Understanding the Costs of the DOL Welfare-to-Work Grants Program

I. Introduction

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Contents

  1. The Welfare-to-Work Grants Program
  2. The National Evaluation and Cost Analysis
  3. Programs Included in the Cost Analysis

The Welfare-to-Work (WtW) grants program is one of several major federally funded initiatives whose purpose is to help welfare recipients and other low-income parents move into employment. In 1997, the Balanced Budget Act (BBA) authorized the U.S. Department of Labor (DOL) to award $3 billion in WtW grants to states and local organizations. These grants were intended to support efforts to help the hardest-to-employ recipients of Temporary Assistance for Needy Families (TANF), as well as noncustodial parents, prepare for employment, find jobs, stay employed, and advance in the job market. The WtW grants program built on the earlier enactment, in 1996, of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which created the work-focused, time-limited TANF program. PRWORA was designed to move people off the welfare rolls and into employment more quickly. WtW grants provided resources targeted to state and local efforts to help particularly disadvantaged individuals who were likely to have great difficulty making that transition.

This report examines the costs of WtW programs in nine sites that operated with federal grant support. The WtW cost analysis is part of a comprehensive, congressionally mandated evaluation, which is being conducted by Mathematica Policy Research, Inc. (MPR), the Urban Institute, and Support Services International, Inc. under a contract from the U.S. Department of Health and Human Services.

The main objectives of the WtW cost analysis were to understand the cost structure of selected programs and factors that influence program costs. Program evaluators and planners should find this information useful in assessing the outcomes of WtW programs and in making decisions about future programs with similar objectives. Table I.1 summarizes the main findings from the cost study.

Table I.1
Summary Findings from the Wtw Cost Study
  • WtW costs per participant reflected meaningful differences in program design.  On average, variations in costs per participant — which ranged from $1,887 to $6,641 — reflected three dominant service approaches. Enhanced Direct Employment programs (average cost of $3,559) emphasized quick entry to employment while also offering preemployment preparation and postplacement assistance. Seeking to enhance participants' employability more systematically, Transitional Employment programs emphasized paid work experience (average cost of $4,346) or helped WtW participants prepare for jobs with employer partners (average cost of $4,513). Postemployment Services programs cost less (average cost of $2,178) because they mostly provided intensive case management to already employed individuals. For programs following the same approach, costs per participant still varied considerably, despite offering a similar mix of services. Differences in how much they emphasized paid work experience and/or postplacement support, and in how these program elements were structured, appeared to be important factors in explaining such cost differences.
  • On average, WtW programs cost more than WIN, less than Supported Work, and about the same as JOBS programs.  Differences in WtW costs per participant compared to these earlier interventions reflected three factors. First, WtW programs targeted hard-to-employ individuals who were excluded from participation mandates (as in WIN) or often deferred from participation (as in WIN and JOBS). Second, although WtW programs did not emphasize education and training (as in JOBS), they sought to build a foundation for employment through direct work experience and other skill upgrade activities more closely linked to employment. Third, to maintain their simultaneous focus on employment and human capital development for hard-to-employ individuals, programs expanded case management and other services. Nevertheless, WtW efforts were not as comprehensive as those undertaken by Supported Work programs.
  • Future efforts could cost as much as, or more than, WtW.  Although the WtW grants program is ending, expanded individual and aggregate Temporary Assistance for Needy Families work requirements may motivate states to continue to focus on hard-to-employ individuals, and even intensify past efforts. Intensifying WtW elements such as structured job readiness, paid work experience, or postplacement case management to address the needs of these individuals could raise average costs. State calls for increased flexibility in program design may also lead to greater use of education and training activities, which could be costly. However, observations from the WtW process and cost analyses suggest that, to the extent that new policies require education and training activities to be pursued concurrent with employment, participation may be limited and cost increases, therefore, less pronounced.

