By Kathy Young, Director of Operations.
Earlier today fellow Market Street staffer Christa Spaht and I wrapped up a series of focus groups and interviews in Joplin, Missouri. These input sessions with business owners and managers were coordinated by the Joplin Chamber of Commerce as a follow-up to community-wide open houses held on July 12th . In the nine weeks since the community was hit by a catastrophic tornado, city leaders have built a framework for recovery, made incredible progress with debris removal, and have started crafting a vision for moving forward.
Led by the Citizens Advisory Recovery Team (CART), the process begun just days after the tornado hit has provided structure for the many conversations occurring in every corner of the community as residents, businesses, and leaders discuss the issues and challenges facing them as well as the many assets and opportunities that provide a much needed source of motivation and hope. Using four umbrella categories (Infrastructure and Environment; Housing and Neighborhoods; Schools and Community Facilities; and Economic Development), the CART group is providing community leaders with a systematic way to receive feedback from a population of nearly 50,000 people who were both directly and indirectly affected by the tornado.
This week’s focus groups gave small business owners and larger employers an opportunity to provide feedback about the issues that they felt should be prioritized. At times the discussion aligned closely with issues facing homeowners and the average citizen, previously captured in the initial series of open house meetings. However, there was also a significant amount of discussion concerning issues that were unique to anyone responsible for keeping paychecks flowing to employees, an extreme hardship for the hundreds of business owners who lost everything in tornado.
In the coming days, our team will report back to the CART group on both the big “themes” that emerged from the five focus groups and assorted interviews. Our first take at evaluating the feedback confirms the expected – that the collective input will include both immediate needs and longer-term issues and opportunities facing the business community and the evolving network of support organizations and agencies like the Chamber, the City, FEMA, SBA, and others. Nine weeks into the recovery and rebuilding process, Joplin continues to benefit from the continued outpouring of worldwide support as well as neighbors helping each other. Whether helping a complete stranger assemble a new household in preparation for their move into temporary housing or small business owners helping spread the word about relocated and reopened businesses (even if they are competitors), the community moves forward with each day.
As we’ve previously noted, the hard work and optimism of Joplin’s residents provides inspiration for our work in the community, as well as the efforts that are underway in Tuscaloosa, Alabama; Ringgold, Georgia; Minot, North Dakota; and other communities coming out of crisis. We encourage our friends and partners to consider helping these communities in whatever way is feasible – financially, through volunteering time, or simply spreading the word.
For more information on recovery and support efforts, please see:
www.rebuildjoplin.org
www.joplinchamber.com
Recent news from Joplin:
Chamber of Commerce President testifies before Senate Subcommittee on Disaster Recovery
Feds put up $1.5 million for counseling for storm survivors
Wednesday, July 27, 2011
Thursday, July 21, 2011
Grassroots Capital: New Financing for a New Economy
By: Evan D. Robertson, Project Associate.
It’s almost three years since Lehman Brothers collapsed and I still don’t understand the financial crisis. I mean, sure I grasp the financial crisis on an intellectual level. I can wrap my head around the fact that the mortgage industry was operating under perverse incentives which placed monumental value on passing the risk of loaning to less than credit worthy borrowers up the value chain. And I get that once those mortgages reached the pinnacle of the value chain crafty, alarmingly intelligent investment bankers securitized those loans, repackaging them in with good loans to hide their risk. I also understand that this was an exceedingly good arrangement for everyone involved until America’s wealthy thought “You know, maybe I don’t actually need a fourth investment property” during which those less than credit worthy borrowers thought “You know, maybe I really don’t need to go for that $300,000 house. I’m happy with my apartment.” What I don’t get, and what I absolutely cannot fathom is that, even after the worst financial crisis of my existence, not a whole lot happened. Our financial industry looks eerilysimilar to the financial industry before the meltdown. Our banks are still “Too Big to Fail” and with every bank failure the industry grows ever more consolidated. Sure, we have Dodd-Frank, the Consumer Financial Protection Bureau, and hopefully a more watchful SEC and Federal Reserve. But, the question I keep asking myself is: Is there any alternative to our financial system, is there a better way?
