The Bottom Line

Research shows that human brains develop more between birth and age 3 than any other time in our lives, yet the concept of public education in the United States typically refers only to the period between kindergarten and high school graduation (K-12.) The first three years of life affect future learning, behavior, and health, but this age group remains conspicuously absent from most public education funding models, policies, and labor protections at the state and federal level. The myriad benefits of increasing access to high-quality childcare and early childhood education programs extend even beyond learning and wellbeing: the broader social and economic impacts prove early childhood programs to be one of the highest-return investments we can make with public dollars. 

I predict the next decade of education finance will be far more inclusive of childcare and early childhood education—expanding the traditional “K-12” focus to a comprehensive “cradle to career” approach to education, made possible through robust public investments in universal access to high-quality early childhood programs. 

Types of childcare between birth and kindergarten

There are separate but related challenges with increasing public childcare and education programs for children between birth and kindergarten.

• Child Care refers to an institution that primarily provides supervision and care of infants and young children during daytime or other times that parents need child care to maintain employment, which can include third shift hours, where there is a gap in care that is often met by home-based care programs. The staff in these facilities are typically not required to possess advanced degrees in education or teaching certifications.
  
  
• Early Childhood Education refers to an early childhood center (sometimes home-based) or school-based preschool that, in addition to meeting children’s basic needs, also focuses on learning and development milestones and provides education to prepare children for kindergarten. The teachers in these facilities typically have higher levels of education and/or training, often including state-certificated teachers. 
  
  
• Head Start is a federal program to support early learning and development for children between birth and kindergarten whose families meet the federal low-income guidelines. “The federal government funds Head Start programs through the U.S. Department of Health and Human Services, Administration for Children and Families. Across the country, school districts, nonprofit and for-profit groups, faith-based institutions, tribal councils, and other organizations qualify to become a Head Start recipient and receive federal funding. The federal-to-local model allows local leaders to create a Head Start experience that is responsive to the unique and specific needs of their community.” 

Let's talk about childcare

Childcare in the U.S. is severely inadequate, inequitable, and unaffordable. Far too many parents cannot find or afford the care they need—out-of-pocket costs to families continue to rise, and families with fewer resources often struggle the most to find or pay for a high-quality program. If parents can’t secure childcare, they are often forced to leave the workforce, impacting not only their family’s livelihood, but also the economy as a whole.

The childcare system is dangerously close to collapse. The COVID-19 pandemic forced many early childhood centers to decrease their enrollment (and revenue/funding), increase their prices, or close their doors entirely. Even as pandemic recovery is underway, the nationwide workforce shortages, rising costs, and impending end of stimulus funding will further imperil the already fragile system. 

A report by the Maryland Family Network highlighted that 50% of working Maryland parents with children age five and under reported a short-term disruption to employment (e.g., a sick child) in the past three months because of issues with child care. “In 2016, absence and turnover due to child care issues of working Maryland parents with children age five and under cost Maryland employers approximately $2.41 billion.” 

There is virtually no industrialized country in the world that doesn’t provide some kind of (generous) paid family and medical leave, state subsidized child care, and/or child tax credits. Wealthy countries’ governments contribute an average of $14,000 per child per year for childcare, compared with just $500 in the United States, most of which is in the form of federal assistance to families in poverty. By contrast, Finland (the / country / whose / education / system / we / can’t / stop / comparing / with / the / U.S.) spends $23,353 per child. In short, this country’s chronic underinvestment in childcare is an economic crisis, an educational disaster, and a global embarrassment—a stunning trifecta of governmental failure.  

Let's talk about early childhood education

The research on the value of high-quality programming for infants, toddlers, and preschool is staggeringly consequential and overwhelmingly positive: children who score higher on “school readiness” indicators when they start kindergarten are more likely to read on grade-level by third grade and more likely to graduate high school on time (without repeating a grade). According to the American Academy of Pediatrics, one of the most widely recognized risk factors for school readiness is poverty: fewer than half (48%) of poor children are ready for school at five years of age as compared with 75% of children from moderate- or high-income households. 

High-quality preschool programming is the closest thing we have to a silver bullet when it comes to mitigating the impact of poverty on a child’s educational outcomes. A 2022 research study by the Washington Office of Superintendent of Public Instruction found that “kindergarten readiness predicted whether students met third grade SBA standards, even after controlling for student characteristics. The odds of meeting ELA standards were 1.62 times greater for students who were kindergarten-ready in literacy compared to students who were not. Likewise, the odds of meeting math standards were 1.72 times greater for students who were kindergarten-ready in math.”

