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

12/01/2001

From the perspective of government budgets, programs are considered "budget neutral" if they can generate savings that equal the expenditures for services. It follows, then, that programs that produce large welfare savings have the best chance of paying for themselves and programs with small welfare savings will have a harder time breaking even. As shown in Table 13.10 the three programs (Grand Rapids LFA, Riverside LFA, and Portland) that resulted in gains to government budgets had the largest welfare savings. The programs with the smallest welfare reductions, ranging from $571 (Detroit) to $1,148 (Columbus Traditional), resulted in net losses. Programs with welfare reductions in the midrange (Columbus Integrated and Grand Rapids HCD) essentially broke even.

Table 13.10
From the Government Budget Perspective:
Estimated Monetary Gains and Losses per Program Group Member
Within a Five-Year Follow-Up Period (in 1999 dollars)

Component of Analysis

Atlanta LFA ($) Atlanta HCD ($) Grand Rapids LFA ($) Grand Rapids HCD ($) Riverside LFA ($) Columbus Integrated ($) Columbus Traditional ($) Detroit ($) Portland ($)

Gains

Payroll taxes a 348 282 227 122 364 282 197 201 698
Income and sales tax 111 155 -295 -86 -277 37 -31 141 -83
Welfare payments 919 747 2,711 1,860 2,868 1,575 1,148 571 2,783
Food Stamps 434 160 643 396 928 1,052 673 341 848
Medicaid 1,159 727 1,026 775 510 1,102 875 309 2,598
Transfer administration 233 151 584 397 472 379 265 159 1,257
Total 3,204 2,221 4,895 3,465 4,865 4,427 3,126 1,724 8,100
Losses
Net cost of program and nonprogram activities and services -3,974 -5,480 -1,987 -3,773 -3,320 -4,183 -3,772 -2,053 -2,865
Net gain or loss (net present value) -770 -3,259 2,908 -308 1,545 244 -646 -329 5,235
Return to budget per net dollar invested in program and nonprogram activities and services b 0.81 0.41 2.46 0.92 1.47 1.06 0.83 0.84 2.83
SOURCES: See Table 13.8.
NOTES:  Estimates reflect discounting and adjustment for inflation.
Estimates were regression-adjusted using ordinary least squares, controlling for pre-random assignment characteristics of sample members.
Rounding may cause slight discrepancies in calculating sums and differences.
Tests of statistical significance were not performed.
a Payroll taxes include employer- and employee-paid Social Security and Medicare taxes.
b The return to budget per net dollar invested is computed by dividing total savings and tax increases by the net cost of activities and services.

To provide some basis for interpreting these results and to facilitate cross-program comparisons, Table 13.10 also presents an additional measure of the cost-effectiveness of the NEWWS programs from the government budget perspective. This measure is called the return to budget per net dollar invested, and it is calculated by dividing the gains (taxes and savings in transfer payments and associated administrative costs) by the total net costs of services. Using this metric, government budgets come out ahead if programs produce more than a dollar's worth of additional revenues and savings for each dollar spent on employment-related services to program group members (compared with controls).

Both the Portland and the Grand Rapids LFA programs produced over $2.00 in increased revenue and savings for every additional dollar spent on program group members. The Riverside LFA program also produced a considerable return, $1.47 per dollar invested. As noted above, the Grand Rapids HCD and Columbus Integrated programs essentially caused the government to break even ($0.92 to $1.06, respectively). The Atlanta, Columbus Traditional, and Detroit programs were not as successful, returning considerably less than one dollar for each dollar invested, ranging from $0.41 in the Atlanta HCD program to just over $0.80 in the other programs. The average return across all of the programs was $1.29 (not shown in any table).

On average, these results are more positive than those found in the GAIN evaluation, in which returns to the government budget ranged from $0.17 per dollar invested (Tulare) to $2.84 (Riverside). The average across all counties in that study was $0.76. In the NEWWS Evaluation, the return on investments in Portland ($2.83) and Grand Rapids LFA ($2.46) compare favorably with the Riverside GAIN program and the SWIM program, which returned $2.84 and $2.34, respectively.

