 What I'm going to be presenting today, I'm currently the chief economist at Deloitte. I joined about a year and a half ago, I came from the Conference Board of Canada, and when I was at the Conference Board of Canada, we did this report on Ready for Life. So our economists and our policy researchers worked on this report, and that's where this material is coming from. In point of fact, I actually started writing about early childhood education even before this when I was the chief economist of the TD Bank. And when I was the chief economist of the TD Bank and we were publishing reports on early childhood education, I had a lot of people look at me and say, like, why are you talking about this? And I looked at them and I said like, it is a fundamental economic issue, right? Businesses are only going to be successful in this country if we have workers with strong skills, right? We are not going to have a rising standard of living for our people if they are not having good outcomes. And so this is a fundamental issue. So I'm going to take you through the analysis and the work we did, and the starting point is going to be the big picture. Like, what's one of the big dominant economic stories that's taking place at the moment? And you may have heard for many years that we've been trapped in over the last 10 years, ever since the last recession, there's been a common narrative around us being trapped in a slow growth environment. BC actually has outperformed, but the point of fact is that we have an aging population, right? So with demographics transpiring, baby boomers are leaving the labor market every single day. It's not a forecast anymore. It's happening. We can see it empirically. And population growth is slowing. And as population growth slows, we're also seeing labor force growth slow because older workers are leaving the labor market. Now we're addressing this in part by through immigration policies, bringing more newcomers to Canada and integrating them into the economy and they're adding to our labor force. But the reality is the baby boom generation is just so large, there isn't a realistic number of immigrants that you can bring in that will resolve the issue. The numbers you would have to bring in, you'd have to bring in like half a million a year and trying to integrate that many newcomers would be really difficult. So we need to increase our immigration and we need to improve the outcomes newcomers are having, but we also need to recognize that demographics is leading to a slower rate of growth in our labor force. And this is inevitable. And it's taking place. It's been taking place now for some time. I remember when I started my career, we always talked about how when the baby boomers exited the labor force, it was gonna have a tectonic impact on the economy. And it's happening right now, right? We can see it in the economic data. It's interesting, when people talk about the rise of precarious work in Canada, I am worried about the outcomes that youths are having. I'm worried about the increase in gig jobs that are lower paying and have weaker benefits. But if you actually look on the net basis, 100% of the increase on the net basis of part-time work is actually coming from workers age 55 plus. If we look at full-time contract jobs, a lot of the full-time contract jobs are baby boomers that are, they say they're retired. I find it interesting, right? They say, oh, I'm retired. And I say, oh, really? So how are you spending your day? Oh, I got a contract to do a little work for this group and I'm helping out this organization. And I'm like, yeah, you're employed, right? So what's happening is demographic shaping the labor force. And what happens is economies grow either because you have more workers or you use your workers more productively. So the labor force is slowing, the labor force growth is slowing and this is inevitable and it's going to slow the rate of expansion of our economies. The other component of it is, if you have fewer workers, what you need is stronger productivity. You need the workers to be more productive. And what we can see in the data is that there has been a secular decline in the rate of productivity growth. Now, when we talk about productivity, I can already see the eyes glazing over. When we talk about productivity growth, Canadians hate the word, okay? So it's the longest four-letter word in the English language, right? And what they think productivity means is they think it means producing more with fewer workers or they think it means working harder. That actually isn't what productivity is about. Productivity is really about if you have a high-skilled workforce generating, they can actually generate higher-valued products, they can build more sophisticated products. If we try to compete with places like China on the basis of wages, we will lose and our standard of living will not rise. So what we need is a more innovative, more competitive economy and to get that, you actually need workers that are more productive. The labor market's also changing. The nature of the labor market is changing. My father started his career at Westinghouse and he ended his career at Westinghouse. Today, your average worker is going to have at least three employers over their lifetime. And what you're gonna see over time is that actually increases. So you need a workforce that's nimble and adaptive and resilient. You need a labor market that actually can deliver a high performance and can actually deal with change. And if we don't change the path we're currently on, if we just say, okay, well, let's let the demographics unfold and then let's hold productivity constant. What happens to the sustainable rate of growth in BC? Effectively, if we went back to the 1990s, the average rate of growth in BC was around 2.5%. Structurally, the