Child-care support, early childhood education, and schooling

Common proxies, such as years of education, have been shown to be ineffective at capturing cross-country differences in skills acquisition, as well as the role they play in the labor market. A large body of research shows that direct measures of skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of individuals’ differences in potential productive capacity than the quantity of education they receive. Evidence shows that cognitive skills in particular are quite relevant to explain wages, while socio-emotional skills are more associated with labor force and education participation decisions.

Standardized testing has become the accepted means of measuring a school’s quality. However, the associated rise in test-based accountability creates incentives for schools, teachers, and students to manipulate test scores. Illicit behavior may also occur in institutional settings where performance standards are weak. These issues are important because inaccurate measurement of student achievement leads to poor or ineffective policy conclusions. The consequences of mismeasured student achievement for policy conclusions have been documented in many institutional contexts in Europe and North America, and guidelines can be devised for the future.

In addition to the traditional education system targeting children and youth, one potentially important vehicle to improve literacy and numeracy skills is adult literacy programs (ALPs). In many developing countries, however, these programs do not seem to achieve these hoped for, ex ante, objectives and have therefore received less attention, if not been largely abandoned, in recent years. But, evidence shows that ALPs do affect other important socio-economic outcomes such as health, household income, and labor market participation by enhancing participants’ health knowledge and income-generating activities.

Teacher effectiveness is the most important component of the education process within schools for pupil attainment. One estimate suggests that, in the US, replacing the least effective 8% of teachers with average teachers has a present value of $100 trillion. Researchers have a reasonable understanding of how to measure teacher effectiveness; but the next step, understanding the best ways to raise it, is where the research frontier now lies. Two areas in particular appear to hold the greatest promise: reforming hiring practices and contracts, and reforming teacher training and development.

Since the 1970s, many countries have established free or highly subsidized education for all preschool children in the hope of improving children’s learning and socio-economic life chances and encouraging mothers to join the labor force. Evaluations reveal that these policies can increase maternal employment in the short term and may continue to do so even after the child is no longer in preschool by enabling mothers to gain more job skills and increase their attachment to the labor force. However, their effectiveness depends on the policy design, the country context, and the characteristics of mothers of preschoolers.

Even in OECD countries, where an increasing proportion of the workforce has a university degree, the value of basic skills in literacy and numeracy remains high. Indeed, in some countries the return for such skills, in the form of higher wages, is sufficiently large to suggest that they are in high demand and that there is a relative scarcity. Policymakers need robust evidence in order to devise interventions that genuinely improve basic skills, not just of new school leavers entering the market, but also of the existing workforce. This would lead to significant improvements in the population that achieves a minimum level of literacy and numeracy.

Most OECD countries spend substantially more on maternity leave schemes than on early childcare. However, given high tax burdens and rapidly aging populations, female labor force participation is critically needed. Moreover, it is important to know whether the main beneficiaries, the children themselves, reap more benefits from one or the other in the long term. The first cohorts exposed to the introduction or extension of maternity/paternity leave schemes and subsidized childcare programs have now completed education and entered the labor market, allowing an investigation of these programs’ long-term economic effects.

The economic and psychological literatures have demonstrated that early investments (private and public) in children can significantly increase cognitive outcomes in the short and long term and contribute to success later in life. One of the most important of these inputs is maternal time. Women’s participation in the labor market has risen rapidly in most countries, implying that mothers spend less time with their children and that families rely more on external sources of childcare. This trend has raised concerns, and an intense debate in several countries has focused on the effectiveness of childcare policies.

Laws on age at school entry affect student achievement and often change for a number of reasons. Older students are more mature and ready to learn. This can have positive impacts on academic, employment, and earnings outcomes. The costs of holding children back include another year of childcare expenses or income forgone by the caregiver parent. Entering the workforce one year later also has implications for lifetime earnings and remittances to governments. School-entry policies could be a useful tool in increasing student achievement, but the short- and long-term impacts need to be better understood.

The cost of children is a critical parameter used in determining many economic policies. For instance, correctly setting the tax deduction for families with children requires assessing the true household cost of children. Evaluating child poverty at the individual level requires making a clear distinction between the share of family resources received by children and that received by parents. The standard ad hoc measures (equivalence scales) used in official publications to measure the cost of children are arbitrary and are not informed by any economic theory. However, economists have developed methods that are grounded in economic theory and can replace ad hoc measures.