The next best place to invest? Child care: get involved in providing high-quality early child care and education programs for your employees. The ROI is huge, and hugely important

Directors & Boards, Spring, 2008 by Allan Miller

COMPANIES ARE OFTEN CAUGHT in a classic dichotomy. What is good for the organization today may not be best for the long-term, and vice-versa. The battle pitting today's stock price or, for the private company, valuation (and the executive compensation that may be related) against what may be tomorrow's corporate best interest, is an issue for boards, economists, and philosophers. There is, however, one element that boards and executives should recognize as being in their best interest in the short term and long term, both internally and as a matter of desirable public policy. It is the availability of affordable, high-quality child care.

Affordable, high-quality early care and education is essential for the success of American business. The effects of an educational system that furthers the development of social skills in very young children, provides them with literacy and math building blocks, and stamps them with a hunger for learning that lasts a lifetime is also a boon to the economy. Business benefits of early education include a more stable workforce today, a more highly skilled labor pool tomorrow, and an economy that includes an increasing proportion of upwardly mobile consumers with access to an increasing amount of disposable income. The improved "stay-in-school" and graduation rates that high-quality programs have been shown to create bring about reduced need for future public spending on special and remedial education, penal systems, and certain social programs. This, in turn, helps to improve the business climate by reducing pressure on taxes and putting more dollars in the pockets of consumers and investors.

High-quality early care and education allows parents to work, confident that their pre-school age children are nurtured, safe, and developing the skills necessary to succeed in later life. It reduces absenteeism at work, improves productivity and, therefore, builds a better current workforce. As one believer, SEI Corp. Chairman and CEO Alfred West, has said, "[SEI] is aware that child care is a critical issue for families in the workforce ... [We have] found that benefits such as [child care options] help in recruiting to fill highly skilled positions, reduce employee turnover, and provide a productive and engaged workplace."

Tied in to global competitiveness

According to a survey of executives from large corporations, high-quality child care is an essential for the future workforce as well. Opinion polling firm Zogby International reports that 83 percent of executives participating in a survey to determine business leaders' views on publicly funded pre-kindergarten felt that high-quality early care and education is important for America to remain competitive in a global economy.

Children from high-quality programs enter school ready to learn. They tend to stay in school longer and get in trouble less than their peers who are not privy to such programs. Thus, they garner the skills necessary to be more successful wage earners. This makes them more competitive in the job market, makes their companies more competitive in the global marketplace, and increases the amount of dollars in circulation available for discretionary spending.

Superior workforce skills can create a distinct corporate advantage in the marketplace. The converse is also true. For a company or a nation, lack of workforce skills can be a distinct disadvantage in an increasingly competitive world.

The notion of early care and education as an economic development tool is one that has been floated for several years. It is finding more converts daily as the considerable evidence accumulates from several studies indicating that improving the quality of early care and education produces better citizens and better economies.

According to Rob Grunewald, regional economic analyst for the Federal Reserve Bank of Minneapolis, "On the margin, the next best place for us to invest economic development dollars is in early care and education." Mr. Grunewald cites an internal rate of return of up to 18 percent realized from investment in education for our youngest citizens, based on the analysis of studies that have gathered data for up to 40 years. Arthur Rolnick, senior VP and director of research for the Minneapolis Fed, has also been out front on the issue. Mr. Rolnick has indicated that, "... the two independent lines of research, brain studies and longitudinal economic analysis, lead us to conclude that the early years are critical to the society's economic development." Facing this investment opportunity, Mr. Rolnick describes the competition among cities to lure corporate citizens with incentive packages as a zero-sum game.

Undoubtedly, their collective influence recently encouraged Federal Reserve Board Chairman Ben Bernanke to make the same case in his speech to the U.S. Chamber of Commerce, Education and Workforce Summit in September 2007: "Building the foundation for lifelong learning from the earliest ages is crucial. Research suggests that ... children who start behind find catching up increasingly difficult ... The payoff from high-quality pre-school and home visitation programs is likely very high, especially for children born into poor or otherwise disadvantaged families."