economy will only support going forward on average over the next several decades, an average of 1.5%. This is the impact of demographics. It will slow growth by 40%. Now, economists talk about growth like it's the holy grail. Like we talk about it like that's the objective. No, the objective is a rising standard of living, right? And it turns out you need economic growth to provide rising incomes that create the rising standard of living. And point of fact, going back to the issue of productivity, since the end of the Second World War, 80% of the entire rise of the standard of living of Canadians has come through increased productivity. That's where we get a rising standard of living. So if we have a trend slowing in economic growth, if growth is going to be 40% slower going forward, what we're going to find is that the standard of living in BC isn't going to rise as quickly. This also has a big impact in terms of governments. So if you add inflation to growth, that's how fast income is gonna rise. So you're gonna go from a world of 4.5% income growth to a world of around 3.5% income growth. So you're losing about a quarter of your growth rate in income and of course that's what you tax. And that's what you use to pay for education. This is what you pay for healthcare. And what we can see is from a demographic point of view, the pressures on the healthcare system are gonna rise enormously. I'm deeply worried that healthcare is gonna be a black hole that consumes resources that we also need to be going into education. So we fundamentally need to change the path we're on. We need to make an economy that's more productive, more creative and if we can do anything to increase labor participation, it's critical at this stage. The other thing that's happening is demand for skills is shifting. So what we're seeing is the net job creation is at the high end of the skill distribution and at the very low end of the distribution and middle skill jobs are getting replaced by equipment and machinery. So again, what we're talking about here is if you actually want a better outcome for British Columbians, we're gonna need a more skilled labor force. And I don't actually know how you build a skilled labor force if you don't get the essential skills right. You can't build the sophisticated skills if you don't get the foundational skills. And this is contributing to the rise of income inequality because what's happening is workers with really strong skills are getting a lot of income there. They have wage bargaining power, but if you're a middle skill worker, or a blue collar worker in today's world, man it's really hard to get wage gains, right. So, and this is actually having an impact we can see politically and economically around the world. You wanna understand Brexit? It's because people in the UK didn't feel like they were getting ahead. You wanna understand the rise of Trump and extreme policies that we're getting in the United States? In a lot of cases it was Americans voting for change because they felt like the system wasn't working for them. I don't wanna see a Canada where Canadians don't feel like they're getting ahead because it could lead to political outcomes that we as a society really do not want. So, this is very foundational. And this is why rising income inequality is one of the big concerns that are out there. And if we look at Canada, we're sort of middle of the pack when it comes to income inequality, which means we need to constantly be ensuring that we aren't going to rise higher up the scales. In BC, income inequality is actually a little higher than that on average in Canada. So, these are big fundamental issues. And why do we care about income inequality? Like, why do we actually care about it? I'll tell you as an economist, you need some. You know, that sounds a little strange. But if you don't pay me to work harder, if you don't pay me to go get new skills, if you don't pay me to take risks, I'm not gonna do it, right? So, you need some income inequality to actually be higher. The opportunity of higher income can be a very powerful motivator in the center. But like most things in life, it gets too high, it can be very corrosive, right? So, higher income inequality can materially harm your economy and your society. And what this slide shows, which is a little hard to get your head around, if you're higher up on the scale, it's if you are born into a high income family, what's the odds of you staying in a high income family? Right? And so, and then along the bottom is income inequality. And what you can see is that societies that have higher income inequality tend to also have lower social mobility, the ability to move up the income ladder. And so, the United States is the poster child for this. And I think America, income inequality has now reached levels that are materially harming their economy. If you are born into a low income family, the odds of you getting up the income scale is extremely low. You're probably gonna get a poor education. You're not gonna be able to climb. And if you're born into a rich family, your parents are gonna ensure that you stay in that category. Just to give you an idea of how bad it is in terms of the United States right now. If America stays on the path they're on with rising income inequality at the recent rate, you should never straight line forecast, but I don't think President Trump's policies are actually gonna reduce income inequality. In eight years time, America will have the income inequality, and sorry, in eight years time, America will have the social mobility of Victorian England. Think about Downton Abbey and upstairs, downstairs and things like that, right? That's the reality, right? And it's harming the economy because what you're doing is you're not able to unlock the