The analytical approach used in this benefit-cost analysis is similar to that used in previous evaluations conducted by MDRC.(11) The general approach is to place dollar values on the program's effects and its use of resources whenever possible, either by directly measuring them or by estimating them.
Program effects on earnings, welfare, and Food Stamp payments were measured directly. Effects on earnings were based on quarterly earnings reported by employers to states' unemployment insurance (UI) systems, and effects on welfare and Food Stamp payments were measured using computerized administrative records (the same data sources were used in the impact analysis presented in Chapters 4 and 5). Effects on Medicaid, fringe benefits, federal income taxes, state income and sales taxes, and the costs of administering transfer programs could not be measured directly, but were estimated or imputed using various data sources (details are provided below).
All of these effects were considered along with the estimated net costs of the NEWWS programs, presented above, to ascertain the net gains and losses to program group members and to government budgets.
The benefit-cost estimates cover a five-year period starting with the quarter after random assignment (quarter 2) for each sample member. This time frame is similar to that used in most previous MDRC benefit-cost analyses of welfare-to-work programs.Projecting benefits and costs beyond five years would be problematic because it is difficult to predict future behavior. However, given the extent to which impacts on earnings and welfare had decayed in most programs by the end of the five-year period, it seems unlikely that there would be many future net returns to the programs.
The benefit-cost estimates in this analysis are expressed in terms of net present values per program group member. The "net" means that, like impacts, the estimated amounts represent differences between estimates for program and control group members. The estimates are in "present value" terms because the accounting method of discounting was used to express the dollar worth at the end of the first year of follow-up of program effects that occurred later in the follow-up period.(12) As in the cost analysis, all estimated amounts in the benefit-cost analysis are expressed in 1999 dollars, eliminating the effects of inflation on the values.