The Slow Money Movement has but one simple goal: One million people investing 1.0 percent of their money in local food enterprises, within the next decade. The movement was founded by Woody Tasch, a former venture capitalist, who wants to create a more sustainable financial system. In order to achieve this, Tasch wishes to slow down capital so that it can nurture small, diverse sets of local entrepreneurial ventures. The Slow Money Movement accomplishes this through facilitating investment in local food enterprises, investments which often require the investor to hold a stock or bond for three to ten years at minimum. Indeed, these investments are rather illiquid and don’t pay the same returns as more established financial products. But, as Amy Cortese (author of Locavesting: The Revolution in Local Investing and How to Profit From It) would argue they offer more stable returns, give you the benefit of investing in what you know, and provide you with the pleasure to seeing where your investment is actually going and what it is going to.
Another movement, peer to peer (P2P) funding, is another financial innovation that is establishing itself. P2P funding uses the social organizing capabilities of the internet to facilitate financial transactions (loans) between everyday people. For example, a P2P funding site called Zopa allows a borrower to post the amount of money they need, the reason they need it, and gives a credit rating of the borrower. The site then allows lenders to look at the borrowers profile and make a decision on whether to loan the individual money or not. The twist is the lender isn’t allowed to lend the total amount of the loan. Let’s say a borrower is asking for $10,000. One lender would typically give anywhere from $50 to $100 requiring at least 10 to 20 other borrowers to enter the loan with the lender. This allows the lenders to give a small amount of their investment capital to the borrower, so if the borrower does indeed default the lender only looses a tiny portion of their loan. The risk of the loan is spread across a greater number of people. The default rate on Zopa loans are low, 3.0 percent for loans issued 3 to 4 years ago.
The final grassroots financial movement is the revival of an old idea, namely, bringing back local stock exchanges. It wasn’t too long ago when NYSE (New York Stock Exchange) wasn’t the only stock exchange serving investors in the U.S. Throughout the 1930’s up until 1991, the United States had a wide assortment of regional stock exchanges that allowed investors to obtain equity stakes in local businesses. LanX is a regional stock exchange currently in development. LanX describes itself as a “self-sustaining, locally governed, regional stock exchange that would match small and medium size enterprises (SMEs) in South Pennsylvania with individual and institutional investors.” The goal of the regional stock exchange movement is to better connect regular, everyday investors to local investment opportunities in their area. The hope is to provide young start-ups and business too small to get an NYSE listing with access to capital markets.
Back to my question: Is there a better way? The answer: Not quite yet. These financial movements are nascent and face great regulatory hurdles as they mature. While these movements will probably never usurp our current financial industry, these movements can certainly work alongside them allowing common investors to take ownership stakes in local businesses. And for this fact alone, they deserve to be on anyone’s radar who has an interest in developing sustainable local economies. If you would like to learn a little more about these movements the following websites are good places to start:
It’s almost three years since Lehman Brothers collapsed and I still don’t understand the financial crisis. I mean, sure I grasp the financial crisis on an intellectual level. I can wrap my head around the fact that the mortgage industry was operating under perverse incentives which placed monumental value on passing the risk of loaning to less than credit worthy borrowers up the value chain. And I get that once those mortgages reached the pinnacle of the value chain crafty, alarmingly intelligent investment bankers securitized those loans, repackaging them in with good loans to hide their risk. I also understand that this was an exceedingly good arrangement for everyone involved until America’s wealthy thought “You know, maybe I don’t actually need a fourth investment property” during which those less than credit worthy borrowers thought “You know, maybe I really don’t need to go for that $300,000 house. I’m happy with my apartment.” What I don’t get, and what I absolutely cannot fathom is that, even after the worst financial crisis of my existence, not a whole lot happened. Our financial industry looks eerilysimilar to the financial industry before the meltdown. Our banks are still “Too Big to Fail” and with every bank failure the industry grows ever more consolidated. Sure, we have Dodd-Frank, the Consumer Financial Protection Bureau, and hopefully a more watchful SEC and Federal Reserve. But, the question I keep asking myself is: Is there any alternative to our financial system, is there a better way?
