The Front Project has commissioned the first comprehensive Australian analysis of the economic impact of early childhood education. CELA CEO Michele Carnegie attended the release event in Melbourne last week. You can read more about The Front Project and the significance of the research to the business community in this article.
For the first time, the sector has access to an Australian analysis proving investment in early childhood education boosts productivity, increases workforce participation, addresses developmental vulnerability in children and creates double the value for every dollar spent.
A Smart Investment for a Smarter Australia, commissioned by The Front Project and conducted by PwC, has for the first time analysed the benefits to the nation of early learning in the year before school. In short, every $1 spent on quality preschool education in Australia returns $2 to government and the wider community.
Universal access to quality education in the year before school benefits us in the following ways:
- Families see a collective $1463million boost in earnings for parents who can return to work or increase their hours of work.
- Business and the economy see $319 million boost in productivity from a more educated workforce.
- Children see a $997 million increase in lifetime earnings, educational achievement and employment, and better health and wellbeing.
- Governments see increased tax revenue of $313 million every year and decreased spending on health, welfare and justice worth $1194 million.
We know that 65% of children today will do jobs that have not been invented yet, so the reality is that our children will need to learn how to learn – early education does this.
- Jane Hunt, CEO The Front Project
Early learning works
CEO of The Front Project, Jane Hunt, said the report highlights the importance of investing in quality early education for business, governments and families.
“We all want our children to be more and have more than we had, and this report demonstrates that early learning is a vital part of making this possible,” Ms Hunt said.
“It’s also vital to our economic stability as the world of work becomes more complex.
“We know that 65% of children today will do jobs that have not been invented yet, so the reality is that our children will need to learn how to learn – early education does this.
“Early learning develops the skills needed to engage in life-long education and succeed through career changes, and we now have the data that shows Australia’s universal early childhood education policy could double the return on investment.”
Ms Hunt said the return on investment (ROI) for early learning was higher than many of Australia’s nation-building infrastructure projects.
“The benefits of early education can be seen immediately, and the returns continue as those kids become adults,” she said.
“This data highlights the importance of governments committing to ongoing funding for the National Partnership Agreement.”
Quality makes the difference
Ms Hunt said the PwC report also highlighted the need to address the variability of quality in early childhood education, particularly among the quarter of services not yet meeting the National Quality Standard. She said the report findings also supported the argument quality early education should be expanded to children two years out from school.
“We now have the data that demonstrates the potential for more children and families to live healthier, happier and more productive lives alongside dividends that will benefit the nation,” Ms Hunt said
We spend only 0.5% of our gross domestic product (GDP) on pre-primary education, while the average in OECD countries is 0.8% and the countries known for great outcomes in all levels of education, like Iceland and Sweden, spend 1.0% or more of their GDP on early learning.
- Michele Carnegie, CEO CELA
CELA CEO Michele Carnegie attended the launch and welcomed the report findings.
“This return on investment is very positive news and we need to remember that Australia is one of the lowest spending countries in the OECD,” she said.
“We spend only 0.5% of our gross domestic product (GDP) on pre-primary education, while the average in OECD countries is 0.8% and the countries known for great outcomes in all levels of education, like Iceland and Sweden, spend 1.0% or more of their GDP on early learning.
“Higher investment is needed in Australia so as all children can have access to quality, affordable early education, to develop the skills they need to be fit for the future of work in a competitive domestic and global market. This means a greater focus on ‘soft skills’ like cooperation, resilience and empathy, which we know are boosted by quality preschool programs of play-based learning.
“Our children should have equal opportunity to reach their potential through affordable and accessible, high quality early education in two years before school. The solution is sufficient investment in universal access to quality early education, which will allow Australia to capitalise on economic opportunity and to gain the economic benefits of early childhood education.”
Flow on to school
PwC Chief Economist Jeremy Thorpe said the research also analyses the substantial impact early learning has on children’s development.
“Using the best available Australian and international research we were able to estimate the impact of early childhood education on early school achievement, and then the likely uplift in achievement at Year 3 and throughout the rest of their education,” Mr Thorpe said.
