5. Preschool as economic stimulus

Previous studies did not focus on the state as a beneficiary of child care investment. That would wait until 2009 and an analysis by economist Robert Fairholm.b Released on the heels of the 2008 collapse of the financial markets when governments were looking for stimulus projects, Fairholm showed how investing in educational child care was a handsdown winner:

  • Biggest job creator: Investing $1 million in child care would create at least 40 jobs, 43 percent more jobs than the next highest industry and four times the number of jobs generated by $1 million in construction spending.
  • Strong economic stimulus: Every dollar invested in child care increases the economy’s output (GDP) by $2.30. This is one of the highest GDP multipliers of all major sectors.
  • Tax generator: Earnings from increased employment would send back 90 cents in tax revenues to federal and provincial governments for every dollar invested, meaning investment in child care virtually pays for itself.

Fairholm’s work also quantified the immediate costs of the sector’s poor employment environment, which results in annual shortages of about 50,000 educators. The net cost to the Canadian economy was estimated at over $140 million for the period 2001 to 2007. The shortage of educators also held parents back from entering the workforce. In total, it meant a loss of almost 50,000 person years of employment.

In addition, Fairholm translated the benefits from preschool for disadvantaged children in the Abecedarian study to middle class Canadian children. Although less dramatic than for disadvantaged children, attendance at preschool would still result in reduced grade failures, less reliance on special education and lower rates of smoking and early high school leaving among children from middle class homes. The study concludes that investments in early childhood programming pay for themselves, in both the immediate and longer-term, with a $2.54 payback for every dollar spent after accounting for all benefits and costs over the immediate to longer-term.

Figure 4.5

b Fairholm and Davis (2010) also analyzed the cost benefits of the recommendations in With Our Best Future in Mind: Report to the Premier on Early Learning in Ontario. It revealed similar results on a child and family system for infants to 12-year-olds delivered by municipal governments and schools.

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