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To Save One Dollar

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My father once told me, "It's no great thing to save a dollar
no matter what the cost. Don't be penny-wise and pound-simple."

When it comes to public investment in children's health and education, saving a dollar today may actually cost more than a dollar tomorrow. Much of today's public expenditure on children is actually an investment in their future productivity and health.

Listed below are the conclusions of evaluations of some government expenditure programs that target children. These studies have considered the economic returns to such expenditures, either in the form of increased productivity for the entire economy or in the form of reduced future expenditure on remediation programs. Therefore, these studies do not take into account the substantial increase in welfare that accrues to the beneficiaries of these programs simply as a result of the provision of the service or transfer.


  • Cuts in immunization programs will increase future health care costs.

    • Every $1 cut in polio immunization costs $10 in later medical costs. Every $1 cut in measles, mumps, rubella immunization programs costs $14 in later medical costs.1

    • Cuts in childhood immunization increase the future incidence of these avoidable diseases and the future cost of treating diseases.


  • Cuts in WIC and Medicaid prenatal care will increase medical expenditure.

    • Every $1 cut in the prenatal care portion of the WIC program costs between $1.77 and $3.90 in increased medical expenses in the first 60 days following childbirth. The USDA made this finding in a five-state study of 105,000 Medicaid births.2

    • Every $1 cut in the prenatal care portion of the WIC program costs $3 in short-run medical expenditure according to a study in Massachusetts.3

    • Every $1 cut in the prenatal care portion of the WIC program costs between $0.49 and $0.83 in additional Medicaid expenditure within the first 30 days after childbirth according to a study in Missouri.4

    • Every $1 cut in the Medicaid comprehensive prenatal care program may cost as much as $2 dollars spent in an infant's first year of life.5

    • Prenatal care decreases the probability of low birthweight infants and the incidence of neonatal death according to several studies.6


  • Cuts in Head Start will lower academic performance and increase medical costs.

    • Head Start increases test scores and results in fewer failed grades for white and Hispanic children, and it has been demonstrated to improve the health of African-American children as measured by the height of participants and by the age at which measles vaccination is received.7

    • Participants in Head Start are less likely to repeat a grade and less likely to be assigned to special education classes.8

    • Measles vaccinations are given to a higher fraction of Head Start enrollees to all other children, both those enrolled and those not enrolled in other preschool programs.9 The cost of missing these vaccinations is discussed above in this document. A much higher share of Head Start children receive medical screening, dental checkups, and other preventive medicine than do comparable children who do not participate.10

  • Cuts in other early childhood education programs can mean enormous future costs to society.

    • The Perry Preschool Experiment in the early 1960's in Ypsilanti, Michigan, is an example of a high-quality preschool program with ancillary services made available to a low-income youth.11 A cost-benefit analysis of the program found that a $1 expenditure on the Perry Preschool program saved $4.75 in future expenditure on special education, public assistance, and crime.12 The high school graduation rate of Perry Preschool enrollees was 67 percent compared to 49 percent for the children in the control group.13


  • Cutting the income of low-income people will reduce future output.

    • Every $1 cut from means-tested transfer programs like AFDC and Food Stamps may cost between $0.92 and $1.51 in lost output due to reduced educational attainment alone.14 We expect this finding to apply to every additional $1 of taxes that low-income working people will pay if the EITC is cut.

    • Each additional child who spends one more year in poverty due to these cuts will cost the economy between $2,466 and $6,759 in reduced output -- through the effect of childhood poverty on reduced educational attainment alone.15 When we account for the total costs of childhood poverty, we find that cutting means-tested transfer programs or increasing taxes on low-income working families will cost the economy $12,105 in reduced output for each additional child who spends one more year in poverty.16

  • Cutting income support for low-income families will reduce the educational achievement of children in those families.17

    • Evidence from the Income Maintenance Experiments definitively demonstrates that educational attainment is higher in low-income families that receive income support. There is strong evidence that childhood poverty reduces educational attainment after controlling for observable family characteristics.18

    • Reducing the amount of education a persone will be able to receive will mean big losses to the economy when the return to education is so high. The return to education is estimated at between a 5 and 13 percent increase in earnings per each additional year of education.19 Cuts in income support that cause a person to forego education during childhood can add up to big productivity losses for the economy.

  • Cutting income transfers to children and their families will reduce our social performance relative to other developed countries.

    • Compared to other developed countries, the United States already has the highest rate of post tax and transfer child poverty. Furthermore, the United States tax and transfer system already has less impact on child poverty than all but one other developed country.20


  • Cutting programs that help young people finish high school may cost as much as $7,000 per dropout per year in lost output alone.

    • In 1993, men aged 25 to 34 with high school diplomas earned $25,632 per year on average. Men in this age range with less than high-school education earned only $18,719 per year. A host of economic findings on the returns to education make clear the value of encouraging completion of high school.21

    • A study of the economic performance of high-school dropouts and the cost of high-school completion in the early 1970s shows that every $1 cut from programs that assist high-school completions may cost the economy as much as $6 in lost output.22

  • Cutting programs that help young people finish high school may have even greater costs when the additional social burdens posed by dropouts are taken into account.

