Why should we invest in early childhood education and care?

The Chancellor of the Exchequer has announced a substantial expansion of ‘free’ childcare for one- and two-year-olds in England. High-quality childcare can improve children’s development, raise family income and boost productivity – but there can be negative effects from low-quality provision.

There are large skills gaps between children from different backgrounds by the time they start school. This is driven in part by differences in use of high-quality early childhood education and care (ECEC), which has significant benefits for children’s development.

At the same time, high childcare costs reduce the net benefit of work (the amount taken home after paying for necessary expenses), which can reduce the incentives for parents – particularly mothers – to work.

Lack of access to high-quality affordable ECEC provision can therefore hamper productivity in the short term, because it limits mothers’ labour force participation and hours of work. It can also negatively affect productivity in the medium term because parents’ skills depreciate outside the workforce – and in the long term, by limiting children’s development.

The evidence suggests that increasing access to affordable high-quality ECEC provision is likely to provide a ‘triple whammy’ of benefits – improving children’s development; increasing family income; and boosting productivity.

These gains are highly likely to outweigh the costs in the long run, but only if provision is of high quality. Otherwise, there is a danger that one or more of these benefits will fail to materialise – or that provision has negative effects.

What are the benefits of attending ECEC for children?

A large body of international evidence demonstrates that attending high-quality ECEC benefits children’s development in the short term, improving cognitive test scores and preparing children for school more effectively.

While some evidence suggests that these test score improvements fade away as children get older, studies considering a wider range of outcomes over the longer term continue to find sizeable benefits in terms of later education and labour market outcomes.

Further, many studies find that the benefits of attending high-quality ECEC provision are stronger for children from more disadvantaged backgrounds.

The evidence on the optimal timing and number of hours of care is less clear-cut, but it suggests that around 15-20 hours of high-quality care per week, starting from the age of two (and possibly even the age of one) is likely to have the most benefits for children’s development.

How reliable is the evidence?

The international evidence on the benefits for children’s development of attending high-quality ECEC provision at the age of three and older is extremely robust. For example, a large number of studies in the United States use random or close to random variation in access to early education to identify effects on children’s cognitive and socio-emotional outcomes soon after attending (for example, Bai et al, 2020; Fitzpatrick, 2008; Pendola et al, 2022; Puma et al, 2010).

The best available evidence from England is observational, comparing children whose parents made different choices about whether and where their children would attend early education, accounting for a rich set of characteristics. But it tells a similar story (Parliamentary Office of Science and Technology, POST, 2021).

For example, children in England who attended high-quality ECEC provision in the 1990s had higher mathematics, language, reading and some types of socio-emotional skills when they started school compared with those who did not attend any formal ECEC provision (Sylva et al, 2004).

There is much less evidence on the effectiveness of attending ECEC provision for children under the age of three. What evidence there is suggests that a limited number of hours per week at these ages could be beneficial for children’s development, especially for those from disadvantaged backgrounds, as long as the settings they attend are of high quality (Sylva et al, 2004; Del Boca et al, 2018; Felfe and Lalive, 2018; Drange and Havnes, 2019).

Attending low-quality settings at these ages, on the other hand, risks negative effects on children’s socio-emotional development and wellbeing, as well as later test scores. This is especially the case for those children attending for higher numbers of hours per week (Baker et al, 2008; Herbst, 2013; POST, 2021).

Some studies suggest that the test score benefits of attending ECEC may fade over time (Blanden et al, 2016; Del Boca et al, 2018; Puma et al, 2010). Others suggest that the positive effects are sustained, especially when children attend high-quality ECEC settings (van Huizen and Plantenga, 2018) and go on to attend high-quality school environments (Carr et al, 2021) with strong instructional alignment across each phase (Wu et al, 2022).

Even if test score effects diminish, studies considering a wider range of outcomes over a longer period suggest that attending high-quality ECEC can continue to have significant positive effects on a range of outcomes beyond high school.

For example, evidence from the United States indicates that attending early education increases the likelihood of graduating from high school by 6 percentage points and the likelihood of ever attending college by a similar amount (Gray-Lobe et al, 2022). Positive effects have also been found on achieved qualifications and labour market outcomes decades later (Havnes and Mogstad, 2011; Goodman and Sianesi, 2005).

Many studies find that the benefits of attending ECEC provision are stronger for children from more disadvantaged backgrounds (Bai et al, 2020; Barnett and Jung, 2021; Del Boca et al, 2018; Pendola et al, 2022).

Most of the generated benefits are realised from attending for around 15-20 hours per week (Melhuish and Gardiner, 2023). But some studies suggest that there are additional benefits from attending full-time for older children (Atteberry et al, 2019).

What are the benefits of offering subsidised ECEC provision for families and society?

A large body of international evidence explores the impact of access to free or subsidised ECEC provision on mothers’ employment, specifically on whether and how much they work. The results depend on the context in which the policy is implemented, including the state of the private childcare market, women’s labour market participation in the economy as a whole, labour demand and family circumstances.

The strongest evidence relates to policies targeted at older pre-school children (those aged three, four and older). There is less evidence on the effectiveness of policies targeted at younger pre-school children (one- and two-year-olds).

Where positive effects on mothers’ employment are found, the benefits can be long-lasting, both for parents and children. Some studies even find intergenerational benefits – in other words, there are positive effects on the children of those who attended high-quality early education as children themselves.

As well as affecting mothers’ employment and working hours, access to high-quality ECEC provision has been shown to benefit mothers’ mental health. Conversely, use of low-quality provision can detrimentally affect mothers’ wellbeing.

How reliable is the evidence?

