Importance of Early Childhood Education: An Economic Perspective

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As a society, can we try and understand the importance of early childhood education from a cost-benefit perspective? After all, investing in education does cost money. If yes, how do we plan and budget our investments as a society? Research of this nature can help answer important and interesting questions of this type: If the Government of India had INR 100000 to spend on education, should it spend on the education of a 3 year old child or use it to provide vocational training of a low skilled 20 year old, who is just about to enter the job market?

Investment and ROI:

An interesting perspective to view the importance of early childhood education (0-5 Years) is from the prism of economic benefits of investing in developing ‘Human Capital[1]’ at an early age. We can then compare the economic benefits versus cost of interventions to develop the Human Capital, at different ages of a person’s lifecycle.

Professor James Heckman, the Economics Nobel Laureate[2] initially studied the effectiveness and economic Return on Investment (ROI)[3] of re-training (skilling) programs of steelworkers in factories.

What he found should not surprise most of us. He found that age of the employees is an important factor in determining the cost effectiveness of the training programs for the company. It becomes increasingly difficult to teach new skills to older employees.

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Investing in Early Childhood Education is Smart!

This finding led him to research the possibility of applicability of this idea to the society at large and generalise it to ROI on investment in Human Capital. His research has shown that it is indeed applicable to the society at large.[4] He found that investing in high-quality early childhood education programs makes immense economic sense. The ROI of such investments could be as high as 13-14%[5], very high rate of return by US standards. ROI of such interventions progressively decrease when done at later stages of child’s life.

                                                         

Figure 1: For the same level of investment at each age, the return is higher on Human Capital when a dollar is spent on the young than when it is spent on the old.

The most important reason for why ROI is higher when you ‘catch them young’ is that ‘learning begets learning’. What this essentially means is that when a child has a strong foundation in learning, his subsequent learning and education also happens to be faster and is more effective. We know that learning and skill upgradation is a lifelong process. Earlier a child gets into this cycle of learning, the better the outcomes would be. Early childhood interventions of high quality also have a lasting impact.[6] This clearly highlights the importance of early childhood education.

Our own life experience repeatedly corroborates this finding. Do we adults not struggle to learn new languages while our kids seem to do the same with complete ease? Our mothers find it hard to understand how to use a smartphone while our kid learns to use to very easily (sometimes to our displeasure!).

Importance of Early Childhood Education: Key Takeaway

Assuming the universality of these findings and their applicability even in the Indian context, there is a need to re-look at our public policy with regards to Education. The key takeaway is that research strongly points to investing in our child’s early education resulting huge long-term benefits, for both the individual and the society at large.

Notes:

1. The word ‘Human Capital’ is familiar to most us in the business and corporate world. To simply state, it is the sum of knowledge, skills, talent, experience, intelligence, judgement, wisdom, creativity etc. possessed individually and collectively in a population. It can be used in a specific context, say with regards to the available talent in the human resources of a software company and it could also be used in the wider context of a society as large as India itself. While the concept of ‘Human Capital’ itself might be subject to a lot of scrutiny about it conceptual utility, measurability, conceptual precision and specificity etc., it still is nevertheless useful. It is widely understood and even if lacking in precision, it roughly represents that same thing in the minds of most people familiar with the concept.

2. The hypothetical question posed in the article, “If the Government of India had INR 100 to spend on education, should it spend on the education of a 3-year-old child or use it to provide vocational training of a low skilled 20-year-old?”, should be treated as a thought experiment. It is not to suggest that Government of the day should radically alter its policy to divert all its funds to early education at the peril of ignoring vocational training of our unskilled labour. These are complex questions which need a detailed analysis.

3. James Heckman’s research into the cost-effectiveness of re-training programs of steelworkers in factories proves that ROI of such programs is negatively correlated with age of employees. However, one important point is worth noting. Besides the general decrease in learning ability with age, one more reason for lower ROI is also the limited time window for returns to accrue to the company that runs the factory for older employees. This does not alter our main takeaway from his research.

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Summary:
  • As a society, if we had to choose between educating a low-skilled 20-year-old or educating a 3-year-old, what should we choose?
  • Research says that money invested the early education of a child has better ROI than money invested on a low skilled 20-year old, who is about to enter the job market.
  • A strong foundation in the early stage of childhood will lead to faster and more effective learning curve in the later years.
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