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To Save One Dollar
TO "SAVE" ONE DOLLAR. . .
OCTOBER, 1995
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.
CHILDHOOD IMMUNIZATION
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.
SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR
WOMEN, INFANTS, AND CHILDREN (WIC) PRENATAL,
AND MEDICAID PRENATAL CARE
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
HEAD START AND OTHER EARLY CHILDHOOD EDUCATION
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
INCOME SUPPORT -- AFDC AND FOOD STAMPS
AND TAX POLICY -- EITC
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
TEEN EDUCATION, DROPOUT PREVENTION,
AND YOUTH EMPLOYMENT
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
LEAD POISONING
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
HOUSING ASSISTANCE
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
CONCLUSION
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.