potential that workers have. Canada is much better. You look on the scale. Canada actually does well. And a lot of it has to do with our education system. And this is where, again, early childhood education is gonna fit into this story because there's an equality issue here. So, at this point you're wondering what the hell is he gonna say something about early childhood education? But I wanted you to understand the bigger economic context because this is where this fits in, right? Because how do you deal with income inequality, right? The natural tendency is to do it through the tax system, right? If you think about the dialogue about the 1% versus the 99, boy, it sounds like a simple solution. Just take money away from the 1% and give it to the 99. Well, here's the problem. I strongly believe in a progressive tax system and it's an important part of our socio-economic framework. But here's the thing. We measure income inequality based on something called the Gini coefficient. And if I take, right now the top marginal tax rate in Canada is 52%, if I take it up to 90%, I take 90% of the income away from the 1%, I give it to the rest, the Gini coefficient barely declines. And if you think about it from math point of view, that had to be the case because they're only the 1%. If you give their money to the other 99%, as you spread it across the entire income distribution, you actually do not materially improve income inequality. So a progressive tax system is a good part of the solution, but it's not gonna do it alone. So how do you deal with this in the most constructive way possible? And the answer is breaking down barriers to opportunity. And this is, again, where I think early childhood education fits into this narrative. Because when we look at which kids benefit the most from early childhood education, it's kids coming from disadvantaged backgrounds. So it's a fundamental part of, it's one contributing factor that can reduce income inequality. So the work we've done, a lot of things the minister already said, that when you invest in affordable, high quality early childhood education, it creates benefits to labor. It increases labor participation amongst women. It improves outcomes that kids are having. Their cognitive skills start developing a lot sooner than we thought decades ago. They have the capability of learning and going up the skills distribution earlier. They are more, they are better school ready. Scholastically, there's an issue that kids that have had a good early childhood education are at better position when they start the education system that the other kids catch up. But here's the thing. There's a cost associated with having those other kids catch up. So any sort of special ed programs and things like that, I will tell you from an economic point of view, it has to be the case that it's cheaper to deal with problems before they start or ensure they don't start or to remediate them earlier than try to remediate them later. Then there's the other benefits from high quality early childhood education and that is the kids have better emotional and social skills. They have better behavioral skills. And those things stay, if you look at the academic studies, those advantages persist throughout their education timeframe. So those benefits are actually permanent. And so if you have better outcomes for parents, you have better outcomes for kids, you end up with better outcomes for the economy, which ends up creating more tax revenues, which ends up being better for government. One of the conversations I had earlier today was the fact that if you have kids that go through early childhood education programs, they make better life choices. If that takes pressure off the healthcare system, man, this is a really valuable thing that you can add to the case for the benefits from early childhood education. When we look at the economic impact, I've already given away the fact that one of the big impacts is that it improves labor participation for women. And this comes at an important time when we have an aging population. So we wanna get the labor participation rate up. And I think one of the big challenges that governments have when they're investing in this space is governments tend to wanna invest in things that will show a payoff before they go back to the electorate and run for election. And the benefits to early childhood education, we think about it as the benefits to the kids and the benefit to the kids are over their lifetime. So when you do economic impact studies, a lot of the gains are gonna be outside of the four year election cycle. But there is a payoff that you actually can see immediately and that is the higher labor participation for women. All right, so if you make affordable, accessible, high quality early childhood education, you can actually lift labor force participation. If we look at labor participation for women in BC, you can see it's actually below the national average, or at least in 2016 it was below the national average. And what we do is we look at it for women that have kids. And what you can see is the labor participation, if they have a young child under the age of five or less than age three, it's about 70%, then it goes up to about 73%, the actual average is around 83% for overall female labor participation. So in other words, there's scope here to actually increase labor participation for women with young children. So nationally we go from like our current and participation rate is around 75%, the OECD is 80% and if we actually went to the top performing OECD countries, it would be a labor participation rate around 83%. So there is actually a significant gain. If you think about it, if we just took the Canadian situation and said what would happen if you had the same labor participation outcomes that other