The Slow Money Movement has but one simple goal: One million people investing 1.0 percent of their money in local food enterprises, within the next decade. The movement was founded by Woody Tasch, a former venture capitalist, who wants to create a more sustainable financial system. In order to achieve this, Tasch wishes to slow down capital so that it can nurture small, diverse sets of local entrepreneurial ventures. The Slow Money Movement accomplishes this through facilitating investment in local food enterprises, investments which often require the investor to hold a stock or bond for three to ten years at minimum. Indeed, these investments are rather illiquid and don’t pay the same returns as more established financial products. But, as Amy Cortese (author of Locavesting: The Revolution in Local Investing and How to Profit From It) would argue they offer more stable returns, give you the benefit of investing in what you know, and provide you with the pleasure to seeing where your investment is actually going and what it is going to.
Another movement, peer to peer (P2P) funding, is another financial innovation that is establishing itself. P2P funding uses the social organizing capabilities of the internet to facilitate financial transactions (loans) between everyday people. For example, a P2P funding site called Zopa allows a borrower to post the amount of money they need, the reason they need it, and gives a credit rating of the borrower. The site then allows lenders to look at the borrowers profile and make a decision on whether to loan the individual money or not. The twist is the lender isn’t allowed to lend the total amount of the loan. Let’s say a borrower is asking for $10,000. One lender would typically give anywhere from $50 to $100 requiring at least 10 to 20 other borrowers to enter the loan with the lender. This allows the lenders to give a small amount of their investment capital to the borrower, so if the borrower does indeed default the lender only looses a tiny portion of their loan. The risk of the loan is spread across a greater number of people. The default rate on Zopa loans are low, 3.0 percent for loans issued 3 to 4 years ago.
The final grassroots financial movement is the revival of an old idea, namely, bringing back local stock exchanges. It wasn’t too long ago when NYSE (New York Stock Exchange) wasn’t the only stock exchange serving investors in the U.S. Throughout the 1930’s up until 1991, the United States had a wide assortment of regional stock exchanges that allowed investors to obtain equity stakes in local businesses. LanX is a regional stock exchange currently in development. LanX describes itself as a “self-sustaining, locally governed, regional stock exchange that would match small and medium size enterprises (SMEs) in South Pennsylvania with individual and institutional investors.” The goal of the regional stock exchange movement is to better connect regular, everyday investors to local investment opportunities in their area. The hope is to provide young start-ups and business too small to get an NYSE listing with access to capital markets.
Back to my question: Is there a better way? The answer: Not quite yet. These financial movements are nascent and face great regulatory hurdles as they mature. While these movements will probably never usurp our current financial industry, these movements can certainly work alongside them allowing common investors to take ownership stakes in local businesses. And for this fact alone, they deserve to be on anyone’s radar who has an interest in developing sustainable local economies. If you would like to learn a little more about these movements the following websites are good places to start:
Tuesday, July 19, 2011
Not a Drop to Drink
By Stephanie Allen, Project Assistant.
As our boss is always reminding us, and pretty much anyone who will listen, our generation isn’t tied to one place—we can and will go where we please. We’ll pick up and leave, move to a new city where we think we’ll have a better quality of life, and we’ll worry about getting a job once we get there. Those of you who have heard Mac Holladay speak probably know what I’m talking about.
Economic development today is as much about cultivating communities where those ever-so-desirable young professionals want to be as smokestack chasing was forty years ago.
You don’t have as many young professionals as you’ll need to replace aging baby boomers? Your young professionals move away to pursue opportunities in bigger, more vibrant cities? Look at your quality of life as a major tool for attracting new ones (and bringing back old ones).
