Federal Reserve Backs Child Care

The President of the Federal Reserve Bank of Richmond, Jeffrey Lacker, recently made these observations in a Washington Post editorial:

"...Recently, a consensus has developed that human capital is more than just the number of years spent in school or on the job. Research suggests that noncognitive skills — such as following instructions, patience and work ethic — lay the foundation for mastering more complex cognitive skills and may be just as important a determinant of future labor market success. These basic emotional and social skills are learned very early in life, and it can be difficult for children who fall behind to catch up: Gaps in skills that are important for adult outcomes are observable by age 5 and tend to persist into adulthood.

"What does the economics of human capital imply for workforce development programs? Several insights are especially relevant. First, it makes economic sense to concentrate intensive human capital investment in the form of formal schooling on the young: The earlier workers invest, the longer they have to profit from their investments. In addition, because earnings typically increase with age, young people attending school tend to sacrifice less by way of forgone earnings than older workers. Another key takeaway is that investments in early childhood can affect later decisions about formal schooling. If the foundations for learning are laid very early, then even mild delays in acquiring noncognitive skills might make skill acquisition more challenging later in life; after all, why try as hard to get good grades, stay in high school or enroll in college when those efforts might not pay off?"

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