countries have with their ECE programs, you'd actually increase the number of women in the labor force by 57,600 women. That's a material number. If we were at the top end of the scale in terms of labor participation, we're talking around 77,000 women that could be in the labor market at a time when we actually need more workers. So this is actually material. On children, we know that there's big benefits. I've already gone through a lot of them so I'm not gonna repeat it, but there's benefits related to skills, there's benefits that are related to the softer, emotional and social skills, and we do need to do better on skills. So I've spent a lot of time doing work on essential skills, literacy, numeracy, critical thinking, and the like. I found it really depressing that five and 10 Canadian adults don't have the desired level of literacy in English or French to succeed in a knowledge-based economy. I mean, I actually couldn't believe that was true when I started doing research on this. I mean, I couldn't believe we have a problem. We're a well-developed advanced economy with a good primary and secondary public school system. How the heck could we have something that's a problem on something so basic as literacy? And yet it turns out, in point of fact, we actually do have a challenge on this front. And part of the issue is it's a conception issue, right? So a lot of people think that literacy is a binary outcome. You're either literate or you're not, and that's not true. It's like any other skill set, right? It's like playing a piano, right? I can't play at all. So I have zero literacy when it comes to pianos, right? But some people can play a little bit. Some people can play a song. Some people are competent, and then you have masters. And literacy is the same thing. So we actually have a situation where five and 10 Canadian adults don't have the desired level of literacy to succeed in a knowledge-based economy. Six and 10 don't have the desired level of numeracy. If you look at it provincially, what you can see is that BC actually is above average in terms of, actually BC is above average on education outcomes in terms of most of the stats, but we still could be doing better, right? We still could be improving. And if we look for kids and we look at the PISA scores, again, BC does quite well, but if we actually look at it overall, what you're looking at, if I take the results of PISA and I say what's the equivalent for kids on the literacy metrics, it's basically about four and 10 kids are not getting the literacy that they need to succeed in a knowledge-based economy, right? 40%, that's an unacceptable number, right? So we need to do better. And I'll be honest, as an employer, I will tell you that of all the economists that actually haven't worked out that I've employed, almost none of them have been because they've been a bad economist. Almost all of the times I've had workers that haven't worked out, because they didn't have the communication skills that I needed. They didn't actually have the literacy and they're really strong mathematically because that's the nature of economics, but a lot of them can't write, right? It's really depressing. So we actually need to do a better job on our skills development. And math is actually where we're, where math skills in a lot of provinces have actually been declining and this is troubling because the world's becoming more quantitative. Again, BC's doing better than average, but skills development is critical. If we look at enrollment in early childhood education, what you can see is Canada's overall enrollment is below the OECD average. The BC enrollment rate, the last number I was given was around 25%. We need to raise that. So I'm really encouraged by the minister's comments around expanding the enrollment opportunities. The other thing we found in our research is that the economic impact, the payoff in terms of skills and the benefits to the kids increase with duration of early childhood education. In other words, it's not if you get one year and then you have a second year, it isn't just like, oh, one plus one, it's actually one plus a number bigger than one. The more years of education you get, it's compounding. So if you have more exposure to early childhood education, you get a bigger payoff. So our recommendation would be if you don't have pre-kindergarten education, do that. And then when you've got that done, move it to the next step and expand it for age three, right? And keep moving down the scale until you get to a universal program. If we wanted to raise, just in terms of numbers, like if we wanted Canada to have OECD average outcomes for enrollment, we'd actually increase the number of kids in the ECE by 134,000. If we went to the top end of the scale, we're talking about close to 400,000 kids. When you go to the Nordic countries, like you go to Sweden and Norway, and these are countries that we compare ourselves to often. In Sweden, there almost is no gender wage gap. And I actually, I fundamentally believe one of the biggest reasons for that is because of an accessible, high-quality, early childhood education system. So we're talking about incrementally and over time. The big problem for governments is that these sort of programs are really expensive, right? So I don't think it's realistic to just go and ask the jurisdiction to please create a universal system immediately because the reality is it would be too expensive. So you have to actually be realistic and fit it into your fiscal constraints. But what you need to do is move the ball steadily down the field to get to where you wanna be, right? So I think of it like playing a football game and going at like 10 yards at a time. Move the ball down the field, okay? Move it a little farther, and eventually you'll get to the goal. The