Commentary: Universal pre-K is worth the cost. We now have proof

The case for federally funded, universally accessible child care is simple: The private market can’t deliver it adequately or affordably to meet the needs of families.

The pushback from policymakers is that it’s too expensive an investment for the government to make, especially in an era of trillion-dollar budget deficits. The child care provisions in the Biden administration’s Build Back Better program of 2021 were estimated to add $40 billion a year to the deficit. Then there are the fraught cultural questions that are asked when the government tries to make child care more accessible, such as what motherhood and childhood ought to look like.

But the lack of investment in child care isn’t equivalent to the federal government staying neutral, nor is it free. Indeed, failing to publicly provide child care incurs significant cost to the federal budget by reducing family incomes. Around 70% of women and 95% of men with children younger than 5 at home are working. Those women work an average of 37 hours a week, and the men 42. A parent cannot work and provide care at the same time, meaning they must find someone to watch their children.

But the Treasury Department deemed the private market for child care a “failure” in multiple ways, while the Labor Department declared prices to be “untenable” for families – surging 263% since 1990 – twice the pace of inflation. This type of care eats up a quarter of family incomes.

So how much does pushing families with working (or aspiring to work) parents into private care cost the federal government in the form of lost tax revenue? It’s impossible to say for sure but a good illustration comes from a study of universal pre-kindergarten published this month by the National Bureau of Economic Research. The researchers examined New Haven, Connecticut, which has offered full-day pre-K since the late 1990s. The program is free to families and has no income tests for entry, but spots are limited and rationed via lottery.

After pooling data on enrollment, parental wages and a survey of parents, the researchers found that free pre-K is associated with a 21.6% increase in a parent’s earnings each year their child is in preschool and an additional six years afterward. That’s the equivalent of an extra $5,500 to $6,500 a year for seven to eight years. This makes universal pre-K “one of the most cost-effective active labor market policies ever evaluated in the U.S.,” they concluded.

The higher earnings came primarily from more hours at work; the options for parents outside of the universal pre-K offered care at a much higher price and for fewer hours. And more hours worked equals more income (and taxes paid, of course). Parents also didn’t have to pull back from their career – taking a less competitive or remunerative job while they waited for free, full-time care to begin – another boost to earnings.

The results of the New Haven study are similar to what researchers found in examining other free expansions of care, including the rollout of kindergarten in the U.S. Notably, the kindergarten study found that more parents entered work in addition to working parents earning more. Plus, it found public program participation decreases – about 10%.

The Bureau of Labor Statistics reports more than 12 million families with children younger than 6 where one or both parents are working. A back-of-the-envelope application of the $6,000 in extra earnings found in New Haven to 12 million workers is $72 billion a year. And if more parents earned enough to no longer be eligible for means-tested programs, it would be even higher. (And it’s worth noting that if child care workers were required to be paid more, so they were no longer in the bottom 5% of occupations, it would be higher still.)

To present the budgetary trade-offs of federal child care as zero versus $40 billion, or whatever such a system would cost, is simply false. In fact, the government is making an enormous investment every year – it’s just paid out through a lower tax base and foregone income tax collections rather than expenditures. So, there’s a potential windfall if Congress abandons its current approach and instead bets on working parents. Free, universal child care will reap immediate returns through higher earnings. The gains may even be enough to fully offset costs. The New Haven research team reasoned that the return on investment for the universal pre-K program was $5 for every $1 spent. And that’s ignoring any positive effect on children.

This is a policy that Congress can pursue that would potentially increase the incomes of millions of American families. That’s a win, and it’s time to take it.

Kathryn Anne Edwards is a labor economist and independent policy consultant.