Early Childhood Education Craig Alexander SVP & Chief Economist October 2012 CANADA HAS AN ESSENTIAL SKILLS CHALLENGE LITERACY IN CANADA 70 Per cent of population with inadequate literacy by category 60 55.1 50 47.7 40 39.3 30 20 10 0 Youth Reading* Adult Prose** Adult Numeracy** * Students aged 15 ** Adults aged 16 and over; Source: Statistics Canada, Learning Metrix Inc. The Economic Outlook 1 TD Economics, September 2012
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 Rates of Return to Human Capital Investment at Different Ages: Return to an Extra Dollar at Various Ages Rate of return to investment in human capital 0-3 4-5 Preschool Programs targeted towards the earliest years Preschool programs School Schooling Post-school Job training Age The Economic Outlook 2 TD Economics, September 2012
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 The Economic Outlook 3 TD Economics, September 2012
PRE-PRIMARY EDUCATION PROGRAMS IMPROVE COGNITIVE AND LANGUAGE DEVELOPMENT Increase by 1% the proportion of students who attend preprimary education Increase the duration of preprimary education by 1 year Reduce pupils-to-teacher ratio in pre-primary school by 1 student Spend an extra dollar (PPP) on preprimary education 0 2 4 6 8 10 12 Source: OECD Score Point Difference on PISA Results LEADING TO BETTER EDUCATIONAL PERFORMANCES 40 35 30 Five-Year-Olds, % Grade retention rate (grades 1-8) % funding for special education Canadian high school dropout rate 25 20 15 10 5 0 All Children Participants Source: Child Care Human Resources Sector Council; 2005 The Economic Outlook 4 TD Economics, September 2012
ECONOMIC AND SOCIAL OUTCOMES ALSO IMPROVE ECONOMIC AND SOCIAL OUTCOMES Participants* (%) Control Group (%) Smoked 41.5 50.7 Used hard drugs 22.2 29.3 Used soft drugs 45.3 54.4 Treated for drug/drinking problems 22.2 33.9 Owned a home 36.7 26.6 Owned a car 73.8 60.9 Had life insurance 66.5 53.8 Source: Child Care Human Resources Council *Participants of the High/Scope Perry Pre-School Program ALL CHILDREN BENEFIT FROM ECE, BUT DISADVANTAGED CHILDREN BENEFIT MORE 35% % Vulnerable by Socio-Economic Status 30% 25% 20% 15% 10% 5% 0% Low Moderate Middle High Family Income Source: Report to the Premier by the Special Advisor on Early Learning, Charles E. Pascal The Economic Outlook 5 TD Economics, September 2012
ECE PROGRAMS ALLOW MOTHERS TO WORK, INCREASING FAMILY INCOME Participation Rate of Women with Children 90% Dual-parent family Single-parent family 85% 80% 75% 70% 65% 60% 55% 50% Child less than 6 years old Child 6-15 years old Source: Statistics Canada, 2011 BUILDING A BETTER WORKFORCE FOR THE FUTURE IS KEY GIVEN CHANGING DEMOGRAPHICS Baby Boomer Generation Share of the Labour Force 40% 38% 36% 34% 32% 30% 28% 26% 24% 22% 20% 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Source: Statistics Canada; Baby Boomer defined as Ages 45-64. The Economic Outlook 6 TD Economics, September 2012
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 Employment Multiplier Jobs per $Million GDP Multiplier per Dollar Increase in Output 50 Employment (lhs) GDP (rhs) 1.0 40 0.9 30 0.8 20 0.7 10 0.6 0 0.5 Child care outside home Education Accom. & food services Recreation Retail trade Health care Agriculture Prof. & tech. services Government Wholesale trade Transportation Industry Construction Fishing Forestry Manufacturing FIRE Utilities Mining Source: Child Care Human Resources Sector Council The Economic Outlook 7 TD Economics, September 2012
AND CAN RESULT IN LOWER SOCIAL COSTS Estimated Annual Cost of One Highschool Dropout, $ 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Social Assistance Crime Tax revenue loss Revenue loss Employment in employment insurance cost insurance premium Source: Canadian Council on Learning MANY STUDIES SHOW THE BENEFITS OUTWEIGH THE COSTS STUDIES OF COST-BENEFIT ANALYSIS OF ECE PROGRAMS Study Benefit / Cost ($) Economic Consequences of Quebec's Educational Child Care Policy, by Fortin, Godbout & St-Cerny, 2011 Better Beginnings, Better Futures by Peters et al., 2010 Worforce Shortages Socio-Economic Effects, by Fairholm, 2009 Child Care as Economic and Social Development, by Prentice, 2007 The Benefits and Costs of Good Child Care, by Cleveland & Krashinsky, 1998 1.49 2.00 2.42 2.78 2.00 Source: Early Years Study The Economic Outlook 8 TD Economics, September 2012
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 The Economic Outlook 9 TD Economics, September 2012
WHILE UNEVEN ACROSS THE COUNTRY, THERE IS PUBLIC FUNDING FOR ECE PROGRAMS ECE Budget as a % of 2011-12 Provincial & Territorial Budgets 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 NL PE NS NB QC ON MB SK AB BC NT YK NU Source: Early Years Study DESPITE EFFORTS TO IMPROVE AFFORDABILITY, SOME FAMILIES STILL UNABLE TO PARTICIPATE 70% Children Age 0-5 with no out-of-home care 60% 50% 40% 30% 20% 10% 0% Poor Low-Moderate Moderate Affluent Family Income Source: Early Years Study The Economic Outlook 10 TD Economics, September 2012
PUBLIC SPENDING IN CANADA HAS FALLEN SHORT OF MANY OF ITS PEERS 2.5% Public Expenditure on ECE services as % of GDP 2.0% 1.5% 1.0% 0.5% 0.0% Canada Australia Italy Germany Netherlands US UK Austria Hungary France Finland Norway Sweden Denmark Source: OECD AND PARENTS COVER MORE OF THE COSTS THAN OTHER COUNTRIES 80 % of program costs paid by parents 70 60 50 40 30 20 10 0 KR US IE CA CZ UK NL PT BE AU FR DK AT NO IT FI DE SE HU Source: ChildCare Resource and Research Unit The Economic Outlook 11 TD Economics, September 2012
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 ALL PROVINCES & TERRITORIES % of GDP % of GDP 2 Budget Balance (left) Net Debt (right) 35 1 30 0 25-1 20-2 15-3 10-4 87-88 90-91 93-94 96-97 99-00 02-03 05-06 08-09 11-12E 5 Source: Federal Fiscal Reference Tables The Economic Outlook 12 TD Economics, September 2012
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. The Economic Outlook 13 TD Economics, September 2012