The best available evidence from England shows that access to free full-time ECEC provision (of around 30 hours per week) for four-year-olds during term-time increases the proportion of mothers with no younger children who are in work by 3.5 percentage points relative to mothers with access only to free part-time ECEC provision (of 15 hours per week during term-time) (Brewer et al, 2022).

But these effects are identified from when children move into free full-time primary education. If mothers’ labour supply responses are driven to a large extent by the social norms or preferences of mothers for returning to work when their youngest child starts school (as opposed to receiving an equivalent amount of free early education at a younger age), these estimates will overstate the likely effect of offering a similar number of hours to families of younger children.

The same study finds no effect on mothers’ working patterns of offering free part-time provision (of 15 hours per week during term-time) to three-year-olds relative to no free provision. This suggests that there is a threshold beyond which childcare subsidies start to become effective. This evidence from England chimes with research from other countries focusing on older pre-school children (summarised in Cascio et al, 2015; Cattan, 2016).

There is much less evidence on the labour supply effects of access to free or subsidised ECEC provision for children younger than three. The evidence that does exist provides a mixed picture in terms of whether estimated effects are likely to be larger (for example, Baker et al, 2008) or smaller (such as Goux and Maurin, 2010) for younger versus older pre-school children.

As well as boosting family incomes in the short term, the benefits of increasing labour market participation can be long-lasting for parents who are induced to go back to work (Lefebvre et al, 2009). Further, the positive effects of the increase in incomes have been shown to outweigh the potential negative effects of children spending less time with their mothers (Nicoletti et al, 2023).

The economy can also gain more generally from an increase in available labour, especially at a time of high demand. Further, there are benefits of limiting skill depreciation and supporting the career progression of mothers kept out of the labour market or working limited hours because of lack of access to affordable childcare.

Indeed, some studies have shown that the labour supply responses to free or subsidised ECEC provision are greater when unemployment rates are lower (Brewer et al, 2022).

In addition to boosting maternal labour supply, access to high-quality ECEC provision has been shown to benefit mothers’ mental health (for example, Blanden et al, 2022; Schmitz, 2020). Conversely, use of low-quality ECEC provision has been shown to have negative effects on mothers’ mental health and life satisfaction (Baker et al, 2008; Herbst and Tekin, 2014).

Several studies have also demonstrated cumulative intergenerational benefits of ECEC provision, finding that the children of those who have attended high-quality ECEC go on to have higher educational attainment. They also have better health and stronger employment outcomes, alongside reduced teen pregnancy and criminal engagement, compared with those whose parents did not have access to ECEC (Barr and Gibbs, 2022; García and Heckman, 2022).

What does the evidence suggest is the optimal early years policy?

The evidence on children’s development suggests that access to around 15-20 hours per week of high-quality care from at least the age of two is beneficial for children’s development, especially among those from disadvantaged backgrounds.

But this level of provision is unlikely to be sufficient to stimulate a significant change in whether or how much mothers work. The evidence suggests that something closer to full-time care, which would more optimally begin as soon as maternity leave policies end, might be needed.

As a result, policy-makers setting early years policy must make a choice between these objectives, or implement more than one policy targeted at different individuals, in order to optimise the effectiveness of early years policy.

Policy-makers interested in early years policy as a tool to reduce socio-economic or other gaps in children’s development might turn naturally to policies targeted at promoting and/or subsidising childcare attendance among those from disadvantaged backgrounds only.

Targeting subsidies at those most likely to benefit keeps upfront costs lower, while maximising likely responses to the policy and minimising how much the government subsidises families to do what they would have done anyway (known as ‘deadweight loss’).

But some evidence suggests that universal subsidies may still be cost effective. They may even deliver greater benefits for disadvantaged children than targeted subsidies. For example, recent evidence from the United States comparing the effectiveness of targeted and universal programmes has suggested that universal programmes may be more effective at raising test scores, especially among children from disadvantaged families (Cascio, 2023).

This is partly driven by greater effects on attendance among these families, and partly by other factors, such as the benefits of attending settings with more mixed peer groups (also found in other studies, such as Sylva et al, 2004 in England).

This, and other studies undertaking cost-benefit analyses of the provision of high-quality universal ECEC provision (for example, van Huizen et al., 2019), estimate that the benefits of doing so are highly likely to outweigh the costs, suggesting that universal provision should not be ruled out.

What else do we need to know?

There is no clear consensus on how best to deliver high-quality ECEC provision, especially in terms of the more readily quantifiable ‘structural’ aspects of quality – such as group size, staff qualification levels and staff-to-child ratios – which are relatively easier for policy-makers to regulate. We need to know more about:

which structural quality measures best predict measures of underlying ‘process’ quality (the aspects of care experienced by children in a setting, such as interactions with staff);
how to train and retain effective early years practitioners;
how to make the right trade-offs between higher numbers of lower qualified staff and fewer highly qualified staff;
and how to make the right trade-offs between group size, childcare ratios and staff qualifications.

Where can I find out more?

Why should we invest in early childhood education and care? This article draws heavily on this overview of the evidence by Claire Crawford and Laura Outhwaite.
Why greater investment in early years should be a no-brainer for the Chancellor. Claire Crawford and Laura Outhwaite comment on potential childcare reforms in advance of the Spring budget of 2023.
The promises and pitfalls of universal early education. Elizabeth Cascio summarises the evidence on the effects of universal early education for children and parents.
Can universal preschool increase the labor supply of mothers? Sarah Cattan summarises the evidence on the links between universal pre-school and mothers’ labour supply.
Understanding the impact of childcare ratios on children’s outcomes. Claire Crawford and Laura Outhwaite review the evidence on the links between staff-to-child ratios in early education settings and children’s outcomes.