kids that get the biggest benefit are the kids that come from disadvantaged backgrounds. But the one thing I would stress to you is you do not want the classrooms to only be filled with kids from disadvantaged backgrounds. The academic research on this is really compelling. That what you actually want is you want mixed classes. And the kids from the disadvantaged background, in a sense, get pulled up by the kids that have had more advantages. So you really want it to be an inclusive system. No conversation around education should overlook the challenges that the Indigenous people have been having and the outcomes they're having and how unacceptable they are. And in reality, from a skills development side of things, it's important to include, that this process has to be inclusive. And I would stress actually, when we think about an aging population, who has the fastest growing population in Canada? What segment? The Indigenous people, right? The gentleman that opened this conference has five kids. You know, that's way above the average, right? And his kids will be entering the labor market and they will graduate from, hopefully they will go on to post-secondary education and graduate from post-secondary education. They are the workers that we're going to have 25, 30 years from now, right? And we need them to have the skills so that they have a successful outcome. So we looked at the cost-benefit analysis, you know, we're economists, we have to actually talk about dollars, right? I mean, it's all about money. And, you know, so there's been lots of studies done looking at cost-benefit analysis, like how much does it cost to have a good quality program? And then if you have a good quality program, what's the benefit that's reaped in terms of increased labor participation, benefits to the kids? And what you get is a range of outcomes. What's interesting if you look at the academic literature, like just take the bottom one, take the lowest, right? It says, for every dollar you invest in early childhood education, you get back $1.60. A 60% return is a pretty damn good investment. I often worry that sometimes advocates overstate their case. They come up with like a really bombastically huge number that's actually not realistic. And it's like, you don't have to go that far. Even the lowest number shows you, man, this is an enormous payoff. We actually did the numbers, and actually, my numbers are actually going to be well above the average in terms of rate of return. We modeled this with the conference board macro models. And we did a few things when we made the assumptions. And one of the things we did was we actually put in, we actually put in on the cost side a significant increase in the salaries for early childhood educators. Right now in Ontario, the ECE educators earn about 44% of what a public teacher does. We increased it to 60. So we didn't actually equalize it, but we moved up the compensation schedule for early childhood educators. I think one of the challenges we have in this space is retention, right? So you have lots of young people that go into early childhood education programs. They graduate, they really are passionate about it. They want to teach kids, they want to help develop children. And then they do it for a couple of years, and then they find out that from a family point of view, they need more money, and then they rotate out. They're still passionate about doing the work, but they don't stay in the occupation. Well, here's the thing. The sweet spot for me when I recruit people is I want, when they get five to six years of experience, man, they are great employees, because what they've done is they've gone from being apprentices to being professionals. And if we have a problem that early childhood educators are leaving the profession, when they get to sort of years three, four, five, these are the people you actually desperately want to retain. So I actually think there's a market failure here. I think that we underpay for early childhood education. And I think that impacts quality. So when we did the numbers and we put in, even with the higher cost numbers we put in, the low ball estimate that we got was for every dollar you put in, you get $1.67 back. And in point of fact, depending on how you measure it and the assumptions you made, we could actually have multipliers well above that. And one thing I would stress, and this came up again in our breakfast conversation, was there's things, there's benefits here I haven't quantified because I don't have a way of quantifying. Like so if kids go through early childhood education, make better life choices, and as a result, they don't do drugs and don't drink as much, and they don't end up with health problems, right? Which we know actually from some of the academic research is true, right? That has a big payoff, but I actually haven't included that here because I have no way of measuring it, right? So in point of fact, I think that if anything, the traditional metrics could actually underestimate it. The last point I'd make, so we talked about the benefits to parents, the benefits to children. I wanna go back to the conversation about equality. And to me, there is a very big equality story here. So let's imagine, I wrote a research paper that said having looked at the BC education system, I have concluded that all of the primary education, sort of grades one to say five, grades one to five should all be delivered from private schools. And we should let parents pay, parents will pay for primary education, and parents that have lots of money can pay for better programs. And kids from disadvantaged backgrounds, they can get a primary education, but it's gonna be delivered in a very poor way because they're gonna get what they can afford. How do you think people in BC would feel