Don’t have any high-density, walkable, live-work areas? Build some.
Don’t have enough entertainment options or cultural amenities? Start some.
Don’t have much public space? Make some.
But what do you do if your water is running out? Purchase more? Get in line.
Water rights and reserves are quickly becoming crisis point issues for many communities with the potential to impact future population growth and economic development in these places. It begs the question: when will the issue of sustainability come to the forefront of community building, outside of places like Boulder and Austin, and to the minds of next generation workers in their relocation decisions? Eventually, a tipping point will be reached and it appears that point is near.
The water issue is one we don’t often pay much attention to in economic development. I suppose that’s because it isn’t a problem we run into all that frequently. Sure, droughts can take a huge economic toll on the agriculture industry, but they’re rarely severe enough to warrant our worrying about them stunting economic growth or development in large cities with diversified economies. But all that might change.
Climatologists think that the drought in the Southwest (which rages on this year) is actually not a drought, but the early stages of a progressive aridification of subtropical regions across the globe. Richard Seagar, a Columbia University climatologist, told readers of the New York Times last Sunday: “You don’t say, ‘The Sahara is in drought.’ It’s a desert. If the models are right, then the Southwest will face a permanent drying out.” The Times reports that cities like Melbourne, Barcelona, and Mexico City (which are also in subtropical regions) have already suffered drought related emergencies. And city planners in Perth, Australia are worried Perth may become the first modern city abandoned for lack of water.
Cities in the American Southwest like Los Angeles, Las Vegas, and Phoenix have long struggled to supply water to their growing populations and to their industrial and agricultural clients, but so far they’ve always come up with a solution without having to limit growth or put constraints on economic development: Los Angeles’s early 20th century water grabs, Orange County’s famous toilet to tap program, and Carlsbad’s desalinization plant. If climatologists are right though, there isn’t likely to be a quick fix big enough to solve this. It’s going to put serious constraints on population growth and it’s going to require a more holistic approach to economic development if cities in the Southwest are going to survive, thrive, and keep their reputations as desirable places to live, work, and grow.
For further reading, check out The Earth Institute at Columbia University’s drought research page. They link a number of news articles and you can download Richard Seager’s paper “Model Projections of an Imminent Transition to a More Arid Climate in Southwestern America”.
As our boss is always reminding us, and pretty much anyone who will listen, our generation isn’t tied to one place—we can and will go where we please. We’ll pick up and leave, move to a new city where we think we’ll have a better quality of life, and we’ll worry about getting a job once we get there. Those of you who have heard Mac Holladay speak probably know what I’m talking about.
Economic development today is as much about cultivating communities where those ever-so-desirable young professionals want to be as smokestack chasing was forty years ago.
You don’t have as many young professionals as you’ll need to replace aging baby boomers? Your young professionals move away to pursue opportunities in bigger, more vibrant cities? Look at your quality of life as a major tool for attracting new ones (and bringing back old ones).
Don’t have any high-density, walkable, live-work areas? Build some.
Don’t have enough entertainment options or cultural amenities? Start some.
Don’t have much public space? Make some.
But what do you do if your water is running out? Purchase more? Get in line.
Water rights and reserves are quickly becoming crisis point issues for many communities with the potential to impact future population growth and economic development in these places. It begs the question: when will the issue of sustainability come to the forefront of community building, outside of places like Boulder and Austin, and to the minds of next generation workers in their relocation decisions? Eventually, a tipping point will be reached and it appears that point is near.
The water issue is one we don’t often pay much attention to in economic development. I suppose that’s because it isn’t a problem we run into all that frequently. Sure, droughts can take a huge economic toll on the agriculture industry, but they’re rarely severe enough to warrant our worrying about them stunting economic growth or development in large cities with diversified economies. But all that might change.
