Texas Border Business
The importance of effective early childhood education can hardly be overstated. In addition to improving the future quality of life and opportunities for children by better preparing them for success in school, such options are crucial to working parents. My firm recently examined this phenomenon through an economic cost and benefit lens, and the results make a compelling case for substantial and sustained investments.
Empirical studies (including by Nobel Laureate Jim Heckman) have quantified direct effects, including future earnings, parental earnings, crime and social costs, and health and quality of life benefits. Using this excellent work as a starting point, the related and comprehensive dynamic effects which ripple through the economy were modeled using our complex systems. Earnings from future generations due to breaking the poverty cycle were also incorporated.
When these major categories of benefits were quantified, the analysis indicates that $1.00 invested in early childhood education yields $60.04 in aggregate net benefits over time. This return on investment includes the total effects (direct, indirect, and induced) associated with increased lifetime earnings of the children and their parents, benefits to future generations, reductions in crime, enhanced health outcomes, and other reduced social costs measured in 2025 dollars on a net present value basis (for additional detail, see https://www.perrymangroup.com/publications/brief/2025/12/9/essential-early-education/).
The gross product generated per dollar invested in early childhood totals $32.36, which is a return on investment much higher than the return on virtually all other types of public and private investments, including any form of infrastructure. In addition to these results, I also estimated the fiscal benefits per dollar invested (tax revenue associated with the increase in economic activity as well as reduced social costs), and they are substantial.
In compiling the research for this assessment, we found a number of supporting facts including that only 4% of kids who read at grade level by the third grade fail to finish high school, and that 16% without early childhood education don’t finish (poverty dramatically compounds the problem). Texas-specific studies have found positive gains in third grade reading level associated with early childhood education for disadvantaged children. The National Academies of Sciences has determined that brain development is also positively affected.
According to the National Institute for Early Education Research, Texas ranks 35th in State funding, 40th in overall funding, and only meets two of 10 critical milestones. Committing resources to effective early childhood education (particularly for vulnerable students) can greatly enhance opportunities for improved success in school and the quality and quantity of the current and future workforce as well as their quality of life. It’s also one of the highest-return investments the State can make, helping to foster improved health, reduced social costs, and multi-generational prosperity. Stay safe!
_____________________
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.