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A. The Welfare-to-Work Grants Program

The BBA defined WtW programs as a complement to the "work first" programs established under TANF. The WtW initiative was developed to give states and localities additional resources to help the hardest-to-employ segments of the TANF population, including the noncustodial parents of children on TANF, find work. To ensure that grantees used WtW resources as intended, the legislation established detailed spending rules. For example, it required that at least 70 percent of grant funds be spent on individuals who met specific eligibility criteria.(1)

DOL distributed the $3 billion in funding that Congress provided for the WtW program to states and to competitive grantees in stages during 1998 and 1999. Seventy-five percent of the federal WtW funds were allocated to states based on a formula that considered states' share of the national poverty population and TANF caseload. State formula grants were awarded in 1998 and 1999. States had to pass 85 percent of the funding they received to local workforce investment boards (WIBs). WIBs and other groups could also receive separate competitive grants directly from DOL. Competitive grants were awarded in three rounds, announced in May 1998, November 1998, and October 1999.

The organizations that actually served WtW program participants were nevertheless diverse. The BBA and its implementing regulations (20 CFR 645.220) required that services relating to job readiness and job placement, as well as postemployment services, be provided through contracts or vouchers. At the local level, therefore, WtW grantees often solicited competitive bids and awarded subcontracts to several community-based and other provider organizations for WtW service delivery.

WtW programs were thus designed and operated primarily at the local level. Partly because of the grantees' reliance on subcontracting, a diverse mix of programs emphasizing different services and targeting different groups of WtW-eligible individuals was often implemented. This rich variety of WtW approaches was evident both across and within grantee initiatives.

Congress did not intend to provide ongoing support for these interventions. WtW grantees were originally given three years from the date they received their WtW awards (both formula and competitive) to spend their grants. WIBs and other WtW grantees, in turn, passed these same requirements to the providers with whom they subcontracted for WtW services. Ultimately, Congress extended the period over which WtW funds may be used to a total of five years.(2) However, no additional appropriations for WtW have occurred or are planned.

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B. The National Evaluation and Cost Analysis

The WtW cost analysis is part of a comprehensive, congressionally mandated evaluation of this federal grants program. The National Evaluation of the Welfare-to-Work Grants Program includes three major components:

1. Descriptive Assessment of All WtW Grantees. Mail surveys of all grantees, conducted in 1998 and 1999, provided an overview of program designs and activities, target populations, characteristics of participants, and, when available, information on early placement outcomes. Visits to several dozen grantees before the first survey helped develop a fuller understanding of program variations and provided a basis for selection of in-depth study sites. Previously released reports document the findings from both national surveys and the early visits to selected grantees. (3)

2. Process and Implementation Study. In 1999-2000 and 2000-2001, two rounds of site visits were conducted to 11 grantee evaluation sites. Some sites were selected because of their innovative approaches, settings, or target groups, others because they were typical of the most common WtW interventions. The process visits included discussions with staff of WtW programs and related agencies, focus groups with participants, and program observations. The aim of the process and implementation study has been to identify implementation issues and challenges, as well as lessons for program implementation.(4)

3. Outcomes Analysis. In 10 of the 11 process study sites, a sample of WtW participants was enrolled. Follow-up data on these participants are being collected through surveys and administrative data. These data are being used to analyze participants' activities in the programs and their employment and social outcomes. The 10 grantee sites where such analyses are being conducted are called the "in-depth study" sites.

In addition, a special process and implementation study focuses on documenting welfare and employment systems operated by American Indian and Alaska Native grantees, the supportive services they provide, and how these tribal grantees integrate funds from various sources to help their members move from welfare to work.(5)

The original design for the national WtW evaluation called for impact and cost-effectiveness analyses based on a random-assignment experimental design. Such analyses were to be conducted in the in-depth study sites. Estimating the full costs of delivering WtW program services was an essential foundation for the proposed cost-effectiveness analysis. The impact and cost-effectiveness components of the WtW evaluation proved infeasible, however. The main barrier to conducting the impact study was difficulty finding grantees that were identifying more eligible candidates than they could serve (grantees with excess demand) — a necessary precondition for random assignment. Without impact estimates, it was impossible to assess the cost-effectiveness of WtW programs.