Climatologists think that the drought in the Southwest (which rages on this year) is actually not a drought, but the early stages of a progressive aridification of subtropical regions across the globe. Richard Seagar, a Columbia University climatologist, told readers of the New York Times last Sunday: “You don’t say, ‘The Sahara is in drought.’ It’s a desert. If the models are right, then the Southwest will face a permanent drying out.” The Times reports that cities like Melbourne, Barcelona, and Mexico City (which are also in subtropical regions) have already suffered drought related emergencies. And city planners in Perth, Australia are worried Perth may become the first modern city abandoned for lack of water.
Cities in the American Southwest like Los Angeles, Las Vegas, and Phoenix have long struggled to supply water to their growing populations and to their industrial and agricultural clients, but so far they’ve always come up with a solution without having to limit growth or put constraints on economic development: Los Angeles’s early 20th century water grabs, Orange County’s famous toilet to tap program, and Carlsbad’s desalinization plant. If climatologists are right though, there isn’t likely to be a quick fix big enough to solve this. It’s going to put serious constraints on population growth and it’s going to require a more holistic approach to economic development if cities in the Southwest are going to survive, thrive, and keep their reputations as desirable places to live, work, and grow.
For further reading, check out The Earth Institute at Columbia University’s drought research page. They link a number of news articles and you can download Richard Seager’s paper “Model Projections of an Imminent Transition to a More Arid Climate in Southwestern America”.
Thursday, July 14, 2011
An Economic Development Story
By Matthew Tester, Project Associate.
Dec. 2008: CRCT SCORES SURGE: MIRACLE OR MASQUERADE?
June 2009: STATE PROBE REVEALS CHEATING ON CRCT
Feb. 2010: CRCT SCANDAL STUNS THE STATE
Jan. 2011: ATLANTA PUBLIC SCHOOLS PLACED ON PROBATION
July 2011: SCATHING REPORT: APS CHEATING WIDESPREAD
To read headlines in the Atlanta Journal Constitution over the last three years is to be shaken by the downfall of a fundamental civic institution, Atlanta Public Schools. Modest inquiries into statistically-improbable results on end-of-year tests at a few schools have exploded into a chaotic bombshell of a national scandal engulfing the entire system. APS has been put on probation by its accrediting agency, educators are facing criminal charges, the Board is fractured beyond repair, and everyone is desperate to assign blame. As an Atlanta resident with a young child, you can count me among those with indignation burning in their ears.
But pursuing Justice is not the same as determining guilt, and, in this case, doing the latter without the former won’t make me sleep any better. The superintendent, the educators, the Board, and the national education system have all received their share of blame as the story has developed. Seems appropriate. But justice is more complicated, and requires some measure of self-awareness. As economic development practitioners, we have to read this (like, well….everything) as, in part, an economic development story. And attempting to wrap one’s head around the tangled web that is holistic economic development can be maddening. If anyone ever tells you they have it licked, just walk away – they’re selling you a bill of goods.
Parents are justified in demanding that schools challenge and advance their children. Property owners are justified in wanting home values to increase. The business community is justified in expecting the school system to perform with excellence. Administrators are justified in expecting teachers to do their jobs well. Teachers are justified in wanting to keep their jobs. The United States is justified in working toward a competitive national workforce. But all these parties are complicit when their interests are elevated above the authentic betterment of young people. This seems to be the story in Atlanta, and I hope we recognize that it’s a story about all of us.
Now I understand why things like the Consumer Confidence Index matter so much – it’s a bellwether and a determinant. Confidence in public schools today is much the same. It both reflects and predicts the decisions of residents and businesses. It must be nurtured through genuine and demonstrable successes, or it will work against community. Another headline proves the point:
Feb. 2010: CRCT FLAP MARS STATE BUSINESS: COMPANIES VIEW CHEATING SCANDAL AS BAD QUALITY-OF-LIFE INDICATOR
Thursday, July 7, 2011
So how’s that targeting working out for you? (Part 1)
By Matt Tarleton, Project Manager.
