Oregon’s Free Preschool Experiment

Between 1941 and 1945, roughly 16.5 million Americans served in WWII alongside the Allied powers (for context, the US population in 1941 was only 133 million), which meant one thing back home: all hands on economic deck, including mothers. The original girlboss, Rosie the Riveter, was born—women joined the ranks of laborers building aircraft, ships, and bombs. 

But employers noticed something: Now that a parent was responsible for parenting and working outside the home, absenteeism was higher. Young children were left in parked cars outside workplaces or by themselves at home, which—understandably—raised some eyebrows. Something needed to be done if all these Rosies were going to keep on riveting! 

As a result, “the federal government supported a nationwide program of child care centers, intended to boost war production by freeing mothers to work,” per Congress’s 2000 report on childcare during the war. At their peak, these childcare centers (in all states except one, and in DC) had enrolled 130,000 children by 1944. 

The general consensus was: We need both parents to pitch in for this economy to keep on economy-ing, and that means we need a childcare solution that works for everyone. 

Under the Lanham Act, local communities received federal funding so they could plan and provide care. The link between economic vitality, national security, and caring for our nation’s youngest members was obvious; prioritized, even. 

We seemed to get it back then. Oh, how things have changed.

It’s long been acknowledged that the US is in a bit of a childcare pickle, to put it kindly. 

The word “crisis” is used more often than not in journalistic coverage of the post-pandemic situation, and public childcare spending (that is, spending from the federal government) amounts to an average of $500 per child, per year as of 2021. For context, the average among our member nations in the Organization for Economic Cooperation and Development (OECD) is $14,436. 

Yet the American family with young children pays an average of more than $20,000 per year out of pocket on childcare.

Relatedly, on The Money with Katie Show this week, we’re speaking with Amanda Freeman and Lisa Dodson, the authors of Getting Me Cheap, about the way low-wage labor traps women in cycles of poverty. 

The upshot? When you’re trying to navigate government subsidies, cobbling together (sometimes multiple) minimum wage jobs, and taking care of your kids, your life is a series of exhausting, impossible tradeoffs.

More than one-third of America’s working poor are also caring for children, with twice as many mothers as fathers represented. Because care work is still seen as gendered (depending on the source, between 88% and 97% of childcare workers are female), it’s undervalued—and disproportionately hurts women’s economic prospects.

When public funding is limited, private spending picks up the tab. If you’re going to have kids, you better have that budget right ’n tight.

According to Yahoo! Finance, 63% of parents said their childcare costs had risen from 2021 to 2022, and roughly half of parents spend more than 20% of their household income on child care. It doesn’t matter how much Starbucks you forfeit: Spending 20% of your household income to effectively keep your job(s) is an expense you can’t outmaneuver with “savvy couponing.” 

And the results of this tradeoff are…well, predictable: This Wall Street Journal piece concluded “employers are challenged to fill jobs” right now because “the high cost and limited availability of child care is keeping some parents out of the labor force.”

Unfortunately, childcare is a conundrum that private markets have a hard time solving, because it costs more to provide than most customers can afford to pay. (This is why all other high-income nations approach it as a matter of civic policy, rather than consumer choice.)

So in developing this week’s episode, I was curious if any local governments were making progress. Surely there has to be a model within the US for how to solve this problem, right? Lo and behold, I stumbled across Multnomah County, Oregon, which is undergoing its very own “free preschool” experiment.

How Multnomah County, Oregon is funding free preschool

Developmentally speaking, early childhood education and care is especially important: Researchers at Georgetown University, Vanderbilt, Duke, and the Brookings Institution, among others, published a study in 2017 that found that while all kids benefit from attending preschool, poor and disadvantaged kids often experience the largest gains. The study suggested that pre-K promotes things like “school readiness” and “longer-term educational success,” as neuroscientists estimate that “the brain grows at an astounding rate over the first several years of life.” 

In other words, if you want a smarter overall population, starting ’em young is a good investment. Enter “Preschool for All” (PFA).

