* By Svante Persson
Investing in preschool is actually more profitable than investing in the stock market. The estimated return (per dollar of cost) for high quality early childhood education is in excess of 10% (see link). In comparison, over the last 20 years the stock market’s S&P 500 index had an average annual return of less than 7.8% per year (see link). Increasing public investment in preschool education can substantially benefit society at large and could help to address LAC’s long-term skills challenge and chronic income inequality. Poor children who fail to achieve their full academic potential are more likely to enter adulthood without the skills necessary to develop into highly productive members of society able to compete effectively in a more competitive global labor market.
The Human Development Index (HDI) is a tool that measures how well a country is doing based on the levels of education and health of its people and overall standard of living. The higher the HDI, the better life is for the majority of the population. The table below shows that of the 20 countries in the world with the highest HDI, 14 of them also have the highest preschool enrollment rates. Only one Latin American country (Mexico) makes the top 20 in enrollment rates and just three (Argentina, Chile and Mexico) make the top 20 in public investment in preschool. Let’s look at why governments in Latin America and the Caribbean (LAC) should invest more in preschool education and what the Inter-American Development Bank (IDB) and the Multilateral Investment Fund (MIF) are doing to help.
A child’s experiences in the first five years of life have a substantial impact on his or her future quality of life. 80% of personal development comes from experiences and environment, only 20% from genetics (see link). Therefore, a child that benefits from quality preschool education is less likely to drop out of school, less likely to become pregnant, and less likely to be arrested for a crime. High-quality pre-school education increases the ability of low-income children to gain from elementary and secondary education, leading to higher high school graduation rates. This generates economic returns at the personal level (better paying jobs and access to better housing, education and other services) and at the societal or national level like higher income tax payments and decreased burden on the criminal justice system (see link).
In a majority of OECD countries, improved access to preschool education also has paralleled the number of women entering the labor force (see link). Increased government investments in preschool since the 1970s is one of the reasons why more women are more likely to be formally employed and have higher earnings (see link). Since economic prosperity depends on having a high employment/population ratio, enabling more women to enter the labor market should be a top priority for any government.
The IDB and the MIF are testing new and innovative ideas to improve access to preschool education as a way to boost long term economic development and reduce poverty in LAC. The idea is that widespread access to quality preschool not only improves people’s lives today but would make the region more prosperous in the future. The MIF-funded preschool projects in the region are testing how private solutions to early childhood development (ECD) could be an option in countries where there isn’t enough public sector investment. Two innovative projects (Colombia “AeioTU Improved Access to Quality Early Childhood Development Services for Low Income Populations” and Costa Rica “Access to Early Childhood Services”) have been developed to improve poor people’s access to quality preschool in the LAC region. In the next few years we will be able to see whether these projects have had a positive impact.
In order to assess the effects of AeioTu early childhood centers in Colombia, the IDB and the MIF are supporting Rutgers University’s National Institute of Early Education Research (NIEER), in collaboration with the Universidad de los Andes-CEDE, to conduct a randomized control trial with 1,218 children. This randomized longitudinal study of high quality early education in the Colombian context is the first of its kind, by including all cohorts of children before school age and focusing on high quality education in disadvantaged neighborhoods. It is too early to measure definitive outcomes, but the MIF/IDB will continue to monitor and report on the on-going evaluation in order to support replication and expansion of quality pre-school services to other countries and communities in Latin America and the Caribbean.
* Svante Persson is Senior Specialist for the Multilateral Investment Fund (MIF).