National Evaluation of Welfare-to-Work Strategies

Evaluating Two Approaches to Case Management:
Implementation, Participation Patterns, Costs, and Three-Year Impacts of the Columbus Welfare-to-Work Program

Chapter 4:
Cost of Employment-Related Services in the Integrated and Traditional Programs

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Contents

1. Components of the Cost Analysis
2. Gross Cost per Program Group Member
   1. JOBS-Related Expenditures by the Welfare Department
   2. JOBS-Related Expenditures by Non-Welfare Agencies
   3. Non-JOBS Expenditures by the Welfare Department
   4. Non-JOBS Expenditures by Non-Welfare Agencies
   5. Total Gross Cost per Program Group Member
3. Gross Cost per Control Group Member
   1. Welfare Department Costs
   2. Non-Welfare Agency Costs
   3. Total Gross Cost per Control Group Member
4. Net Cost per Program Group Member
5. Costs by Educational Attainment Subgroup

Endnotes

The preceding chapter examined the participation in employment-related activities by sample members assigned to the integrated and traditional programs and to the control group within the two-year period following their entry into the study. These are important indicators of the level of investment made in each individual required to participate in JOBS. This chapter presents information on total expenditures for employment-related services over the two-year period, and it shows how these costs varied across program activities and support services.

In addition, this chapter presents estimates of the cost that the government incurred for employment-related services for integrated and traditional group members over and above what was spent on the control group. This is referred to as the net cost per program group member, and it is the difference between the total cost per program group member (integrated group member and traditional group member) and per control group member of all program-related and non-program-related employment services that were used during the two-year follow-up period.

It is important to emphasize that to match the methodological approach used in the cost analyses of the other programs studied in the NEWWS Evaluation, the cost estimates in this chapter reflect only expenditures on employment-related services. That is, the cost estimates presented here reflect the costs of the JOBS program and do not include expenditures on income maintenance services. Income maintenance costs will be included in a benefit-cost analysis in the final report in the evaluation. That analysis will determine whether the programs' net benefits are greater than their net costs after five years. It would be premature to present a two-year benefit cost analysis here because the total return on the JOBS program may be evident only after several years.The later report also will compare the benefits and costs of the two Columbus programs with those of the other programs studied in the NEWWS Evaluation.

The cost figures presented here include JOBS and non-JOBS activities, and they are calculated per program group member rather than per participant. Non-JOBS costs are included in the total cost because they represent additional investments of resources that have the potential to affect program group members' future earnings and welfare receipt, just as they do for control group members. Thus, they are included in the gross cost estimates used to compare the cost per program group member with the cost per control group member.

Similarly, it is necessary to report costs per program group member, not just per participant in JOBS. The requirement to participate may have affected sample members' behavior (some individuals may have chosen to avoid the mandate by finding employment on their own or by leaving welfare). As is true for controls, program group members who did not participate in JOBS could have participated in education and training services on their own. In addition, to exclude nonparticipants could introduce bias because the program may have influenced sample members' behavior.

As described in Chapter 1, unlike random assignment in most of the other NEWWS Evaluation programs, in Columbus random assignment occurred in the welfare office at the point clients were determined to be JOBS-mandatory and were referred to the JOBS program. Therefore, the Columbus sample includes some people who were informed about the program by an income maintenance (IM) worker but never received further information about the program from a JOBS case manager (either a traditional JOBS case manager or an integrated case manager), and who never participated in the JOBS program. Sample members in the program groups who remained JOBS-mandatory may have been sanctioned for noncompliance. Therefore, even though these sample members may not have participated in the JOBS program, costs were incurred on their behalf, and other investments may have been made through nonwelfare sources. Although including nonparticipants in the calculations yields correct cost estimates, because the sample is systematically different from those in the other programs in the evaluation, the cost figures presented here are not directly comparable to those in the other sites. To facilitate cross-site comparisons, nonexperimental estimates — namely, estimates including in the base only participants in a specific activity — are used in some places.

Under traditional case management design, clients were assigned a separate IM worker and a JOBS case manager. Sample members in the integrated group were assigned to a single worker who performed both income maintenance and JOBS functions. Case managers in both groups served clients in all programs (for example, the Food Stamps Employment and Training program and the General Assistance [GA] work program), not only the JOBS program.⁽¹⁾ As noted above, welfare department costs in this chapter represent expenditures to provide services for the JOBS program only; costs for income maintenance functions will be accounted for in a future analysis.

