Early Childhood Education · 2012. 10. 24. · The Economic Outlook 1 TD Economics, September 2012 Early Childhood Education Craig Alexander SVP & Chief Economist October 2012 CANADA

The Economic Outlook 1 TD Economics, September 2012

Early Childhood Education

Craig Alexander SVP & Chief Economist

October 2012

CANADA HAS AN ESSENTIAL SKILLS CHALLENGE

LITERACY IN CANADA

39.3

47.7 55.1

0

10

20

30

40

50

60

70

Youth Reading* Adult Prose** Adult Numeracy** * Students aged 15 ** Adults aged 16 and over; Source: Statistics Canada, Learning Metrix Inc.

Per cent of population with inadequate literacy by category


ESSENTIAL SKILLS DEVELOPMENT IS CRITICAL

n Stronger essential skills:

n Increases likelihood of employment

n Decreases odds of unemployment

n Reduces duration of unemployment

n Increases range of occupations

n Lifts lifetime earnings

n Raises standard of living

HIGHEST RETURN ON INVESTMENT IS EDUCATION OF CHILDREN

Age

Ra

te o

f re

turn

to

in

ve

stm

en

t in

hu

ma

n c

ap

ita

l

Preschool programs

Schooling

Job training

0-3

4-5 Preschool

School

Post-school

Programs targeted towards the earliest years

Rates of Return to Human Capital Investment at Different Ages:

Return to an Extra Dollar at Various Ages


THE BENEFITS OF EARLY CHILDHOOD EDUCATION ARE WIDESPREAD

Children Parents

Economy & Society

THE FIRST 5 YEARS OF LIFE CAN IMPACT ECONOMIC AND SOCIAL SUCCESS

n Research has challenged prior misconceptions. Human abilities driven more by environment (80%) than genetics (20%)

n Basic abilities can be altered early in life as genes respond to life experiences

n It is more difficult to improve a child’s learning abilities later in life


PRE-PRIMARY EDUCATION PROGRAMS IMPROVE COGNITIVE AND LANGUAGE DEVELOPMENT

0 2 4 6 8 10 12

Spend an extra dollar (PPP) on pre-primary education

Reduce pupils-to-teacher ratio in pre-primary school by 1 student

Increase the duration of pre-primary education by 1 year

Increase by 1% the proportion of students who attend pre-

primary education

Source: OECDScore Point Difference on PISA Results

LEADING TO BETTER EDUCATIONAL PERFORMANCES

0

5

10

15

20

25

30

35

40

All Children Participants

Grade retention rate (grades 1-8)

% funding for special education

Canadian high school dropout rate

Source: Child Care Human Resources Sector Council; 2005

Five-Year-Olds, %


ECONOMIC AND SOCIAL OUTCOMES ALSO IMPROVE

Participants* (%) Control Group (%)

Smoked 41.5 50.7Used hard drugs 22.2 29.3Used soft drugs 45.3 54.4

Treated for drug/drinking problems 22.2 33.9Owned a home 36.7 26.6

Owned a car 73.8 60.9Had life insurance 66.5 53.8

*Participants of the High/Scope Perry Pre-School Program

ECONOMIC AND SOCIAL OUTCOMES

Source: Child Care Human Resources Council

ALL CHILDREN BENEFIT FROM ECE, BUT DISADVANTAGED CHILDREN BENEFIT MORE

0%

5%

10%

15%

20%

25%

30%

35%

Low Moderate Middle HighFamily Income

Source: Report to the Premier by the Special Advisor on Early Learning, Charles E. Pascal

% Vulnerable by Socio-Economic Status


ECE PROGRAMS ALLOW MOTHERS TO WORK, INCREASING FAMILY INCOME

50%

55%

60%

65%

70%

75%

80%

85%

90%

Child less than 6 years old Child 6-15 years old

Dual-parent family Single-parent family

Source: Statistics Canada, 2011

Participation Rate of Women with Children

BUILDING A BETTER WORKFORCE FOR THE FUTURE IS KEY GIVEN CHANGING DEMOGRAPHICS

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

Source: Statistics Canada; Baby Boomer defined as Ages 45-64.

