Early Childhood Educator Pay Equity Fund: Benefits, Costs, and Economic Returns
Evidence | Publications

Early Childhood Educator Pay Equity Fund: Benefits, Costs, and Economic Returns

Published: Nov 19, 2024
Publisher: DC Action
Human Services Equity Early Childhood Professional Development Employment State and Local Research and Evaluation Policy Analysis
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Authors

Owen Schochet

Clive R. Belfield

Key Findings
  • The annual cost of Washington, DC’s Early Childhood Educator Pay Equity Fund (PEF) is calculated at $54 million. Costs in fiscal year 2023 include supplemental payments to a cohort of 4,085 child care and early education (CCEE) educators; subsidized health insurance for 1,140 educators with 155 dependents; and administrative expenses.
  • The PEF generates a series of annual benefits valued at $67 million. Benefits for CCEE educators include reduced absenteeism, more work experience, welfare savings, and reduced health expenditures and medical debt. Facilities benefit from reduced staff turnover. Families benefit from increased access to CCEE and improvements in service quality.
  • The benefits of the PEF exceed its costs by $12 million. The benefit-cost ratio is 1.23, and the one-year return on investment (ROI) is 23 percent. Sensitivity testing suggests the benefits may be even greater, such that ROI is even higher.
  • Although PEF requires a substantial commitment of resources, our analysis shows it generates significant benefits that exceed its costs and establishes that the program is socially efficient.

The Early Childhood Educator Pay Equity Fund (PEF) is a novel and important investment in child care and early education (CCEE) educators in Washington, DC. Since 2022, the PEF has provided educators with pay supplements of as much as $14,000 per year, bringing their compensation up to the level of K–12 teachers. In 2023, subsidized health care was also bundled into the PEF.

This report shares findings from a benefit-cost analysis to determine the economic value of the PEF, including the health insurance component, as of fiscal year 2023. This analysis examined the extent to which investments in CCEE educators generated benefits for educators, their employers, and families that rely on CCEE.

Although PEF requires a substantial commitment of resources, results suggest it generates significant benefits that exceed its costs. The one-year return on investment in the PEF is estimated conservatively at 23 percent, and sensitivity testing suggests it might be even higher. These findings establish that—from a District-wide perspective—the PEF is socially efficient.

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