How universal preschool creates $20 for every $1(to $3) dollar(s) spent
New NBER paper reveals universal Pre-K programs aren't just for parents; they're economic rocket fuel that practically prints money for states
"Universal Pre-K as Economic Stimulus," by Northwestern's C. Kirabo Jackson, Julia A. Turner, and Jacob Bastian, reveals UPK programs generate up to $20 in economic benefits for every dollar spent, dramatically lifting employment and labor force participation while potentially paying for themselves through increased tax revenue.
Why it matters: While UPK has long been proposed as economic stimulus, this first comprehensive analysis across nine states and cities provides clear evidence that accessible preschool programs drive substantial labor market gains beyond just helping parents of young children.
By the numbers:
1.2% increase in labor force participation
1.5% rise in employment rates
1.6% growth in hours worked
$3-$20 generated in earnings for every dollar spent on UPK
10 percentage point increase in public Pre-K enrollment
5.5% growth in total real wages
Go deeper: Researchers analyzed Universal Pre-K programs implemented across Georgia, Oklahoma, West Virginia, Florida, Iowa, Wisconsin, D.C., Vermont, and New York City from 1995 to 2020, leveraging staggered adoption with a difference-in-differences approach:
Enrollment impact: While some children shifted from private to public Pre-K (showing some crowd-out effect), overall enrollment rose 6.6 percentage points, with part-time enrollment increasing 3.6 points and full-time rising 3.7 points
Employment pathways: UPK increased labor force participation by 0.8 percentage points and employment by 0.9 points, with the larger employment effect suggesting reduced unemployment and improved job matching
Beyond parents: While mothers of young children experienced a 1.4 percentage point employment boost, they accounted for only one-third of total effects — indicating broader economic benefits
Female focus: Women without young children showed substantial gains in full-time status (0.9 percentage points) and hours worked (0.28 weekly hours), while effects for prime-age men were minimal
Multiple mechanisms: Effects operate through three channels: relieving informal caregivers (primarily women), increasing labor market attachment in anticipation of future childcare access, and boosting disposable income among families
Time-use evidence: Using American Time Use Survey data, researchers found UPK reduced childcare time by 4.51 weekly hours for mothers of young children and 1.54 hours for women without young children
Quality matters: Washington D.C.'s program — America's most ambitious, spending $22,207 per child — produced effects nearly double the national average with 1.7 percentage point increases in both labor force participation and employment
Treatment heterogeneity: Effects varied substantially across locations, with the standard deviation of true effects estimated at 1.1 percentage points — explaining previously mixed research findings
Inelastic labor demand: UPK had no effect on average wages despite increased labor supply, suggesting highly inelastic labor demand
Self-financing potential: The employment boost generated enough tax revenue that UPK programs might fully pay for themselves through increased federal and state taxes
Fiscal externality: Much of the tax revenue accrues to the federal government rather than states, highlighting the efficiency of federal subsidies for state UPK programs
Between the lines: Program quality and scale proved decisive. The researchers controlled for potentially confounding factors with region-by-year fixed effects and policy controls (EITC, minimum wages, welfare). Areas with higher public Pre-K enrollment and high-quality programming saw significantly stronger employment effects, while simply having a UPK program without substantial enrollment increases produced no measurable impact. That said, there isn’t much data in this study on simply *giving* parents the money directly vs Universal Pre-K.