specifically the value of providing http://ftp.iza.org/dp3515.pdf. is fair is not economically efficient. resources to disadvantaged children

1 researching law © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted vol 22 | no 3 | summer 2011 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality and their families in an attempt to the data show a need achievement gap, reduce the equalize the children’s possibilities for for a new model of need for special education, in- social and economic success. skill formation crease the likelihood of healthier For many years, Flavio Cunha lifestyles, lower the crime rate, from the University of Pennsylvania, America is using antiquated models and reduce overall social costs. myself, and colleagues at the Univer- of human skill formation in devising In fact, every dollar invested in sity of Chicago, University College policies to educate children for suc- high-quality early childhood Dublin, and other institutions have cess in the 21st century. My colleagues education produces a 7 to 10 been synthesizing what is known and I have analyzed many long-term percent per annum return on 1 from the fields of biology, human studies of early human development investment. Policies that pro- development, education, psychology, and the impact of early investment vide early childhood educational cognitive science, and economics to on schooling and adult outcomes. We resources to the most disadvan- answer the following three questions: reached the following conclusions: taged children produce greater social and economic equity. 1. When does inequality start? 1. Inequality in early childhood ex- We can create a more level and 2. Is it worthwhile to reduce periences and learning produces productive playing field for all inequality by investing inequality in ability, achieve- by making wise and timely in- in education? ment, health, and adult success. vestments in effective education. 3. How best to invest limited 2. While important, cognitive abil- resources to create more ities alone are not as powerful as winning or losing the productive human capital? a package of cognitive skills and lottery of birth social skills—defined as atten- It is important to look at the data tiveness, perseverance, impulse Each of us is born into circumstanc- and invest wisely. This is an impera- control, and sociability. In short, es over which we have no control. tive among economists. Our society cognition and personality drive Our parents, their genes, education, has finite resources. Taxpayers can education and life success, with health status, economic resources, and should expect value for their in- character (personality) develop- and environment are passed onto us vestments in government programs ment being an important and through our families and neighbor- and in their fellow citizens. Taking a neglected factor. hoods. These endowments shape the hard look at the economic value of ef- 3. Adverse impacts of genetic, trajectories of our lives. forts to create human capital helps us parental, and environmental By nature and circumstance, en- see where best to invest our resources resources can be overturned dowments are unequal. At birth, each in education to achieve its ideal— through investments in quality child inherits different capabilities equalizing opportunity to build early childhood education that and different resources to capitalize greater and enduring value for all. provide children and their par- on them. We can’t completely change The evidence is quite clear that in- ents the resources they need to that picture. But we can change some equality in the development of human properly develop the cognitive of it. In particular, we should address capabilities produces negative social and personality skills that create the inequity in the resources families and economic outcomes that can and productivity. have to properly develop their chil- should be prevented with investments dren’s potential. 4. Investment in early education in early childhood education, partic- It comes as no surprise that there for disadvantaged children from ularly targeted toward disadvantaged are significant differences in family birth to age 5 helps reduce the children and their families. environments and the resources in- vol 22 | no 3 | summer 2011 © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted researching law 2 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality

vested in children across socioeco- portion of American children under married parents or that individuals nomic groups. Gaps in cognitive and the age of 18 with a never-married pass a parenting test before having emotional stimulation for children mother grew from less than 2 percent children. It is feasible to recognize from families of different socioeco- in 1968 to over 12 percent in 2006. the trends in our society and make nomic status open up early. Family The fraction of American children adjustments in social investments to status makes a substantial difference. under age 18 with only a single par- fill gaps and improve social and eco- The graphs below show the fre- ent (i.e., never married or divorced) nomic outcomes. quency of cognitive stimulation and has grown from 12 percent to over 27 The problem is not just one of emotional support against standard- percent during this period. single parenting. We currently have ized scales arrayed from the worst The problem is not just income. a society that makes high-quality on the left to the best on the right. A Even though income is the standard parenting difficult. The high cost of curve shifted rightward indicates more way to measure poverty, recent re- living often requires dual careers and beneficial stimulation or support. In- search suggests that parental income incomes. Work hours and commutes tact families invest greater amounts in is an inadequate measure of the re- are long, wages are stagnant, and rela- their children than do single-parent sources available to a child. Good par- tively few jobs offer generous paren- families, although the exact reasons enting is more important than cash. tal leave benefits. In addition, we no why are not known. These invest- High-quality parenting can be avail- longer live in intact, intergenerational ments pay off in higher achievement. able to a child even when the family families where parents are supported There are large gaps in cognitive is in adverse financial circumstances. in the daily tasks of child-rearing by stimulation and emotional support While higher income facilitates good their parents and siblings. at early ages. They persist through- parenting, it doesn’t guarantee it. When asked, a large majority of out childhood and strongly influence An economically advantaged child ex- Americans agree that the interests of adult outcomes. The evidence on dis- posed to low-quality parenting is more children are best served if one parent parities in child-rearing environments disadvantaged than an economically remains at home with the child. This and their consequences for adult disadvantaged child exposed to high- is a bittersweet affirmation of a fam- outcomes is troubling in light of the quality parenting. ily value that is nearly impossible to shrinking proportion of children be- It is not feasible in a free society fulfill for many middle-class families, ing raised in intact families. The pro- to insist that all children be raised by let alone working-class and working-