Excellent preschools consistently prove to be our very best shot at closing the stubborn gaps in educational outcomes across race and class lines, and not only have we failed to universally invest in early childhood programs, but they often elude our entire concept of education, which only begins at kindergarten as far as educational funding and policy is concerned.

Who pays for early childhood care costs?

Parents and families currently bear the majority (55%) of early childhood care costs through private payments that are estimated to consume between 10-27% of annual household income. Fractured private networks of (often unregulated/unlicensed) centers with varying costs, quality, and safety have obvious equity implications. We also lack a comprehensive understanding of how the myriad funding streams for early childhood education are being allocated (and to whom), which leads to notable inequities in funding. A comprehensive study by Afton Partners in IL showed there was no correlation between funding and community needs. 

The birth-to-five period is a critical window for identification of a child’s special needs, as well as early intervention to address developmental delays. However, targeted funding streams for Early Childhood Special Education in particular do not support child- and family-centered services. For inclusion purposes, all children who are eligible for special education services should be able to receive them in a way that meets their needs and the needs of their families across a continuum of settings in home, schools, and community-based programs. 

“The early childhood education system is also highly socioeconomically segregated. Means testing for programs causes children to be sorted, and thus segregated, into classrooms by their family’s income, which, in practice, often translates to racial, ethnic, and linguistic segregation as well. For example, Head Start and state preschool programs often operate in parallel and serve children in poverty separately from their higher-income peers in state or private preschool programs. Although some schools and community-based organizations blend state preschool and Head Start funding, doing so is difficult due to differences in federal and state standards and reporting requirements.” 

The education funding inequities and segregation of special education services and low-income students literally begin at a child’s birth and are often compounded through high school—a damning indictment of this country’s empty promise to create equal opportunities for all children. 

What about workforce development and ROI?

Early childhood centers continue to struggle to hire staff and pay them a living wage, especially as workforce shortages push wages up in other industries like retail and restaurant chains. The Bureau of Labor Statistics reports that childcare workers earned a mean annual wage of $27,680 as of May 2021—hovering near the federal poverty line for a family of four. Many childcare workers do not have access to employer-provided benefits, including paid sick leave. Early childhood educators are 97% women and are more racially diverse than the general population with 38% of childhood educators estimated to be women of color. Structural racism and misogyny are glaringly obvious in a field where the work of women and, specifically, women of color, is persistently undervalued and underpaid despite well-documented economic impact. 

Today, the US spends about $76 billion per year on early childhood, of which families foot the bill for about 55% ($42 billion) for private child care. There is another hidden cost to this system: parents forgo roughly $30–35 billion in income because the current high cost of early childhood education leads many parents to leave the paid labor force, or reduce their paid work hours, to care for their children. This translates into a loss of tax revenue of about $4.2 billion each year. That brings the tab closer to $115 billion, for which we have a fractured system of care that is inadequate, inequitable, economically depressing, and exploitative to the childcare workforce—not exactly a bargain. 

One study estimates that the cost of providing universal birth-to-five care and education—in which teachers are appropriately compensated and programs are of high quality and available to all families—would be in the ballpark of $400 billion per year. Yes: that’s a steep ~250% increase in spending, but studies show that high quality birth-to-five programs yield a 13% return on investment (ROI). This research analyzes a wide variety of life outcomes, such as health, crime, income, IQ, schooling, and the increase in a mother’s income after returning to work due to childcare. 

We can conclude that this ROI may be significantly underestimated at scale when we factor in:

• The stimulus of parents redirecting $42 billion in saved costs to other spending
• The additional economic stimulus created by households earning an additional $30-35 billion as the cost/benefit ratio of work versus childcare shifts to favor workforce reentry
• The economic stimulus of the 2-3 million women in the childcare workforce realizing increased wages (remember: women influence 85% of consumer spending)
• Billions of dollars in increased tax revenue due to the all of the above
• Increased GDP to the tune of over $200 billion per year 

The only real question about investing in early childhood care and education is: how can we afford not to make these critical investments in education, society, and the economy?

This article is the eighth in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read other topics in the series now:

• Teacher Compensation
• Declining Enrollment
• Pension Debt & Reform
• The Great Unbundling
• The Future of EdTech
• Reimagining K-12 Real Estate
• State Funding Formulas
• Investing in Early Childhood
• School Choice
• EdFinTech Climbs to New Heights

Special thanks to Katie Reed and Laura Weeldeyer  for their contributions to this piece! 

Contributing Authors

Katie Reed, Partner and Managing Director | Afton Partners