Return on Investment

What kind of venture can deliver a 13 percent return on investment (ROI) per year? Hint: it’s not the stock market.

The answer is high-quality early childhood education programs for children birth to age 5.

The latest research by Nobel Prize-winning University of Chicago economics professor James Heckman shows that investment in high-quality early childhood education for disadvantaged children, beginning at birth, delivers a 13 percent return on investment per child, per year. By contrast, the stock market averages 7 percent ROI.

Heckman points to four big benefits of investing in early childhood development: preventing the achievement gap, improving health, boosting earnings, and a high rate of return. Access to high-quality early childhood education benefits not only the future generation, but it strengthens the current workforce as well. Research shows that businesses lose $3 billion each year when employees miss work due to child care breakdowns ( Child Care and Parent Productivity: Making the Business Case). Additionally, researchers in Louisiana determined that the state loses almost $84 million annually in tax revenue for Louisiana’s economy due to child care issues (Losing Ground: How Child Care Impacts Louisiana’s Workforce Productivity and the State Economy).

Early childhood education plays a crucial role in Alaska’s economy as well. The McDowell Group reports in the 2015 Economic Impact of Early Care and Learning in Alaska Report that 15 percent of Alaska’s workforce depends on child care. And as a result of access to child care, Alaskans are able to earn $2 billion in wages. In all, the early childhood education industry accounts for $512 million in total economic activity in Alaska. The Committee for Economic Development (CED), a business-led national policy group, also reports that the Alaska child care industry revenue of $83.1 million led to another $50 million in spillover impact on our economy.

With a 13 percent ROI in societal benefits, and billions of dollars in savings from increased employee productivity, high-quality early childhood education is a smart business investment. John E. Pepper, former CEO of Procter & Gamble, and James Zimmerman, former CEO of Macy’s, agree. Read their op-ed, The Business Case for Early Childhood Education.

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