    • Perhaps the most extreme form of dropping through the cracks in the educational system is incarceration in the criminal justice system. Men aged 18 to 34 without a high school diploma had a one-in-four chance of being in prison, on probation, or on parole at any time in 1992. The equivalent probability for men aged 18 to 34 with a high-school diploma or higher education is only 4 percent. The expected lifetime cost of prison, parole, and welfare is $69,000 for high-school dropouts, $32,000 for high-school graduates, and $15,000 for college graduates.23

    • The Quantum Opportunities Program (QUOP), which provides intensive academic assistance and counseling and a small stipend to child AFDC recipients, achieved a 63 percent high-school graduation rate among program participants compared to only 42 percent for members of a control group. A remarkable 42 percent of QUOP participants enrolled in higher education, compared to only 16 percent of the control group. Only 24 percent of QUOP participants became parents during the four-year program compared to 38 percent of the control group.24 The QUOP program is cost-effective.

    • Cutting the Summer Youth Employment Program will take minimum wage summer jobs and remedial education from hundreds of thousands of disadvantaged young people, aged 14 to 21, who would not otherwise have these opportunities. Studies show that the program does not displace private market employment but, rather, employs youth who would otherwise be unemployed.25

    • Programs like the Center for Employment and Training (CET) in San Jose, California, generate returns much greater than their short-run costs. CET increases youth participant earnings by $6,000 per year in the third and fourth years following the program when compared to a control group. The cost per youth averages a one-time expenditure of $4,200. The CET program even increases the earnings of minority, female single-parents -- an especially difficult-to-serve population -- by $1,500 per year.26

    • The Job Corps increases the earnings of participants by $1,300 per year, a 15 percent premium, compared to a demographically similar comparison group. The cost for the residential program is high, $15,000 per participant, but the population served is highly disadvantaged: 80 percent are high school dropouts and three-quarters never worked before entering the Job Corps.

    • Graduates of the Job Corps are employed 3 weeks more per year and receive 2 weeks fewer of welfare benefits and 1 week less of unemployment insurance than the comparison group in the four years following the program. Job Corps graduates are also more likely to receive high school diplomas (25 percent against 5 percent of the comparison group) and have a lower incidence of felony crime commission.27 Every $1 cut from the Job Corps means $1.45 in lost productivity and future remedial and legal expenditure. The program evaluation found that the lifetime benefits of the program are 45 percent greater than program costs.28

    • The Jobstart program costs $5,900 per participant for a 7 month program and generates an average earnings gain of $400 per year -- an 8 percent increase over the comparison group. If this earnings gain persists, then the return on the investment easily covers the cost of the program.29


  • Cutting the programs that reduce the incidence of childhood lead poisoning can mean large increases in future medical expenditures and compensatory education.

    • Cost-benefit analysis on lead poisoning reduction programs found nearly $750 million (1994 dollars) in savings on averted medical care and compensatory education between 1986 and 1988.30

    • Lifetime earnings are decreased by $1,147 for each additional microgram per deciliter of lead in a child's bloodstream.31

    • An EPA analysis of lead in drinking water found that tightening the drinking water standard from 50 micrograms per liter to 20 micrograms per liter would cost about $230 million per year and would generate benefits in reduced medical expenditure and increased cognitive ability of between $109 million to $296 million per year.32


  • Cutting housing voucher programs will limit the effectiveness of a proven means to move families towards better housing and economically beneficial outcomes for youth.

    • In the Gautreaux housing voucher program initiated in Chicago in 1980, 60 families, of whom 90 percent were single-parent AFDC recipients, were given housing vouchers for middle-class suburban neighborhoods. The outcomes for this group were compared to those for 40 families given vouchers for urban neighborhoods. When the children in these families reached age 18:
      -- the dropout rate for the suburban youth was 5 percent, compared to 20 percent for the urban youth;
      -- more than half of the suburban youth were enrolled in college, compared to 20 percent of the urban youth;
      -- three-quarters of the suburban youth were employed, compared to 40 percent of the urban youth; and
      -- 21 percent of the suburban youth were earning more than $6.50 per hour, compared to 6 percent of the urban youth.33

    • Cutting housing voucher programs will deny access to better school quality, increased job availability, and improved physical safety, which were the keys to success according to evaluation of the Gautreaux case.

  • Cutting subsidized permanent housing will mean that homeless families must use expensive emergency housing.

    • In Washington, D.C., a program that provides both housing subsidies and social services costs $765 per family per month, while emergency housing for homeless families costs $3,000 per month.34


This survey examines some studies of federal expenditure programs that invest in the future of American children. The focus is on the economic return to spending on these programs measured in future output and future remedial expenditure. While this document does not address the undoubtedly substantial reduction in immediate misery that these programs bestow upon their beneficiaries, such benefits and the repercussions of their loss should be considered before any cut is made.

Furthermore we have examined only some of the public expenditure programs for children based on the availability of reliable cost-benefit analysis. Other public expenditure programs at the federal, state, and local levels almost certainly generate economic returns but have not yet received proper evaluation.

1 House Select Committee on Children, Youth, and Families. Opportunities for Success: Cost Effective Programs for Children Update, 1990. 101 Cong. 2 sess. (GPO 1990).

2 U.S. Department of Agriculture, Food and Nutrition Service, Office of Analysis and Evaluation, The Savings in Medicaid Costs for Newborns and Their Mothers from Prenatal Participation in the WIC Program, Vol. 1, (Washington, D.C.: Mathematica Policy Research, Inc., 1990).

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