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Saturday, November 27, 2010
Child Care Subsidies Pay Off
By Frances Varela
Albuquerque Small Business Owner
During the recent gubernatorial campaign and in the press, two key issues emerged: how to create a "positive business climate" in New Mexico by providing corporations with tax breaks and the issue of child care subsidies.
There are some unexamined assumptions about how to promote a positive business climate in New Mexico. A common assumption is that if we provide out-of-state corporations with big "handouts" in the form of tax breaks, subsidies and incentives, this will create economic growth. Another common assumption is that providing "handouts" in the form of child care subsidies to low-income families so they can participate in the workforce and further their education is a drain on the state budget and detracts from economic growth.
Major distinguished economists have weighed in on this debate.
Dr. James Heckman, University of Chicago professor and recipient of the 2000 Nobel Prize in Economics, has argued that investing in human capital and the workforce is one of the most effective strategies for promoting economic growth.
In his analysis, the highest rates of economic return to society result from investment in high quality early childhood programs, especially for disadvantaged children.
Art Rolnick, senior vice president and director of research of the Federal Reserve Bank of Minneapolis, has done economic analysis demonstrating that providing subsidies, tax incentives and other taxpayer-funded handouts to corporations provides negligible to negative rates of return to the taxpayer. He further presents data that investment in high quality early childhood programs yields an astounding 16 percent rate of return to the public who invested in them.
This high rate of return is due to savings in welfare costs, special education, reduction of crime, increased earnings of participants, greater school achievement with fewer school dropouts.
In New Mexico, 63 percent of families with children under the age of 6 are in the workforce. This is because with the high cost of living it takes two paychecks to make ends meet.
Families with young children are at the very lowest end of the pay scale because they are just starting their careers or pursuing an education.
High-quality early care and education (aka child care or day care) costs an average of $550 per month for one child ($998 for two), or one-third of the average household budget.
Families who can't afford child care, but have to work, are forced to place their children in unsafe home environments that contribute nothing to their child's development or to school readiness.
When the state of New Mexico provides subsidies for child care, this is a two-generation investment in New Mexico's current and future work force. The most formative and crucial years in the development of a human being are from the womb to the kindergarten classroom.
Creating the foundation for school and future economic success is the economic result that high quality early childhood programs (day care or child care) produce.
By providing child care to working parents, we support them to participate in the workforce, absenteeism is reduced and there is higher worker productivity. Keeping families working reduces welfare dependency and reduces costs to the state.
If we are truly going to be results-oriented, then the state welfare assistance that corporations receive in the form of tax breaks need to prove that they can at least yield the same rate of public return to the taxpayer that high-quality early childhood programs demonstrate.
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