cognitive stimulation and emotional support by family type Ages 0–2, female white children, by family type. Cognitive stimulation is measured by how often parents read to children and the learning environment in the home. Emotional support is measured by how often children receive encouragement (e.g., meals with parents).2 © 2011 Seong Hyeok Moon. All rights reserved. Moon. Hyeok © 2011 Seong

3 researching law © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted vol 22 | no 3 | summer 2011 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality

poor families. Parents need help, and tained by scoring high enough on an are not as successful as they could be their children will suffer if they don’t achievement test). Those who don’t because they neglect the need to close get it. Society will pay the price in graduate from high school but obtain gaps in character development. higher social costs and declining eco- a GED are less successful economi- Low-quality parenting fails to nomic fortunes. cally than high school graduates. This provide children with cognitive and Poor parenting is an important has more to do with shortfalls in per- character development. Low-qual- contributor to life poverty. But par- sonality skills—or character—than ity education fails in the same way. enting deficits can be addressed. An cognition. The GED test is effective High-quality early education can be equalizing factor is early access to ed- in screening for test takers’ cogni- an equalizing factor. ucation, which changes the equation tive abilities. It completely misses for the parent and the child. Like their noncognitive traits.4 Individu- targeting disadvantaged quality parenting, quality early learn- als who persist in graduating from children promotes ing is defined as developing a package high school are more likely to have economic efficiency of cognitive and character skills. personality traits that help them suc- ceed in life. They show up, control We cannot possibly equalize all the cognition their impulses, work toward a goal, factors that contribute to achieve- and character and work with others. Those with ment and personal success. But we propel success GED certificates are as smart as ordi- can invest wisely to correct disparities nary high school graduates, but they that create large and persistent prob- Numerous studies have documented tend to be characters rather than peo- lems that threaten the well-being of that cognitive ability, usually mea- ple with character who have greater our nation. sured by scholastic achievement tests, value and potential for employment. Gaps in the capabilities that play predicts schooling, wages, participa- Simply put, cognition and character important roles in determining di- tion in crime, health, and success in drive the educational success that ul- verse adult outcomes open up early many facets of life. Personality traits— timately results in economic success across socioeconomic groups. The often referred to as character—have for individuals and society at large. gaps originate before formal school- also proven to be powerful predictors The same bundle of psychologi- ing begins and persist through child- of the same outcomes.3 These abili- cal traits strongly predicts a variety hood and into adulthood. Remediat- ties are attributes of character: per- of diverse behaviors, such as smok- ing the problems created by the gaps severance, motivation, self-esteem, ing, employment, teenage pregnancy, is not as cost effective as preventing self-control, conscientiousness, and wages, wages given schooling, and them at the outset. forward-thinking behavior. many other aspects of economic and For example, schooling after the Cognition and character work to- social life—all of which affect local, second grade plays only a minor role gether. They determine future social state, and national economies.5 in creating or reducing gaps. Con- and economic status. For example, Given this fact, it is alarming that ventional measures of educational the higher the cognitive and charac- our education system primarily val- inputs—class size and teacher sala- ter capabilities, the more likely it is ues cognitive achievement. Important ries—that receive so much attention that the individual will choose and character traits that promote person- in policy debates have small effects on succeed in a white-collar job. al achievement are largely ignored or creating or eliminating disparities. This This is borne out in my recent maligned as “soft” and nonmeasur- is surprising when one thinks of the joint work on the economic conse- able skills. Evidence suggests that great inequality in schooling quality quences of getting a GED (a high efforts that focus mainly on closing across the and especially school equivalency credential ob- disparities in cognitive achievement among disadvantaged communities. vol 22 | no 3 | summer 2011 © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted researching law 4 in any form, by any means, in part or in whole without the prior written permission of the author. the economics of inequality