about that? Now what we have is a current system where you get maternity leave benefits, so you have a child and the government provides you with support for 12 to 18 months, and then you're left to your own devices until kindergarten, and the kids are going into kindergarten at age five. So between 18 months and age five, we have a situation where the kids get whatever the parents can afford. Why is that acceptable? Like, why is it that we think that inequality is okay? And I would stress that throughout all of this, I'm talking about early childhood education, and I'm being very precise on my words, I'm talking about it as being education. We know brain development happens very early in life. We know a lot of formative brain development happens very early. We know that kids can actually develop skills and be developed early in their lives before they enter the public school system. So in my mind, it's all one giant continuum. In my mind, you have a child, and now you're having child development and education, and that starts immediately, and it continues all the way through. So I have no idea why the historical artifact that we do kindergarten at age five, but we have this inequality part of the segment. I don't actually understand why Canadians actually think that's acceptable. One thing I found quite shocking when I did this sort of research was, you know, when I did my first report at TD, and I went to the bank and said, hey, I'm gonna do a report on early childhood education. They said, oh, that's great, because who's gonna be against early childhood education? So over my career, I have done research on, I've done research on putting a price on carbon. I've done research on building pipelines. I've done research on healthcare reform. You know what topic I actually got the most pushback and blowback on when I put out research? It's actually this topic. It's actually early childhood education. And it astonished me. Like I just, God is my witness, I didn't see it coming. But there's a lot of people that are not supportive in terms of this is where they want their tax dollars to go. And I think that there's a misunderstanding about what we're talking about. And fundamentally, I think the disconnect is, the people that are not strong advocates view it as daycare, like it's babysitting. That's what they think, right? They think that what we're really talking about is babysitting, and that is not what I am talking about. What I am talking about is early childhood education programs where you have a well-developed curriculum delivered by a trained educator so that the time the child is spending the child is actually learning and developing. And that is what we're talking about. And I think a lot of the opposition or lack of support comes from people that actually don't view it as part of the education system. And that's actually what we need to overcome. I had a funny experience where I was invited by CBC to do an interview, a radio interview on my report. And I'm like, sure. And they're like, come into the studio. The sound will be better. And I'm like, OK. And then I showed up, and it was a call-in show. If I'd known that, I never would have done it. And so you had these people phoning in. And I had people that were upset, that didn't agree with me. And they wanted to voice their concerns. And my all-time favorite one was a gentleman that called up and said he didn't want his tax dollars going to this because he went past one of these daycare facilities. And he looked in the window. And you know what those kids were doing? They were playing. And I vividly remember in the back of my head, all these responses came up. And it's like, don't say that. Don't say that. Don't say that. That's how they learn. And I think that's where a lot of the disconnect comes from. So the thing I think we strongly need to think about and the thing we want to stress is that we are talking about education. And it can help us to address socioeconomic issues. So when we did the math on this and we looked at what the impact would be, the share of census families that have kids in the age of 0 to 4, you're talking about 0.5% of all households. But moving up to the OECD average actually reduced income inequality for families with low income or with families with young children by 2.3%. So it doesn't sound like much, but you're reducing income inequality by 2.3% but for a group that's only 0.5% of the total. So it's actually a fairly significant impact in terms of improving outcomes. So in my humble opinion, I actually think that there is a strong economic case to be made for expanded investments in early childhood education. As an economist, I think we need to maximize the use of our available population. That means that we have to increase labor participation as much as we possibly can. And there's a lot of different dimensions to that in terms of improving outcomes that newcomers are having, improving outcomes that indigenous people are having. But one of the areas where we can actually improve things is increasing labor participation amongst women. And then there's the benefit to the children. And I think that the competition in the world economy is only gonna get stronger. I think the labor market's going to continue to become more dominated by contract gig-type work. I think the structure of the labor market's changing and we need resilient workers with strong skills. And I actually think we need to start building those skills right after birth. And I think ultimately if you do that, you're going to have a big payoff to the economy and I think you're gonna have a big payoff to government. And so I actually think that we need more advocates, not just from the public sector, but we need more advocates for this in the private sector as well. And that's part of the case.