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More pre-K education makes good sense for business

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Archives - May 2006
Monday, May 01, 2006

Expanding pre-K education for disadvantaged children isn’t just a social issue for business leaders — it’s a smart economic investment.

By Robin Doussard

Ken Thrasher is a sharp businessman who has a surefire way to save the state money, create a better workforce and get a great return on an investment.

Give disadvantaged 3- and 4-year-olds a chance.

“These kids who don’t make it end up costing us money,” says Thrasher, CEO of Portland-based compliance company Compli and an education advocate for 30 years. Research shows that the achievement gap between advantaged and disadvantaged children already is entrenched before the first day of kindergarten, and that closing that gap means increasing access to high-quality early childhood education programs.

“If we don’t start right,” Thrasher says, “it becomes a big problem.” 

While the funding battles for K-12 grab the headlines, Thrasher and dozens of other business and civic leaders from around the
state are making the case that a critical economic development issue is providing quality education for disadvantaged pre-schoolers. This coalition, the Ready for School Campaign, is preparing to ask the 2007 Legislature to fund an expansion of the Oregon Head Start Pre-Kindergarten program, and it’s basing its case on such hard-nosed business fundamentals as cost savings and bottom-line returns.

“For years we’ve been talking about the moral arguments and that hasn’t gotten us that far,” says Swati Adarkar, executive director of the Children’s Institute, a Portland research and action organization that is leading the communication and research effort for the Ready for School Campaign. “Now people are realizing it is an economic development strategy.”

Source: Oregon Department of Education

Net annual state revenue per person by education level
High school dropout -$8,460
High school graduate
Some college -$1,343
College graduate $8,250
Source: Oregon Department of Education

Oregon Department of Education estimates the cost would be $40 million over the first two years. To continue the program would cost $27 million per year. Ready for School’s Thrasher says that funding options are being analyzed and no proposal has been
recommended yet.

Richard Alexander, the founder of window-maker Viking Industries and a member of the Ready for School steering committee, says he believes quality pre-K programs are “the most effective and best economic development plan you can have.”

“Business is attuned to this issue because they see it as an economic issue as well as a social issue,” Alexander says. “Funding early education is right for the kids and it’s right for the state. It reduces crime, improves the workforce and increases the tax base. We’re going to have to convince everyone that this is a very, very good investment with a high rate of return. We can’t afford not to do this.”

WHAT’S THE ECONOMIC IMPACT of having 40% of Oregon’s disadvantaged children go without early education? The National Institute for Early Education Research estimates it costs society about $100,000 for every child who grows up in poverty and without access to at least two years of early schooling. These costs are from lost earnings, crime and social service needs. In Oregon, that means the future societal cost of its 6,400 disadvantaged children who currently have no access to early education would be $646 million. 

How early investment saves future costs was examined in Michigan’s landmark Perry Preschool Study, which tracked over 40 years low-income children who were given two years of early education. It found that they were not only better prepared for school but were better citizens. They were more likely to hold a job and were four times less likely to have any criminal involvement as adults. The study found that for every $1 invested, there was a savings to society of nearly $13.

Also, the Perry study found that for an investment of $15,166 per student over two years there was an economic return to society of more than $195,000. The vast majority of the benefit came from crime-cost savings.

Nobel Prize-winning economist James Heckman of the University of Chicago has written that preschool and other interventions for disadvantaged children “raise the quality of the workforce, enhance the productivity of schools and reduce crime, teen pregnancy and welfare dependency. They raise earnings and promote social attachment. Focusing solely on earnings gains, returns to dollars invested are as high as 15-17% [per year].”

“It comes down to cost-effectiveness and future savings,” says Adarkar. “We have a group of core business leaders who are adamant that pre-K has to be part of the discussion on education. It’s a growing choir.”

The choir reaches beyond Oregon. A national poll earlier this year of 205 senior executives at Fortune 1,000 companies found that American business leaders over-whelmingly backed public funding for pre-K for all children to keep the U.S. economy globally competitive.

Despite the growing recognition of the importance of early education, Oregon still falls far behind other states, which mightily frustrates the state’s advocates. Oklahoma and Georgia have free voluntary preschool programs for all 4-year-olds regardless of their family’s income. California will vote in June on a measure to provide preschool for all 4-year-olds in the state. Here, advocates are focused on helping the neediest children first, where they say the payoff is bigger.

Many Oregon business leaders point with envy to the strides Washington State has made in addressing these issues. Gov. Chris Gregoire has led the charge to create a Department of Early Learning, a public-private partnership for early childhood services called Thrive by Five, and Washington Learns, an 18-month comprehensive study on the state’s existing education system, from early learning through K-12 to higher education.

Meanwhile, Oregon is 40th among states in enrollment of children in preschool and struggles with substantial funding and quality issues throughout its education system, from pre-K through K-12 to university levels.

Lyn Hennion, senior vice president of Medford brokerage firm Strand Atkinson Williams & York and a member of the Ready for School leaders panel, said business interest in the pre-K issue is all about workforce development. “Businesses aren’t going to locate in Oregon if they don’t have access to a good workforce. And there won’t be a good workforce without education. In order to turn out the best possible product, we’ve got to start young.”

Why has this taken so long to figure out? “It’s been talked about for a long time, but it is easy to cut those programs when you need money to fix the product, rather than the machine,” Hennion surmises. “It will be 20 years before you get the payoff. And 3-year-olds aren’t the voters.”

Maybe not, but they now have some powerful advocates, businesspeople such as Thrasher, who is intent on being a voice for children because he owes his success to a caring mentor and because he believes in payback. And because he’s a sharp businessman.

“Every kid should have a chance,” says Thrasher. “And if you start right, you’ll save time, money and effort.”

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