“The evidence suggests that if early childhood education puts students ahead at the start of primary school, the benefits will increase as they progress through the education system.”
ECE creates agile learners
Lisa Chung, Chair of The Front Project’s Board said the report reveals the enormous opportunities created later in life when we invest in the early years.
“Succeeding in future workplaces will require agile, lifelong learners, who are comfortable with continuous adaptation and a willingness to change industries or sectors,” Ms Chung said.
“It’s possible to train people in new information and contexts, but without teams who can learn and re-learn, innovation and efficiency suffer.”
Zac Hatzantonis, PwC’s early childhood practice leader, added: “The report demonstrates that better investment in early childhood education will also help reduce escalating social welfare, health and justice costs.”
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Example of benefit
Health costs to government
The full PwC report provides detailed explanations of the methodology and material applied to the economic analysis task.
Here we share just one example of the benefits created by quality early learning programs for children that will lead directly to reduced costs to government services (and therefore to taxpayers). It is useful to have a few specific examples like these ready for any discussion you are having with influencers or policy makers in government or business.
6.4.1 Reduction in health related costs for early school leavers
Studies show that early school leavers are statistically more likely to have long-term health issues. The Mitchell Institute calculated that 42 per cent of male and female early leavers in the working age population have a long-term health condition. The rates in the general working age population were 24.6 per cent for males and 27.1 per cent for females (Lamb & Huo, 2017). The estimated decrease in the number of early school leavers means that this group of people would be expected to have fewer health problems, leading to reduced health related costs.
The benefit was calculated as the increased number of children graduating from high school instead of leaving early (approximately 4,000), by the reduced propensity to long-term health conditions. In order to monetise the benefit, we used calculations of the estimated additional costs per person on Emergency Department admissions and extended admissions to public hospitals (this approach is illustrated in Figure 18). This is a conservative estimate, as people with long- term health conditions are likely to have higher use of primary and allied health as well. However, consistent data was not available to calculate the full benefit. The total annual reduction in health-related costs due to the increase in the number of children graduating high school was calculated at $420,000. These benefits are expected to start in 2048, when the children who receive early childhood education is aged 35.
6.4.2 Decreased rates of obesity
Early childhood education attendance has been linked with a reduced incidence of obesity related illness. Currently obesity is estimated to be prevalent in 28.2 per cent of the population (Australian Bureau of Statistics, 2015).
The Head Start study from the U.S. found that early childhood education is estimated to reduce rates of obesity by 28 per cent (Frisvold, 2006). For our study, we reduced this rate and incorporated a 9.2 per cent decrease in obesity propensity to better reflect the Australian context. This implies that around 8,500 children who would otherwise be expected to be obese will, instead, be of healthy weight. The estimated benefit in monetary terms is calculated by determining the reduced healthcare expenditure from lower prevalence of obesity related illnesses. Healthcare expenditure associated with obesity-related illnesses was almost $8,000 per person ($2017-18) per annum (PwC Australia, 2015).
The total annual reduction in obesity related costs due to early childhood education attendance was calculated at over $67 million. This benefit was assumed to start in 2048, when the study cohort is aged 35 and continue until they are aged 81.
6.4.3 Decreased rates of smoking
Early childhood education attendance has also been linked with a reduced incidence of smoking related illness. Currently, around 12.2 per cent of the Australian population smokes. The Head Start study from the U.S. found that early childhood education is estimated to reduce rates of smoking by 6.2 per cent. We reduced the size of this expected benefit by 50 per cent, to better reflect the Australian context. This results in an estimated 2,300 fewer children who will grow up to be smokers. Healthcare expenditure associated with smoking-related illnesses was over $8,000 per person (2017-18) per annum.
The total annual reduction in crime, smoking and obesity related costs due to early childhood education attendance was calculated at over $19 million. These benefits are assumed to start in 2048, when the cohort is aged 35 and continue until they are aged 81.