To summarize the main findings presented in this chapter: The estimated total cost (in 1993 dollars) per program group member for employment-related services within two years after random assignment was $3,018 for the integrated program and $2,589 for the traditional program. The net costs of the integrated and traditional programs were $2,149 and $1,720, respectively. The integrated program had somewhat higher employment-service costs because it had higher unit costs, particularly for case management and vocational training. However, given that the case management experiment in Columbus was as much about reforming income maintenance as it was about JOBS, without the income maintenance costs it is not possible to draw final conclusions about the comparative total costs of the two program approaches. As mentioned, a future benefit-cost analysis will include these costs.

The original design for the integrated program included reduced caseloads of about 100 cases each, which might have made integrated case management a higher-cost approach. However, as implemented, integrated case managers were assigned about 140 cases for whom they provided both income maintenance and JOBS services. Average caseloads for IM workers and traditional JOBS case managers were approximately 260 cases each.⁽²⁾ Thus, the relatively small cost difference between the two programs is not surprising.

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I. Components of the Cost Analysis

Figure 4.1 illustrates the elements of the cost analysis. For the two program groups, costs were calculated for two categories of activities and services: those provided to meet the JOBS requirements or to support JOBS participation and non-JOBS services and activities. Within each category, costs are further broken down by whether they were paid for by the welfare department or by non-welfare agencies. As represented in Figure 4.1, the total cost per program group member for employment-related services (box 3) is the sum of the welfare department's operating expense (for example, for case management, job search services, and associated overhead costs) and support services costs (box 1) and the expenses incurred by non-welfare agencies (for example, local adult education providers, community colleges, and vocational training institutes) to provide educational and training activities that met JOBS requirements (box 2). Non-JOBS costs (box 6) include child care expenditures paid by the welfare department for participation in programs other than JOBS (for example, transitional and at-risk child care) (box 4) and the costs of services that program group members received outside the JOBS program (box 5). Total JOBS and non-JOBS costs per program group member make up the total gross cost per program group member (box 7).

The sections of this chapter follow the flow of the diagram in Figure 4.1, beginning with the JOBS-related expenditures and ending with the net cost per program group member (box 11), which is calculated by subtracting the total cost for employment-related services per control group member from the total cost per program group member. The control group estimate represents costs that the government would have incurred in the absence of the JOBS program, and the net cost represents the cost of the JOBS program over and above control group costs.

Figure 4.1

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II. Gross Cost per Program Group Member

This section examines expenditures made by the welfare department and by non-welfare agencies for employment and training activities and support services provided to sample members in the integrated and traditional programs. Costs are broken down into the following categories of activities: orientation and appraisal, job search, basic education, post-secondary education, vocational training, and work experience.⁽³⁾

In order to determine how much was spent per program group member on each JOBS activity, its unit cost was first calculated using data for the "steady-state" period of calendar year 1993. This year was chosen as a period of relatively stable program operations when many of the sample members were receiving services. The unit cost of an activity is an estimate of the average cost of serving one person in a specified activity for a specified unit of time: for example, one month of participation. For each activity, the unit cost was calculated by dividing expenditures during the steady-state period by the measure of participation.⁽⁴⁾ Once the unit cost of an activity was determined, it was multiplied by the average number of units spent in the activity to determine the average cost incurred per program or control group member during the follow-up period.⁽⁵⁾

Table 4.1 (column 1) shows the welfare department unit costs by category. For job search and basic education, the welfare department cost reflects the cost of related case management (assigning recipients to the activity, monitoring attendance, and so on), as well as the cost of providing the activity itself (for example, the cost of classroom instruction, job search facilitation, and classroom space). The welfare department paid for the costs of providing these activities through contracts with local providers who were given on-site space to provide services to JOBS participants. The unit costs for the other activities reflect the cost of case management.

The differences between the two programs in the welfare department's cost of monitoring post-secondary education and vocational training may reflect efficiencies due to economies of scale. The larger traditional JOBS case management unit was divided into two smaller units: one served recipients who were considered "job-ready" and the other served those who were "not job-ready."⁽⁶⁾ Having more homogeneous caseloads (in terms of service needs) may have streamlined the case management effort by reducing the number of different types of activities each worker had to monitor. The higher unit cost for the integrated group for vocational training provided by non-welfare agencies (column 4) reflects use of more expensive services — sample members in this group were more likely to attend proprietary schools (particularly cosmetology programs).

A. JOBS-Related Expenditures by the Welfare Department (Figure 4.1, Box 1)

The Columbus welfare department incurred costs to operate the JOBS program, as well as for child care and other support services.

