What happens if you don't invest? The cost of inaction for early childhood education

• In Event: Highlighted Session: Four types of data required for results-based financing in ECD and education

Proposal

The cost of inaction (COI) represents both direct and indirect costs to society if an intervention, which leads to desirable social or environmental outcomes, is not provided. For example, the indirect costs of not providing quality early childhood education (ECE) would be poor economic growth as a result of low labor productivity and direct costs would be criminal justice system expenditures resulting from higher crime rates.

When financing is tied to specific outcomes, such as in RBF, data on the cost of not achieving them helps funders to determine how much they should pay. In countries where there is a strong social safety net, direct costs avoided would include for example unemployment benefits, while in low-income countries, where such safety nets may not exist, the estimated value of an outcome may be mostly based on the opportunity costs. The cost of inaction is a central consideration in ECE, where missed opportunities may have severe individual and societal consequences.

This presentation features research that builds on the empirical literature on the costs and benefits of early life interventions to illustrate the economic rationale for funding such programs. The focus of the analysis is on universal provision of at least one year of ECE which corresponds to SDG target 4.2. The cost and benefits of offering at least one year of ECE programming to all pre-school age children are calculated and monetized. This is done by estimating the long-term impact of these programs in terms of additional future wage and labor incomes resulting from early life participation in these programs. The literature on the long-term impacts of ECE programs is substantial. However, few studies have been able to follow children into adulthood and to directly quantify later wage benefits. To create longer-term links, this study combines pooled estimates of ECCE impacts on child development in early life from our meta-analysis with evidence on how these improvements in childhood skills relate to indicators of adult productivity. Data included in the COI calculations include impact estimates using either randomized or quasi-experimental study designs (including large scale national programs), assumptions regarding the minimum working age in most countries, data on the average number of completed years of schooling by countries’ populations aged 25 years and older, average wages and wage growth.

Author

• Jaqueline F. Natal, ECDAN