At Market Street, we frequently work with communities to help them identify the clusters of economic activity in their regions that can serve as engines for future growth. From a practitioner’s point of view, focusing strategic investments and programs on specific clusters (a.k.a. “targeting”) can help ensure that limited budgets are spent wisely on developing opportunities that have best chance for success, and thus, offer the best return on investment.
Ten years ago, biotechnology was all the rage. Practically every state, chamber of commerce, or local government was targeting biotechnology. If you weren’t targeting biotech, something had to be wrong with you! Today, biotech still has promising opportunities but clean energy seems to be the new research and development target in vogue. Now let me make it abundantly clear that I am fervent supporter of clean energy investments at the federal, state, local, and household level. I agree that clean energy presents tremendous growth opportunities that support both economic and environmental sustainability. But every community cannot successfully compete for these jobs. The same was, and is still true, for biotechnology.
So out of curiosity, I wanted to take a look at recent trends in the scientific research and development sector. Officially defined by the North American Classification System (NAICS) under the code 5417, this sector comprises establishments that undertake research or apply research findings to create new products or processes. There are many other research and development activities captured under other classifications (see Pharmaceuticals; NAICS 3254) due to the fact that research and development is not the establishment’s primary revenue-generating activity. However, NAICS 5417 gives us strong coverage of the predominantly small (1-100 employees) establishments that are principally engaged in research and development related to biotechnology, clean energy, and a variety of other applications.
Consider the following:
Keep these statistics in mind and look for “Part 2” in the weeks ahead. This will give you some time to consider what these findings mean to you and your community. In “Part 2” I’ll touch on the appropriate way to interpret them and what they mean for communities in today’s competitive environment where targeting is commonplace. HINT: It isn’t as pessimistic as it might appear.
At Market Street, we frequently work with communities to help them identify the clusters of economic activity in their regions that can serve as engines for future growth. From a practitioner’s point of view, focusing strategic investments and programs on specific clusters (a.k.a. “targeting”) can help ensure that limited budgets are spent wisely on developing opportunities that have best chance for success, and thus, offer the best return on investment.
Ten years ago, biotechnology was all the rage. Practically every state, chamber of commerce, or local government was targeting biotechnology. If you weren’t targeting biotech, something had to be wrong with you! Today, biotech still has promising opportunities but clean energy seems to be the new research and development target in vogue. Now let me make it abundantly clear that I am fervent supporter of clean energy investments at the federal, state, local, and household level. I agree that clean energy presents tremendous growth opportunities that support both economic and environmental sustainability. But every community cannot successfully compete for these jobs. The same was, and is still true, for biotechnology.
So out of curiosity, I wanted to take a look at recent trends in the scientific research and development sector. Officially defined by the North American Classification System (NAICS) under the code 5417, this sector comprises establishments that undertake research or apply research findings to create new products or processes. There are many other research and development activities captured under other classifications (see Pharmaceuticals; NAICS 3254) due to the fact that research and development is not the establishment’s primary revenue-generating activity. However, NAICS 5417 gives us strong coverage of the predominantly small (1-100 employees) establishments that are principally engaged in research and development related to biotechnology, clean energy, and a variety of other applications.
Consider the following:
- As of 2010, the scientific research and development sector represents only one half of one percent of total national employment.
- Roughly half (49.7 percent) of the sector’s employment is concentrated in 12 metropolitan areas. All twelve of these metropolitan areas are among the twenty largest metropolitan areas in the country. This leaves roughly 310,000 scientific research and development jobs to be divided among the rest of the country.
- Between 1990 and 2010, the scientific research and development sector added 144,623 net new jobs, growing from 476,239 employees in 1990 to 620,862 employees in 2010.
- Roughly half of this growth (72,083 jobs) occurred in only eight metropolitan areas. Roughly two-thirds of all growth (95,998 jobs) occurred in only 22 metropolitan areas. Therefore, fewer than 49,000 scientific research and development jobs were created in the last two decades outside of these 22 regions.