1. Operating costs. Welfare department operating costs were determined using expenditure data that captured the costs of JOBS-related activities, starting at the point that sample members were randomly assigned. Total expenditures (salaries and overhead costs) were allocated to JOBS activities using time studies completed by case managers. In addition, payments made by the welfare department to outside organizations that were contracted to provide JOBS services (primarily job search and basic education) are included in the total welfare department costs. Costs incurred by the welfare department to accommodate MDRC research requirements and requests were excluded from total expenditures. As shown in Table 4.2 (column 1), these costs were $631 per integrated program group member and $318 per traditional program group member.
2. Support service costs. Other JOBS-related costs include payments for child care and participation allowances that participants were eligible to receive. Table 4.2 (column 1) shows that the average JOBS child care cost was $341 per integrated program group member and $349 per traditional program group member.⁽⁷⁾ Table 4.3 provides more detailed information about patterns of support service receipt. Average monthly payments of over $370 were high compared with the other programs studied in the NEWWS Evaluation, but low rates of receipt (less than 15 percent) and relatively short durations (about 6.5 months) put the cost per program member near the average of the other programs. The higher participation allowance payments to integrated program group members ($199 versus $133) mainly reflect a higher rate of receipt among sample members in that program — 63 percent compared with 48 percent.
3. Total JOBS-related costs incurred by the welfare department. Table 4.2 shows the combined costs of providing the services described above: the welfare department spent $1,182 per integrated group member for employment-related services and $810 per traditional group member. A large part of this difference is due to the higher cost in the integrated program for monitoring participants in post-secondary education and vocational training activities.

B. JOBS-Related Expenditures by Non-Welfare Agencies (Figure 4.1, Box 2)

Non-welfare agencies also incurred costs providing JOBS services to program group members.⁽⁸⁾ For basic education, non-welfare costs reflect expenditures beyond those covered by contracts with the welfare department. In Columbus, non-welfare agencies spent $1,141 per integrated group sample member and $1,291 per traditional group sample member (Table 4.2, column 2). Although basic education and post-secondary education costs were higher for the traditional group (sample members in the traditional group participated in these activities for more hours while in JOBS than their counterparts in the integrated group), these differences are offset by the higher cost of vocational training activities chosen by sample members in the integrated group.

C. Non-JOBS Expenditures by the Welfare Department (Figure 4.1, Box 4)

As shown in Table 4.2 (column 4), the welfare department spent an additional $176 per integrated program group member and $152 per traditional program group member on child care services unrelated to the JOBS program. Table 4.3 shows that traditional program group members received nearly equivalent amounts from transitional and other low-income child care programs ($77 and $70, respectively). Sample members in the integrated group received similar levels of support from other child care programs ($69 per program group member), but received half again as much in transitional child care ($101 per program group member).

D. Non-JOBS Expenditures by Non-Welfare Agencies (Figure 4.1, Box 5)

The cost to non-welfare agencies for education and training activities undertaken outside the JOBS program was $519 per integrated group sample member and $336 per traditional group sample member. These costs are primarily for activities that sample members undertook during periods when they were not required to participate in JOBS. A large part of the difference between the two groups is accounted for by the cost of post-secondary education: in this case, sample members in the integrated group spent more time in post-secondary education activities outside the JOBS program than did those in the traditional group.

E. Total Gross Cost per Program Group Member (Figure 4.1, Box 7)

Table 4.4 shows that the sum of the JOBS and non-JOBS costs produces a total gross cost per person of $3,018 for the integrated program and $2,589 for the traditional program, with post-secondary education and vocational training accounting for much of the difference between the groups.

As discussed earlier in this chapter, owing to the different point of random assignment in Columbus, a direct comparison of this site's costs with those of the other programs in the NEWWS Evaluation would not be meaningful. An approximation that results in more comparable figures is achieved by considering the costs of activities per participant in the activity (calculated by dividing the cost per program member by the participation rate). The integrated program had the lowest per-participant cost for basic education of all the programs in the NEWWS Evaluation; the traditional program cost was also relatively low. (The cost of basic education per participant was $1,615 in the integrated program and $2,088 in the traditional program. Among the other JOBS programs, the Riverside labor force attachment program had the lowest per-participant cost in basic education at $1,845.) The average per-participant costs for post-secondary education and vocational training were higher than the average costs in the other programs.⁽⁹⁾

The high levels of office automation and administrative support for staff, described in Chapter 2, may have contributed to lower case management costs in Columbus. In addition, by co-locating contracted job search and basic education activities at the JOBS center, most clients were funneled into services provided by lower-cost agencies. Although on-site services were provided as a convenience for clients, this arrangement may have also reduced the effort required of case managers to monitor participation in these activities.

