Bureau of Business Research
Date of this Version
6-14-2007
Abstract
The early care and education industry has both current and long-term economic consequences for the Nebraska economy. The long-term impact is to help to educate and develop children into productive and higher earning adults. This impact is well understood. As stated by Nobel Prize winning economist James Heckman, “Early advantages cumulate; so do early disadvantages… redirecting additional funds toward the early years, before the start of traditional schooling, is a sound investment in the productivity and safety of our society” (Heckman and Masterov, 2005).
In addition to these long-term impacts, the early care and education industry also has current impacts on the economy. These are less well understood, but also are significant. What are these current impacts? First, each year the early care and education industry brings additional jobs and earnings into the state economy as it draws external funds to the state, in the form of federal dollars to support early care. This represents a substantial economic impact on the state economy. Second, and more fundamentally, the early care and education industry provides more parents with an opportunity to work. This increases the workforce available to the Nebraska economy, a critical issue in a state where an aging population may limit future growth in the work force, and where labor force participation rates are already among the highest in the nation. This study focuses on these current impacts that early care and education has on the Nebraska economy. Throughout, estimates are based on what was measurable in the available data, and may be underestimates to the extent that data are unavailable. The following key conclusions were reached:
• The early care and education industry statewide provides services to 100,000 Nebraska children, employs over 12,000 Nebraska workers (including the selfemployed), and generates hundreds of millions of dollars of revenue.
• The industry is not only large; it also has a substantial impact on the current economy of Nebraska. The federal funds that Nebraska receives to support the early care and education industry has a statewide economic impact of $241 million, including $87 million in annual earnings by approximately 6,100 workers.
• The early care and education industry expands the size of the Nebraska labor force. For example, consider two government programs that provide resources to parents for early care. The Federal Child and Dependent Care Tax Credit program allows an additional 1,400 mostly middle income married women in Nebraska to hold full-time jobs. The Child Care and Development Fund (CCDF) allows an additional 2,500 lower income single mothers to hold either part-time or full-time jobs in Nebraska. These programs also allow additional lower income married parents, or middle income single parents to work. However, existing economic research does not permit us to estimate these effects.
• Research indicates that early care and education providers, particularly nonprofit providers, also receive significant private in-kind donations to support their services. Research further indicates that non-profit early care and education providers have used these donations to lower the cost of early care services to parents or to increase the quality of care.
• Programs that support early care generate new tax revenues. The economic and labor market impact of the CCDF program generates additional income, sales, and property tax revenue for the State of Nebraska. The additional revenue amounts to $16 to $18 million per year. This is equivalent to two-thirds to three-quarters of the $24.1 million annual allocation by the State of Nebraska to the CCDF. This implies that the cost to the people of Nebraska to 1) help lower income parents obtain early care and education for their children, and 2) allow lower income parents to build their skills and earnings capacity through work is one-third as large as it would appear when simply looking at the state outlay for the CCDF program.
The implications of the report, however, are broader than simply the merits and costs of the Child Care and Development Fund, or other programs that receive the support of state government. The broader implication is that the early care and education industry is a significant infrastructure industry for the Nebraska economy. It should remain an important focus for monitoring and input not just by government but also by volunteer organizations, foundations, and private business.
Comments
Published by Bureau of Business Research, Department of Economics, College of Business Administration, University of Nebraska–Lincoln for Early Childhood Interagency Coordinating Council (ECICC). Used by permission.