From the perspective of government budgets, the results were mostly positive for those without a high school diploma or GED. As shown in Table 13.11, both Atlanta programs produced losses. Gains ranged from $437 in Detroit to $5,564 in Grand Rapids LFA. For those with a high school diploma or GED, only the employment-focused programs paid for themselves (Atlanta LFA broke even). This is consistent with other findings: The welfare savings were larger for employment-focused programs; and those entering education-focused programs with a high school diploma or GED were more likely to participate in higher-cost activities, such as post-secondary education or vocational training, than those entering employment-focused (particularly LFA). However, this is not to say that programs with high rates of participation in higher-cost activities cannot pay for themselves: The mixed-approach Portland program had the highest returns to the government budget.

Table 13.11
From the Government Budget Perspective:
Estimated Monetary Gains and Losses per Program Group Member
Within a Five-Year Follow-Up Period,
by High School Diploma or GED Status at Random Assignment (in 1999 dollars)

Component of Analysis

Atlanta LFA ($) Atlanta HCD ($) Grand Rapids LFA ($) Grand Rapids HCD ($) Riverside LFA ($) Riverside HCD ($) Columbus Integrated ($) Columbus Traditional ($) Detroit ($) Portland ($)

Without a high school diploma or GED

Gains

Payroll taxesa 154 -0 438 154 321 189 414 182 207 684
Income and sales tax -272 133 -236 24 -613 -418 260 133 92 -423
Welfare payments 774 249 3,218 2,240 3,121 3,058 2,207 1,393 518 2,628
Food Stamps -14 -227 849 776 967 1,040 1,489 809 444 273
Medicaid 964 276 1,183 1,019 533 767 1,674 1,014 411 1,858
Transfer administration 137 9 705 529 504 543 539 318 172 1,058
Total 1,742 440 6,156 4,741 4,833 5,178 6,583 3,850 1,843 6,077

Losses

Net cost of program and nonprogram activities and services -3,741 -6,140 -592 -3,645 -3,555 -4,572 -4,383 -3,039 -1,406 -3,290
Net gain or loss(net present value) -1,999 -5,700 5,564 1,096 1,278 606 2,200 811 437 2,787
Return to budget per net dollar invested in program and nonprogram activities and servicesb 0.47 0.07 10.40 1.30 1.36 1.13 1.50 1.27 1.31 1.85

With a high school diploma or GED

Gains

Payroll taxesa 466 453 72 103 421   169 198 178 685
Income and sales tax 338 143 -335 -138 82   -141 -104 109 42
Welfare payments 1,014 1,034 2,359 1,572 2,539   1,124 969 576 2,939
Food Stamps 732 378 513 159 878   759 587 238 1,132
Medicaid 1,290 964 906 598 481   713 840 211 3,066
Transfer administration 296 231 502 306 431   269 231 139 1,390
Total 4,137 3,204 4,016 2,599 4,832   2,893 2,721 1,452 9,253

Losses

Net cost of program and nonprogram activities and services -4,209 -5,073 -2,177 -3,972 -2,775   -4,305 -4,096 -2,488 -2,948
Net gain or loss (net present value) -72 -1,869 1,839 -1,373 2,057   -1,412 -1,375 -1,036 6,305
Return to budget per net dollar invested in program and nonprogram activities and servicesb 0.98 0.63 1.84 0.65 1.74   0.67 0.66 0.58 3.14
SOURCES: See Table 13.8.
NOTES:  Estimates reflect discounting and adjustment for inflation.
Estimates were regression-adjusted using ordinary least squares, controlling for pre-random assignment characteristics of sample members.
Rounding may cause slight discrepancies in calculating sums and differences.
Tests of statistical significance were not performed.
a Payroll taxes include employer- and employee-paid Social Security and Medicare taxes.
b The return to budget per net dollar invested is computed by dividing total savings and tax increases by the net cost of activities and services.