Early investment in the disadvantaged key to closing inequality gap
To reduce inequality and promote prosperity, policymakers should focus on investment in early childhood education for disadvantaged children
During his 2013 State of the Union address, US President Barack Obama referred to University of Chicago professor James Heckman's findings of a 7 to 10 per cent return on investment per annum for certain early childhood education programmes. These rates of return are higher than those in the stock market between 1945 and 2008.
Everyone knows education boosts productivity and enlarges opportunities, so it is natural that proposals for reducing inequality emphasise effective education for all.
But according to Heckman, "existing solutions ignore a powerful body of research in the economics of human development that tells us which skills matter for producing successful lives. They ignore the role of families in producing the relevant skills. They also ignore or play down the critical gap in skills between advantaged and disadvantaged children that emerges long before they enter school".
His path-breaking research shows the rate of return to a unit dollar invested in human capital is the greatest in the prenatal period, followed by zero to five years of age.
Heckman synthesised two unrelated streams of literature - the human capital approach to health economics and the economics of cognitive and non-cognitive (character-building) skill formation - to help us understand the origins of human inequality.
He found that ability gaps between individuals and across socioeconomic groups opened up at early ages, for both cognitive and non-cognitive skills, as did gaps in health status. These gaps are highly correlated with family background factors such as parental education and maternal ability.
Most importantly, small initial skill gaps that appear in early childhood will accelerate into increasingly larger gaps over time if they are not remedied. Intervention at early ages is therefore warranted before it is too late.
If a young disadvantaged child can be helped to acquire the most relevant skills when their learning capacity is most effective, then their skill gaps could be narrowed more effectively and also most cost-effectively.
High-quality early childhood programmes are great economic and social equalisers - they supplement the family lives of disadvantaged children by teaching consistent parenting and giving children the mentoring, encouragement and support available to functioning middle-class families. Smaller class sizes, adult literacy and many job training programmes, on the other hand, are not nearly as effective or cost-efficient.
To check the growth in the underclass, Heckman has called on policymakers to adhere "to a few essential principles: focus on disadvantaged families, start at birth, integrate health, develop cognitive and character skills, and encourage local innovation in quality programmes from birth to age five".
Economic growth and equality are often considered conflicting policy goals. Heckman shows there need be no trade-off between equity and efficiency. Early investment in disadvantaged children will help reduce inequality, in both the short and the long run, and promote prosperity.
Heckman will deliver a public lecture on investing in early childhood at the University of Hong Kong on March 30.