Baby Boomer Generation Share of the Labour Force


ECONOMY NEEDS MORE SKILLED WORKERS

n Population is aging, labour force growth is slowing

n Labour shortages will be encountered

n Virtually all net job creation will be for PSE graduates

n Life-long learning and skills development will be critical

n Economy must compete on value-added output, which will demand higher skills

n Increasing productivity is essential, and won’t be successful without highly educated workers

COMPARED TO OTHER INDUSTRIES, ECE PROVIDES A LARGE RETURN TO THE BROADER ECONOMY

0

10

20

30

40

50

Child

car

e ou

tsid

e ho

me

Educ

atio

nAc

com

. & fo

od s

ervi

ces

Recr

eatio

nRe

tail

trade

Heal

th c

are

Agric

ultu

rePr

of. &

tech

. ser

vice

sG

over

nmen

tW

hole

sale

trad

eTr

ansp

orta

tion

Cons

truct

ion

Fish

ing

Fore

stry

Man

ufac

turin

g

FIRE

Utili

ties

Min

ing

0.5

0.6

0.7

0.8

0.9

1.0Employment (lhs) GDP (rhs)

Industry

GDP Multiplier per Dollar Increase in Output

Employment Multiplier Jobs per $Million

Source: Child Care Human Resources Sector Council


AND CAN RESULT IN LOWER SOCIAL COSTS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

SocialAssistance

Crime Tax revenueloss

Revenue lossin employment

insurancepremium

Employmentinsurance cost

Source: Canadian Council on Learning

Estimated Annual Cost of One Highschool Dropout, $

MANY STUDIES SHOW THE BENEFITS OUTWEIGH THE COSTS

Study Benefit / Cost ($)

Economic Consequences of Quebec's Educational Child Care Policy, by Fortin, Godbout & St-Cerny, 2011 1.49

Better Beginnings, Better Futures by Peters et al., 2010 2.00

Worforce Shortages Socio-Economic Effects, by Fairholm, 2009 2.42

Child Care as Economic and Social Development, by Prentice, 2007 2.78

The Benefits and Costs of Good Child Care, by Cleveland & Krashinsky, 1998 2.00

STUDIES OF COST-BENEFIT ANALYSIS OF ECE PROGRAMS

Source: Early Years Study


BUT THERE ARE LIMITATIONS TO THESE FINDINGS

n Costs can run over budget

n Quantifying benefits is difficult § Several assumptions made §  In the long run, things change – many unknowns

n External factors can affect results

n Location and program design/implementation matter

ALL RESULTS TELL SAME STORY

n All studies show that benefits are greater than the costs despite analyzing different programs

n In most parts of Canada, there is a gap between the end of parental leave and formal schooling

n Evidence that accessibility and cost are key issues

n Current system is fragmented

n Suggests increased investment and maximizing impact of the system would be beneficial


WHILE UNEVEN ACROSS THE COUNTRY, THERE IS PUBLIC FUNDING FOR ECE PROGRAMS

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

NL PE NS NB QC ON MB SK AB BC NT YK NU


ECE Budget as a % of 2011-12 Provincial & Territorial Budgets

DESPITE EFFORTS TO IMPROVE AFFORDABILITY, SOME FAMILIES STILL UNABLE TO PARTICIPATE

0%

10%

20%

30%

40%

50%

60%

70%

Poor Low-Moderate Moderate AffluentFamily Income


Children Age 0-5 with no out-of-home care


PUBLIC SPENDING IN CANADA HAS FALLEN SHORT OF MANY OF ITS PEERS

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Canada

Australia

Italy

Germany

Netherlands US UK

Austria

Hungary

France

Finland

Norway

Sweden

Denmark

Source: OECD

Public Expenditure on ECE services as % of GDP

AND PARENTS COVER MORE OF THE COSTS THAN OTHER COUNTRIES

0

10

20

30

40

50

60

70

80

KR US IE CA CZ UK NL PT BE AU FR DK AT NO IT FI DE SE HU

% of program costs paid by parents

Source: ChildCare Resource and Research Unit


ALL THIS SUGGESTS THAT CANADA IS UNDERINVESTING

n To move more in line with other comparable OECD countries, public investment in early childhood education in Canada would have to rise by $3-4 billion

BUT GOVERNMENTS NOT IN POSITION TO BOOST SPENDING

-4

-3

-2

-1

0

1

2

87-88 90-91 93-94 96-97 99-00 02-03 05-06 08-09 11-12E5

10

15

20

25

30

35Budget Balance (left) Net Debt (right)% of GDP % of GDP

Source: Federal Fiscal Reference Tables

ALL PROVINCES & TERRITORIES


BOTTOM LINE

n Investment in education is the ultimate tool to address many economic and social challenges

n Once fiscal balance sheets are back in order, policymakers should consider moving early childhood education higher on the priority list

TD Economics

www.td.com/economics This report is provided by TD Economics for customers of TD Bank Group. It is for information purposes only and may not be appropriate for other purposes. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

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Early Childhood Education · 2012. 10. 24. · The Economic Outlook 1 TD Economics, September 2012 Early Childhood Education Craig Alexander SVP & Chief Economist October 2012 CANADA