My colleagues and I have looked enriching early Program was its positive effect on at this. We controlled for the effects family environments noncognitive (character) skills.9 of early family environments using can compensate Direct investment in children is conventional statistical models. The for disadvantage only one possible channel for inter- gaps substantially narrowed. This is vening in the lives of disadvantaged consistent with evidence in the Cole- The Perry Preschool Program is the children. Many successful programs man Report (which was published in flagship early childhood intervention also work with mothers to improve 1966) that showed family character- program. Perry enriched the lives of parenting skills. The two inputs—di- istics, not those of schools, explain low-income African American chil- rect investment in the child’s cogni- much of the variability in student test dren with initial IQs of 85 or below. tion and personality, and investment scores across schools. The intervention was targeted to in the mother and the family envi- Such evidence opens the ques- 3-year-olds and was relatively mod- ronment she creates—are distinct, tion of which aspects of families are est: 2.5 hours per day of classroom but they complement each other. Im- responsible for producing these gaps. instruction, 5 days per week, and 1.5 provements in either input improve Are they due to genes? Family envi- hours of weekly home visits. Chil- child outcomes. Improvements in ronments? Family investment deci- dren participated for only two years, both are the wisest investment. † sions? Can the gaps be avoided or and no further intervention was giv- The Nurse-Family Partnership surmounted? Evidence from inter- en. But the lives of participants were intervenes solely with at-risk first- vention studies, such as the High- tracked for decades to see the effect time mothers during pregnancy, 6 Scope Perry Preschool Program and on school and adult outcomes. sends nurses to the home regularly for 7 the Abecedarian Project, suggests an Perry did not produce lasting the first two years of a child’s life, and important role for investing resources gains in the IQs of its male partici- teaches mothering and infant-care in improving family environments pants and produced at best modest skills. It promotes adult success of the in order to produce better educa- gains in IQ for females. Yet the pro- children of disadvantaged mothers. tion and adult outcomes.* Creating gram has a rate of return of around In addition, research documents that a positive early environment through 7 to 10 percent per annum for males perinatal interventions that reduce parental support and/or formal early and females—well above the post– fetal exposure to alcohol and nicotine childhood education shapes abilities, World War II stock market returns to have long-term effects on cognition, 10 capabilities, and achievement. equity (estimated to be 5.8 percent socioemotional skills, and health. Knowing this, it is imperative to before the 2008 meltdown). This evi- The evidence from a variety of ear- 11 change the way we look at education. dence defies a strictly genetic inter- ly intervention programs shows that We should invest in the foundation pretation of the origins of inequality. enriching the early environments of of school readiness from birth to age Even though their IQs after age disadvantaged children has lasting ben- 5 by providing early childhood edu- 10 were not higher on average, par- eficial effects on adolescent and adult cation for disadvantaged children. We ticipants’ achievement test scores were outcomes of program participants. should build on that foundation with higher. This evidence underscores the high-quality elementary and second- difference between achievement test moving toward ary education to sustain the develop- scores and IQ. Achievement tests better education and ment of successful lives. Providing measure acquired knowledge and are economic outcomes that kind of equity will build a more influenced by personality factors.8 productive society for all. The principal influence in the Perry Educational equity is often seen as a

* To learn more about the Perry Preschool Program, see www.highscope.org. For more information on the Abedecarian Project, see www.fpg.unc.edu/~abc. † To learn more about the Nurse-Family Partnership, see www.nursefamilypartnership.org. the economics of inequality

