How Effective Are Different Welfare-to-Work Approaches? Five-Year Adult and Child Impacts for Eleven Programs. Analytical Perspectives

12/01/2001

An important issue in benefit-cost analyses of government programs is determining who bears any benefits or costs of the program. A program effect can generate gains from one perspective while generating losses from another. For example, a decrease in welfare payments is a financial loss from the perspective of the program group but a financial gain from the perspective of the government. This makes it important to consider the perspectives of all the directly affected groups when assessing each main program effect.

This analysis presents the net benefits and costs of the NEWWS programs from the perspective of program participants and government budgets. In the following table, the main financial effects are shown as an expected gain or benefit (+), a loss or cost (-), or neither a benefit nor a cost (0), according to a priori expectations regarding their value. (The tables in the following sections show the actual gains and losses in dollars.)

Expected Main Financial Effects of NEWWS Programs

Accounting Perspective
Welfare Sample Government Budget
Increased earnings and fringe benefits + 0
Increased tax payments - +
Reduced use of transfer programs - +
NEWWS operating costs 0 -
Increased use of support services 0 -

The welfare sample perspective identifies net gains or losses for program group members, indicating how they fared as a result of the program. As illustrated, it is expected that earnings impacts represent gains for participants, whereas reductions in welfare payments and higher tax payments (resulting from earnings gains) represent losses. The program may be considered a net gain from the standpoint of program group members if the gains from earnings exceed losses from reduced transfer payments and higher taxes. The net cost of providing eligibility and employment-related services to participants has no direct effect on their income.

The government budget perspective identifies net gains and losses incurred by a combination of federal, state, and local government budgets. Net gains to the government budget occur through savings in transfer payments and their related administrative costs and through higher taxes paid by program group members compared with control group members. The government budget comes out ahead if tax increases and savings in transfer payments and administrative costs exceed the net cost of providing NEWWS program services. Program group members' earnings gains do not directly affect the government budget's net gains or losses.