The Economic Case for Helping Poor Children

From University of Chicago's James Heckman at VoxEU:

The Perry Program was administered to 58 disadvantaged African-American children in Ypsilanti, Michigan between 1962 and 1967. The treatment for this program consisted of a daily 2.5-hour classroom session on weekday mornings and a weekly 90-minute home visit by the teacher on weekday afternoons. The control and treatment groups have been followed through age 40. There is a consistent pattern of successful outcomes for treatment group members compared with control group members, even though an initial increase in IQ gradually disappeared within the four years following the intervention.

Such IQ fadeouts have been observed in other studies. Focus on cognitive skills alone misses the point. The Perry program operates primarily through improving the noncognitive traits of participants (Heckman, Malofeeva, Pinto and Savelyev, 2008). At the oldest ages tested, treated individuals scored higher on achievement tests, attained higher levels of education, required less special education, earned higher wages, were more likely to own a home, and were less likely to go on welfare or be incarcerated than controls even though their IQs were no higher than those in the control group. In the similar, but more intensive and earlier starting Abecedarian program, IQ gains were found to last into early adulthood.

An estimated rate of return (the return per dollar of cost) to the Perry Program is around 10%. This high rate of return is higher than the post-World War II return on US stock market equity (5.8%) and suggests that society at large can benefit substantially from such interventions in the lives of disadvantaged children. Interventions in the later lives of disadvantaged children, such as job training, convict rehabilitation, and reduced classroom sizes, have much lower returns (Cunha, Heckman, Lochner and Masterov, 2006).

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