social movement to bring equal edu- rental education. Evidence shows 4 See James J. Heckman, John Eric Humphries, and Nicholas S. Mader, “The cational opportunities to disadvan- that supplementing the family envi- GED,” in Handbook of the Economics of taged populations, as well as to equal- ronments of disadvantaged children Education, ed. Eric A. Hanushek, Ste- phen Machin, and Ludger Woessmann, ize educational achievement across a with educational resources is an ef- vol. 3 (Amsterdam: Elsevier, 2011); James wide range of people with different fective and cost-efficient way to pro- J. Heckman, John Eric Humphries, and Nicholas Mader, Hard Evidence on Soft backgrounds, skills, abilities, and vide equal opportunity, achievement, Skills: The GED and the Problem of Soft family resources. and economic success. Gains made in Skills in America (Chicago: University of Chicago Press, forthcoming); and James J. It’s a noble cause. But one per- early childhood should be followed Heckman and Yona Rubinstein, “The Im- son’s nobility can be seen by another through with quality elementary, sec- portance of Noncognitive Skills: Lessons from the GED Testing Program,” Ameri- as an entitlement program that pro- ondary, and postsecondary education can Economic Review 91, no. 2 (2001): vides great value to the receiver and that promote the development of 145–149. little to the giver. This is why I have cognition and character. 5 See Almlund et al., “Personality Psychology not focused my work on the moral The logic is quite clear from an and Economics.” aspects of providing equity through economic standpoint. We can invest 6 Lawrence J. Schweinhart, Helen V. Barnes, and David P. Weikart, Significant Ben- early childhood education—even early to close disparities and prevent efits: The High/Scope Perry Preschool Study though the case for early interven- achievement gaps, or we can pay to through Age 27 (Ypsilanti, MI: High/Scope tion could be framed this way. I’ve remediate disparities when they are Press, 1993). focused on its practical value—why harder and more expensive to close. 7 Frances A. Campbell, Barbara H. Wasik, Elizabeth Pungello, Margaret Burchinal, it makes sense and how it generates Either way we are going to pay. And, Oscar Barbarin, Kirsten Kainz, Joseph J. 7 to 10 cents per year on every initial we’ll have to do both for a while. But, Sparling, and Craig T. Ramey, “Young Adult Outcomes of the Abecedarian and dollar invested. there is an important difference be- CARE Early Childhood Educational Inter- We can make serious inroads to- tween the two approaches. Investing ventions,” Early Childhood Research Quar- terly 23, no. 4 (2008): 452–466. ward reducing inequality, elevating early allows us to shape the future; the underclass, and generating more investing later chains us to fixing the 8 See Lex Borghans, Bart H. H. Gol- steyn, James J. Heckman, and John Eric productivity from our investments in missed opportunities of the past. Humphries, “IQ, Achievement, and Per- people. But to do so requires that we Controlling our destiny is more in sonality” (unpublished manuscript, De- partment of Economics, University of accept the facts and rethink our no- keeping with the American spirit. Chicago, 2010). tions of parenting, education, and the 9 James J. Heckman, Lena Malofeeva, Ro- development of human potential. endnotes drigo Pinto, and Peter Savelyev, “Under- Achieving educational equity standing the Mechanisms Through Which 1 James J. Heckman, Seong Hyeok Moon, an Influential Early Childhood Program starts by recognizing that nothing Rodrigo Pinto, Peter A. Savelyev, and Boosted Adult Outcomes” (unpublished is equal and everything is dynamic. Adam Yavitz, “The Rate of Return to the manuscript, Department of Economics, University of Chicago, 2010). People have diverse abilities. These HighScope Perry Preschool Program,” Journal of Public Economics 94, nos. 1–2 10  abilities account for a large portion of (2010): 114–128. David L. Olds, “Prenatal and Infancy Home Visiting by Nurses: From Ran- the variation across people in socio- 2 Seong Hyeok Moon, “Multi-Dimension- domized Trials to Community Replica- economic success. Substantial abil- al Human Skill Formation with Multi- tion,” Prevention Science 3, no. 3 (2002): Dimensional Parental Investment” (PhD 153–172. ity gaps across children from various diss., Department of Economics, Univer- 11  sity of Chicago, 2010). Summarized in Arthur J. Reynolds and socioeconomic groups emerge before Judy A. Temple, “Economic Returns of they start school. 3 See Mathilde Almlund, Angela L. Duck- Investments in Preschool Education,” in Since inequality starts at or be- worth, James J. Heckman, and Tim Kautz, A Vision for Universal Preschool Education, “Personality Psychology and Economics,” ed. Edward Zigler, Walter S. Gilliam, and fore birth, it can and should be cor- in Handbook of the Economics of Education, Stephanie M. Jones (New York: Cam- rected at or before birth with the ed. Eric A. Hanushek, Stephen Machin, bridge University Press, 2009), 37–68. and Ludger Woessmann (Amsterdam: El- resource of early childhood and pa- sevier, forthcoming). vol 22 | no 3 | summer 2011 © 2011 James J. Heckman. All rights reserved. No part of this material may be reproduced or transmitted researching law 6 in any form, by any means, in part or in whole without the prior written permission of the author. president copy editor William C. Hubbard Anne Godden-Segard researching law director An ABF Update designer Robert L. Nelson Quarterly Publication Bradley Sexton Designs Volume 22, Number 3 writer | editor Summer 2011 contact Katharine W. Hannaford email : [email protected] phone : 312.988.6500 www.americanbarfoundation.org

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