Investing in Young Children Strengthens our Economy  

PRINT

Policies supporting early childhood help people meet their full potential, as well as facilitate economic growth. Tax credits reduce child poverty, paid family leave improves parents’ mental health, and Early Head Start programs enhance literacy and numeracy skills. These policies illustrate the power of state decisions, which do not merely affect the individual child’s life; policy choices generate a ripple effect that fortifies communities and propels the wider economy.  

Clearly, infants and toddlers are not simply beneficiaries of policy. These young children are vital assets, whose wellbeing supports our country’s advancement. Stress early in life carries a societal price tag because of strain to public resources and hampered economic growth. This post explores the economic argument for why the youngest children, our most vulnerable yet promising assets, deserve strategic investment. 

Early Childhood Development: The Ideal Window of Opportunity  

Research underscores the importance of the first 3 years of a child’s life in shaping their cognitive, emotional, and social development. This is not abstract theory; it is reality grounded in a body of scientific evidence, with key policy takeaways synthesized in the Prenatal-to-3 State Policy Roadmap.  

In the earliest years of life, our brains absorb knowledge and experiences at an astounding rate. Over a million new neural connections form every second from birth to age 3, and the brain relies on environmental input to fully form. Unfortunately, this period of rapid growth makes young children especially susceptible to harmful environmental stressors—such as poverty, abuse, and maternal depression. 

As early as 9 months, we can already see disparities in cognitive development, social-emotional development, and health between high- and low-income families. Once present, these achievement gaps can be hard to reverse. Given the crucial foundation early years provide for subsequent learning, as well as future physical and mental health, this period offers the optimal opportunity for improving child health and development and for closing achievement gaps.  

Investment in Early Childhood: A Catalyst for Economic Returns  

When we support families with young children, we invest in a promising future with tangible returns. These returns extend beyond immediate and individual economic benefits to include larger and broader, long-term benefits. Although the cost to taxpayers may seem steep, a deep dive into the research paints a different picture.  

The US actually spends more money on national defense than it does on policies to help young children succeed. We also spend more money on incarceration compared to children. But policies that set children up for future success in school and life can really pay off—by mitigating societal challenges and reducing government health and human services spending needs. Prenatal-to-3 policies can reduce taxpayer burden in the areas of remedial and special education, health care, and criminal justice expenditures.  

For instance, the earned income tax credit, which helps workers with low and moderate incomes keep more of their wages, is one of the most cost-effective anti-poverty policies in the US and can bring a significant return on investment. Depending on the generosity of the credit, analyses of South Carolina and Pennsylvania show that a refundable credit could lead to potential net benefits outweighing costs by a ratio of 10:1 and 7:1 respectively. The benefits accrue through increased tax revenue and a reduced tax burden.  

A Global Perspective: US Children are Behind, but We Know How to Catch Up 

When viewed globally, the need to invest in early childhood becomes a pressing call to action. Compared to peers in other advanced economies, American children fall behind in crucial areas—such as self-regulation, literacy, and numeracy—which predict later success in school and life. According to the OECD, policies that impact these scores range from paid family leave to tax credits, but “the most direct policy levers available… are in the realm of early care and education, as well as parenting programs”. In the US, this looks like Early Head Start, a program that provides child development and family support, and early intervention services, programs for young children with disabilities or developmental delays.  

The US also trails behind in paid family leave; we are the only OECD country without a national policy. Despite known benefits, only 13 states have adopted a statewide paid family leave program, and only 7 of these states have fully implemented benefits of at least 6 weeks. In September 2023, Oregon will become the 8th state to implement benefits.  

Global comparisons become even more glaring when we note that emerging economies like China and India have incorporated early childhood into their national strategies. Both countries have invested to increase preschool enrollment and remove financial barriers to early care and education. The achievement gaps we see in young children are harder to bridge as they grow older, making this an urgent concern.  

Without dedicated action at the state level, our country risks falling even further behind in a globally competitive economy. The productivity of our future workforce, a key driver of economic growth and competitiveness, relies on federal and state attention to the most effective policies to ensure children thrive from the start.  

Strategic investment in early development can stimulate our economy and enhance our global standing. As we invest in young children, we invest in our country’s future.  

To stay up to date on the state policies that impact children from the prenatal period to age 3, sign up for our newsletter

Related

States and community organizations can increase awareness of credits. Increasingly, the state and federal government use tax credits, such as the child tax credit and the earned income tax credit, to support families with low
Evaluating Texas’s in-kind and monetary assistance during COVID-19 To promote nurturing and responsive parent-child relationships and healthy home environments, states can offer home visiting programs to expectant and new parents with young children. During the
Though most legislative sessions have adjourned, lawmakers and advocates across the country continue to advance efforts to support children and families. A lot can happen at the tail end of a legislative session, as Colorado