A detailed analysis of the costs of WtW programs is still useful, however. The new time-limited nature of welfare assistance raises the stakes of participation in programs such as WtW for individual participants. It also makes it important to examine how fiscal and other resources are distributed to support the transition to employment and self-sufficiency. The goals of the WtW cost analysis were therefore redefined to focus on (1) understanding more fully how specific WtW interventions operated, and (2) exploring the cost implications of the alternative strategies or approaches used by WtW program operators. More specifically, the WtW cost analysis was restructured to address three descriptive and analytic objectives:

1. Describe the cost experiences of selected WtW programs

2. Compare program costs across grantees, sites, or program components

3. Identify factors that help account for cost variations within and across WtW programs and explore why and how these factors affect costs

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C. Programs Included in the Cost Analysis

The process and implementation analysis explored the implementation of the full range of WtW grant-funded initiatives in the grantee study sites. These grantee initiatives often included multiple programs — distinct interventions offering different mixes of services, targeting specific groups of WtW-eligible clients, or operated by different contractors. The cost analysis focuses on a subset of the programs that received operational support through WtW grant funds in the evaluation's in-depth study sites. Eighteen WtW programs out of a possible 36 from 9 of the 10 in-depth study sites are included.(6) (Table C.1 in Appendix C identifies the programs excluded from this analysis.)

The programs included in the WtW cost analysis were purposefully selected. Whenever possible, we sought to develop cost estimates for all programs that were enrolling a sample of participants for the evaluation's outcomes study. Because these programs were more intensively involved in the evaluation, it was more feasible to collaborate with local staff to collect this type of information.

This was not possible in all in-depth study sites, however. In two in-depth evaluation sites — Boston and Fort Worth — the grantees enrolled WtW study participants and then referred them to as many as 13 different programs.(7) In these two sites, it would have been impractical to collect and analyze cost information for all these programs, so we selected a subset of the programs that could potentially serve WtW sample members. The cost analysis includes those programs that served the largest number of WtW participants and that reflected (to the extent possible) the variety of WtW service delivery approaches that was evident at the grantee site.

The WtW programs differed along three important dimensions (Table I.2):(8)

1.Service Locations. Most (16) of the programs operated out of one or two locations. However, the West Virginia program, which covered 29 rural counties, had six offices, and the Nashville program, which contracted with several service providers, had seven offices.

2. Target Population. All of the cost analysis programs were open to all WtW-eligible participants. However, many developed interventions that were more specifically tailored to the needs of a particular segment of this population. Of the 18 programs

Table I.2
Characteristics of the Wtw Cost Analysis Programs
WtW Program Services
In-Depth Study Site:
WtW Program Operator		 Service Delivery Locations Target Population Outreach and Recruitment Job Readiness Case Management Paid Work Experience Job Development and Placement Subsidized Employment Post-
employment Followup		 Retention/
Advancement Incentives		 Support Services
Boston:
Marriott 1 Relatively job-ready X X X   X   X    
Partners 1 Relatively job-ready X X X   X   X    
Chicago:
Catholic Charities 2 Hard-to-serve   X X X X   X   X
Employment and Employer Services (E&ES) 1 General WtW-eligible   X X   X X X   X
Easter Seals 1 Hard-to-serve   X X X X X X   X
Maximus 2 General WtW-eligible   X X   X   X   X
Pyramid 1 Relatively job-ready   X X X X   X   X
Fort Worth:
Arlington Night Shelter (ANS) 1 Homeless   X X   X   X X X
Women's Center (WC) 1 General WtW-eligible   X X   X   X   X
Johns Hopkins University:
Florida 1 Employed X X X   X   X X  
Maryland 1 Employed X X X   X   X    
Nashville:                      
Pathways 7 General WtW-eligible X X X X X   X   X
Philadelphia:                      
Transitional Work Corporation (TWC) 1 Hard-to-serve X X X X X   X X X
Phoenix:
Employment And Respect Now (EARN) 1 EC residents X X X   X   X   X
West Virginia:
Human Resources Development (HRD) 6 Rural residents X X X X X X X X X
Yakima:
People for People (PFP) 2 WtW-eligible/ NCPs   X X X X   X   X
Farm Workers Clinic (FWC) 1 Migrant workers   X X X X   X   X
Opportunities Industrialization Center (OIC) 1 General WtW-eligible   X X X X   X   X
Note:  EC = enterprise community; NCPs = noncustodial parents.

included in the cost analysis, 8 targeted hard-to-serve individuals.(9) Five programs targeted WtW-eligible individuals more generally, and two targeted WtW-eligible recipients who had already found employment.