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III. Gross Cost per Control Group Member

Control group members participated in education and training activities on their own initiative. In addition, they were eligible for some support services from the welfare department. Therefore, the gross cost per control group member for employment-related services includes expenditures by the welfare department and non-welfare agencies. This cost serves as a benchmark against which the gross cost per program group member is compared in order to determine the net cost of the programs.

A. Welfare Department Costs (Figure 4.1, Box 8)

Control group members were eligible to receive child care for education and training activities that they participated in on their own and could receive work-related transitional and other non-JOBS child care. Table 4.4 (column 2) shows that the welfare department spent $321 per control group member for child care ($10 of this represents program administration costs) and $10 on participation allowances.

B. Non-Welfare Agency Costs (Figure 4.1, Box 9)

Table 4.4 (column 2) shows that the total non-welfare agency cost for control group members in Columbus was $538. Post-secondary education ($243) and vocational training ($203) activities accounted for the majority of these expenditures.

C. Total Gross Cost per Control Group Member (Figure 4.1, Box 10)

Summing the welfare and non-welfare agency costs produces a total gross cost of $869 per control group member for employment-related services. This control group cost is used in the next section as the benchmark to determine the net cost per integrated group member and per traditional group member.

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IV. Net Cost per Program Group Member
(Figure 4.1, Box 11)

Table 4.4 (column 3) shows the net costs of employment-related services for the integrated and traditional programs. For the integrated group, $2,149 was spent per program group member over and above what was spent on the control group. For the traditional group, the net cost was about $400 lower.

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V. Costs by Educational Attainment Subgroup

Table 4.5 presents gross and net costs of employment-related services for sample members with and without a high school diploma or GED at random assignment. For both programs, gross costs were higher for the subgroup with a high school diploma or GED (graduates) than for those without a credential (nongraduates). Graduates had higher gross costs than nongraduates primarily because they were more likely to participate in higher-cost activities, such as post-secondary education and vocational training. In addition, although graduates and nongraduates received similar participation allowances, graduates received substantially more child care support (both JOBS and non-JOBS). These same patterns in participation and costs are seen for graduates and nongraduates in the control group. Thus, net costs for employment-related services were also higher for graduates than for nongraduates.

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Endnotes

1.  Only clients who were mandatory for the AFDC JOBS program were eligible to be assigned to integrated case management, so integrated case managers would have had fewer clients in the other work programs. Because integrated case managers were responsible for all members of a household, they would have worked with any GA or Food Stamps-only recipients who were part of the sample member's household. In addition, sample members who stopped receiving AFDC, but received Food Stamps or GA, would have continued on the integrated case manager's caseload.

2.  As noted in Chapter 2, for every two integrated case managers, there were about 280 cases, compared with caseloads of about 260 for every pair of traditional JOBS case managers and IM workers.

3.  These activities are described in Chapter 2.

4.  For example, in calculating a cost per month of participation, the participation measure is "participant-months," which is obtained by summing the monthly total number of participants in the activity across all months in the steady-state period.

5.  A more detailed explanation of general cost methodology can be found in Hamilton et al., 1997, pp. 165-69.

6.  Until mid 1993 there were two integrated units with six case managers each. During the second half of the year, there were three integrated units with seven case managers each. During the same period, there were five traditional units with an average of six case managers each.

7.  For both programs, an additional $10 per program group member was spent in administering these payments.

8.  This analysis assumes that education and training services provided by non-welfare agencies were financed by non-welfare agencies (including the U.S. Department of Education, if program group members received Pell Grants or other financial aid) and not by sample members themselves. To the extent that sample members actually financed their own education and training, this analysis overstates the true costs to non-welfare agencies per sample member. This has distributional implications, but does not overstate the total cost of services. The GAIN evaluation of seven counties in California found that fewer than 10 percent of sample members may have spent their own or their family's resources on education and training. See Riccio, Friedlander, and Freedman, 1994, for details.

9.  The average cost per participant in post-secondary education was $4,939 in Columbus and $4,697 in the other NEWWS programs. The average cost per participant in vocational training was $4,292 in Columbus and $3,994 in the other programs. Because of data limitations, Portland and Detroit costs are not included in these averages.

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