- Only 62 metropolitan areas added more than 100 jobs in the sector over this twenty-year period. Of these 62 regions that added at least 100 jobs in the scientific research and development sector, only one metropolitan area (Ames, Iowa) possessed fewer than 100,000 residents in 2010.
- While only 62 metropolitan areas added more than 100 jobs between 1990 and 2010, 60 metropolitan areas actually shed employment during that time. That leaves the vast majority of the nation’s metropolitan areas with sluggish growth, between one and 100 net new jobs created over a twenty-year period.
Keep these statistics in mind and look for “Part 2” in the weeks ahead. This will give you some time to consider what these findings mean to you and your community. In “Part 2” I’ll touch on the appropriate way to interpret them and what they mean for communities in today’s competitive environment where targeting is commonplace. HINT: It isn’t as pessimistic as it might appear.
Tuesday, July 5, 2011
All I Really Need to Know I Learned in Preschool
By Stephanie Allen, Project Assistant. You know that poem “All I Really Need to Know I Learned in Kindergarten”? It suggests that most of what you need to know about how to get along in life you learned as a small child in school: don’t take things that aren’t yours, share, clean up your own mess, don’t hit people, put things back where you found them, play fair, say you’re sorry—that sort of thing. It’s an inspirational poem—the kind of thing your mom might have included in the card she gave your kindergarten teacher after your kindergarten graduation.
Whether you find the poem inspirational or just overly sentimental, new research suggests it’s right about one thing: we learn some pretty economically (not to mention socially) valuable life lessons in school-based early childhood education programs. Data from studies of preschool programs in Ypsilanti, Michigan and Chicago, Illinois suggest that the “soft skills” we learn in early childhood (from ages 2 to 5) have a huge economic impact.
We often think of preschool as playtime and not necessarily as a place where the sorts of skills that boost our earning potentials are being developed. Typically, when we look at the value of education we’re talking about the value of knowing the material that was covered in class or developing a certain set of cognitive skills. The soft-skills we learn in preschool like how to negotiate, to share, to stay on task, to respect others, to pay attention, to control our tempers, etc. are somewhat more difficult to quantify, but apparently no less important than the cognitive skills we learn and the knowledge we acquire in K-16.
A study published last month in Science suggests that kids who go to preschool have higher educational attainment, higher income, higher socioeconomic status, higher rates of health insurance coverage, lower rates of justice-system involvement, and lower rates of substance abuse. Research from the Perry Project in Ypsilanti shows that disadvantaged boys who went to preschool were half as likely to be in jail as their counterparts in the control group who did not attend preschool; the preschool kids were also unemployed less often and earned about 30 percent more than their non-preschool going counterparts. All of that not only means increased incomes for the individuals involved, it also has an impact on local, state, and national economies.
University of Chicago economist and Nobel Prize winner James Heckman has argued that investing money in high-quality preschool for disadvantaged kids is one of the smartest things we can do with our money. In his 2010 paper “A New Cost-Benefit and Rate of Return Analysis for the Perry Preschool Program: A Summary”, Heckman maintains that for every dollar we spend on such programs we get back 7-10 percent per year in reduced costs of courts and crime, reduced costs of educating unruly and undisciplined kids, reduced costs of unemployment and social safety net programs, and increased earnings, among other things.
Considering the relatively low cost of high-quality preschool programs, the high level of economic return, and the high level of participation effects, we might do well, as economic developers, to focus more of our attention when it comes to workforce training on funding early-childhood education.
Regular readers of this blog may recall my related post from last September on the economic value of high-quality kindergarten programs. I thought I’d also share a few links to other papers James Heckman has written about the economic value of preschool: “The Productivity Argument for Investing in Young Children”, and “Analyzing Social Experiments as Implemented: A Reevaluation of the Evidence from the HighScope Perry Preschool Program”. I first heard about these studies from the Planet Moneyblog—they also have a podcast where they talk to James Heckman about his work on the value of preschool.