3. Complementary Services. The content, intensity, and method of delivering WtW services varied across the programs. All of the WtW cost analysis programs, however, provided some form of job readiness, case management, job placement and postemployment follow-up services (Table I.2). The programs varied more in the extent to which they offered other services. Fourteen programs provided some assistance with support services such as child care and transportation (always to supplement those provided by TANF), but four relied only on TANF-funded support services. Similarly, eight programs engaged in some outreach and recruitment activities, while the other 10 relied primarily on referrals from the local TANF offices to identify and enroll WtW-eligible participants. Nine of the 18 programs offered paid work experience to their WtW participants; three offered subsidized employment with private employers. Four of the cost analysis programs used incentives to reward participants for good performance or achievement of notable employment milestones, although this was not a major emphasis of any intervention.

As we discuss in the following chapters, the costs of these programs varied in ways that were consistent with these differences. This variation is a rich source of information and yields important insights into WtW program operations. Chapter II describes the methods we used to estimate the full costs of operating these programs and presents our cost estimates. Chapter III explores the variation in measures of total and unit costs for WtW programs. Chapter IV places our cost findings in the larger context of evaluations of programs that have worked to link welfare recipients to employment.

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Endnotes

1.  The BBA required that at least 70 percent of all WtW grant funds (both formula and competitive) be spent on individuals with a specific combination of employment barriers. They could be TANF recipients who themselves (1) had been receiving TANF or AFDC for 30 or more months or were within 12 months of reaching a time limit; and (2) faced two of three specific barriers to employment — lack of a high-school diploma or GED certificate and low reading or math skills; substance abuse problems; or a poor work history. Alternatively, they could be noncustodial parents who faced two of these same three barriers and had children in a long-term TANF case. As the WtW programs were implemented, it quickly became clear that the congressionally defined eligibility criteria were slowing enrollment and limiting participation. Therefore, the WtW eligibility rules were amended in November 1999. These amendments left intact the requirement that 70 percent of WtW funds be spent on a defined category of participants, but broadened this category to make it easier for both TANF recipients and noncustodial parents to qualify for WtW services. (For more details, see Perez-Johnson et al. 1999.)

2.  This extension was granted in response to the difficulties that most grantees encountered enrolling WtW-eligible individuals, which lasted for most of the grants' original implementation period. The restrictiveness of legislatively defined eligibility criteria was a major contributing factor to these difficulties. These implementation issues are discussed in more detail in Fender et al. 2000 and other reports from the national evaluation.

3.  For results of the two surveys, see Perez-Johnson and Hershey 1999, and Perez-Johnson et al. 2000. Findings from the exploratory site visits are discussed in Nightingale et al. 2000.

4.  Findings from the first round of process visits are discussed in Nightingale 2001. Topical briefs on recruitment challenges and strategies (Fender et al. 2000) and on the approaches used by programs serving noncustodial parents (Martinson et al. 2000) are also available.

5.  Results for the first year of the tribal program evaluation are reported in Hillabrant and Rhoades 2000.

6.  We were unable to collect cost information for the Milwaukee study site, the NOW program, operated by the Wisconsin Department of Corrections.

7.  In Boston, individuals determined eligible for WtW could be referred to one of 11 "employer partnerships" or two "enhanced community service" programs.

8.  Appendix A contains detailed profiles of these programs.

9.  These include the Philadelphia-TWC, Chicago-Catholic Charities, and Chicago-Easter Seals programs, which targeted individuals generally considered hard-to-employ because of limited work experience, substance abuse problems, or physical disabilities. They also include programs that targeted residents in Phoenix's enterprise community, homeless individuals (Fort Worth-ANS), residents from the extremely isolated rural areas in West Virginia, and migrant farmworkers (Yakima-FWC) or noncustodial parents (Yakima-PFP). While the BBA did not categorize noncustodial parents as "hard-to-employ," the experience of WtW programs aiming to work with this group suggests that they can have many obstacles to program participation and employment (see Martinson et al. 2000).

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