Market forces and preschool

One of the paradoxes of early childhood education (ECE) policy is that ECE doesn't seem to obey the normal economic rules of supply and demand. If high quality ECE is so valuable, why is there a proliferation of poor quality providers? Isn't high quality ECE in demand?

The answer is that high quality ECE is expensive. This is a labor-intensive industry and to attract and retain highly qualified teachers, wages and benefits must be higher than in competing industries. In addition, developmentally appropriate, safe, and sturdy equipment and supplies are expensive as well. Developmentally appropriate facilities are also costly. (My example is usually the child-sized toilets and sinks you'll find in well-designed child care centers.) And, of course, one cannot overlook the importance of fresh and nutritious food, adequate outdoor play space, or enrichment activities such as field trips.

It's no wonder that many local child care providers and preschools cannot afford to offer all these elements. And while there are some that do, most parents cannot afford to pay the resulting tuition.

So maybe the rules of supply and demand do hold true...but there just aren't enough parents here who can afford to be demanding.

An eye-popping ABC News/Forbes.com story illustrates this: In larger cities like New York and San Francisco, there are enough parents able and willing to pay preschool tuitions rivaling those of Ivy League colleges. These preschools are able to charge over $25,000 per year and have waiting lists for enrollment.

So it seems, when a critical mass of parents able to afford highest quality is present, the market will respond and offer that quality, at the highest price the market will bear.

The challenge for cities like Milwaukee, where that critical mass isn't present, is to find ways to provide high quality more cost effectively and/or to improve parents' ability to pay for higher quality. Neither of these options is easy. The most effective cut is to labor costs, but that will impact quality directly. Improving parents' ability to pay means increasing their wages, a long-term tactic, or subsidizing tuition, a short-term tactic. What we've found here in Wisconsin is that tuition subsidies have not resulted in increased quality because they can be used even at lower quality providers.

While no one wants Milwaukee parents to be put in the position of signing up for preschool while their child is still in utero, and then spending 3/4ths of the median household income on tuition, it would be nice if more parents were able to demand higher quality ECE and/or more providers were able to offer it. Early next year the Forum will release a report analyzing the ways in which other jurisdictions have tried to help their ECE markets develop.