PFA is intended to address the lack of childcare openings, a problem Oregonians were facing even before Covid forced us all inside. 

So how does it work? The local government (via the Multnomah County Preschool and Early Learning Division) partnered with 36 preschool programs at 47 different locations across the county to provide 700+ slots for the 2022–2023 school year for 3- and 4-year-olds in the program’s first year. Their plan? Start with that cohort and expand over time.

All programs are free, and parents can check their eligibility online (I took a quick spin around the site and was impressed at how un-bureaucratic it felt, proving that applying for government programs doesn’t have to suck).  

The policymakers who developed PFA knew they’d need to increase wages for early educators, provide professional development, invest in recruiting and retaining a skilled and diverse workforce, and—of course—provide the slots to families. 

So, the multimillion dollar question: How are they paying for it? 

Multnomah County voters approved a new tax that went into effect in early 2021: “1.5% on taxable income over $125,000 for individuals and $200,000 for joint filers, and an additional 1.5% on taxable income over $250,000 for individuals and $400,000 for joint filers.” A detailed, itemized breakdown of exactly how the program’s expenses break down can be found here, but I noticed things like “early mental health specialists” made the list.

In its first year, the county expected to bring in $120 million in revenues for the program. They exceeded their goal by 60%, bringing in a whopping $187 million, with 20% of overall revenue ($37 million) coming from just 100 returns filed by the wealthiest residents. (!!)

Now, the program hasn’t been in place long enough to judge its long-term effects, but a longitudinal study would be interesting:

• How will poverty in the area be impacted by free preschool? If working parents don’t have to worry about childcare, will they have an easier time getting additional education and finding more reliable work?

• How will public education be impacted? Will dropout rates decrease over time?

• How will workforce participation in the local economy be impacted as fewer parents have to leave the workforce because they can’t find childcare?

• How will family’s savings rates (and consumer spending!) be impacted by having this enormous burden lifted?

If all goes according to plan, it could be an interesting model for other local governments to try—especially if the federal government doesn’t.

Government spending in general, in light of the ongoing debt ceiling issue

Of course, many Americans might bristle at the idea of government spending right now, given the recurring question of whether or not to raise the US debt ceiling. 

But it’s important to remember the crucial paradox here: Not spending on childcare ultimately lowers tax revenues anyway, since it pulls laborers out of the workforce, which makes government borrowing to fund its spending more prevalent.

It’s estimated that universal childcare would cost something on the order of $140 billion per year—but there are ways to raise tax revenues that don’t further disadvantage the middle class. 

Approximately $180 billion in tax revenue per year (yep, more than enough!) could be collected if legal loopholes that allow corporations to reduce their taxable income to zero were closed (e.g., Whirlpool, FedEx, Nike, HP, and Salesforce, and 50 other large American corporations, paid no federal corporate income taxes in 2020).

And it doesn’t even take a loophole to pay less: In 2018, the corporate tax rate was dropped from 35% to 21%. As Raymond Baker points out in his book Invisible Trillions: How Financial Secrecy Is Imperiling Capitalism and Democracy—and the Way to Renew Our Broken System, corporations can boast record profits in earnings calls—then turn around and (through the magic of accounting) show the IRS a net operating loss. 

Really, there’s a sort of cosmic fairness to corporate taxes footing the bill for universal childcare, considering employers are the true primary beneficiaries of childcare anyway. You don’t need someone else to watch your kid every day if you don’t have to go to work.

I’m just spitballing as your resident personal finance wonk with an internet connection—but there are plenty of areas ripe for reform that would raise the money necessary to pay for these programs. We figured it out in the 1940s, after all—with a lot less money than we have now.

And as most other high-income nations have already figured out, these programs more than pay for themselves in the economic benefits: The more people who are able to stay in the labor force, the more the economy grows (and the higher tax revenues go)—and the kids they raise are better equipped to meaningfully participate in said economy when they grow up.