How Effective Are Different Welfare-to-Work Approaches? Five-Year Adult and Child Impacts for Eleven Programs. Issues in the Cost Analysis


The primary purpose of the cost analysis is to estimate the cost of providing NEWWS services, over and above the cost that would have been incurred in the absence of the program  that is, to estimate the average net cost per program group member. The net cost is the difference between the gross cost per program group member and the gross cost per control group member, where the gross costs reflect the cost of all services that sample members used in the NEWWS programs and of the education and training services that they used outside the programs, when they were no longer receiving welfare benefits. In other words, the cost for the control group is the benchmark used to determine the additional costs incurred as a result of the NEWWS programs.

This report updates cost figures based on two years of follow-up data presented in earlier reports.(1) (As noted above, data limitations did not allow inclusion of Oklahoma City in the five-year analysis.) Table 13.1 shows that, at two years, education-focused programs were more costly to operate than employment-focused programs. The average net cost was $1,846 (in 1999 dollars) for the employment-focused programs and $2,523 for the education-focused programs. Similarly, the net costs were 1.5 to 2.6 times greater for the HCD programs than for the LFA programs. The earlier reports presented only program costs because a full cost-benefit accounting with only two years of data was considered premature, in that the total return on program investments would be evident only after several years.


Table 13.1
Estimated Gross and Net Costs Within a Two-Year Follow-Up Period,
by Program and Service Component (in 1999 dollars)

Program and Component

Total Gross Cost per Program Group Member ($) Total Gross Cost per Control Group Member ($) Total Net Cost per Program Group Member ($)

Atlanta Labor Force Attachment

Orientation and appraisal 72 n/a 72
Formal assessment n/a n/a n/a
Job search 816 8 807
Basic education 507 58 449
Post-secondary education 289 315 -26
Vocational training 751 443 309
Work experience 174 20 152
Subtotal (operating) 2,609 843 1,765
Child care 883 291 591
Other support services 193 17 176
Total 3,685 1,152 2,533

Atlanta Human Capital Development

Orientation and appraisal 72 n/a 72
Formal assessment n/a n/a n/a
Job search 194 8 185
Basic education 1,263 58 1,205
Post-secondary education 300 315 -14
Vocational training 1,792 443 1,350
Work experience 126 20 105
Subtotal (operating) 3,746 843 2,903
Child care 806 291 515
Other support services 413 17 397
Total 4,966 1,152 3,814

Grand Rapids Labor Force Attachment

Orientation and appraisal 18 n/a 18
Formal assessment 9 n/a 9
Job search 823 78 745
Basic education 819 793 27
Post-secondary education 1,944 1,715 229
Vocational training 730 841 -111
Work experience 122 12 110
Subtotal (operating) 4,465 3,438 1,026
Child care 408 230 177
Other support services 30 n/a 30
Total 4,903 3,669 1,233

Grand Rapids Human Capital Development

Orientation and appraisal 18 n/a 18
Formal assessment 312 n/a 312
Job search 289 78 210
Basic education 2,064 793 1,272
Post-secondary education 2,123 1,715 408
Vocational training 1,205 841 364
Work experience 213 12 201
Subtotal (operating) 6,224 3,438 2,786
Child care 603 230 372
Other support services 37 n/a 37
Total 6,865 3,669 3,195

Riverside Labor Force Attachment

Orientation and appraisal 111 n/a 111
Formal assessment 6 n/a 6
Job search 877 45 832
Basic education 172 106 67
Post-secondary education 707 421 286
Vocational training 237 243 -6
Work experience 56 65 -10
Subtotal (operating) 2,164 878 1,286
Child care 98 33 66
Other support services 54 n/a 54
Total 2,316 911 1,405

Riverside Human Capital Development(without a high school diploma or GED)

Orientation and appraisal 107 n/a 107
Formal assessment 13 n/a 13
Job search 729 43 685
Basic education 2,340 181 2,158
Post-secondary education 186 150 36
Vocational training 236 258 -22
Work experience 63 30 33
Subtotal (operating) 3,674 662 3,012
Child care 183 16 166
Other support services 82 n/a 82
Total 3,938 678 3,260

Columbus Integrated

Orientation and appraisal 17 n/a 17
Formal assessment n/a n/a n/a
Job search 79 7 72
Basic education 516 89 427
Post-secondary education 1,163 270 892
Vocational training 693 226 467
Work experience 82 7 76
Subtotal (operating) 2,550 599 1,952
Child care 569 346 221
Other support services 221 11 211
Total 3,340 956 2,384

Columbus Traditional

Orientation and appraisal 9 n/a 9
Formal assessment n/a n/a n/a
Job search 100 7 93
Basic education 632 89 543
Post-secondary education 1,046 270 775
Vocational training 313 226 87
Work experience 63 7 57
Subtotal (operating) 2,163 599 1,564
Child care 552 346 205
Other support services 148 11 138
Total 2,863 956 1,907


Job search 265 47 218
Education and training a 3,541 1,890 1,651
Work experience 78 10 68
Subtotal (operating) 3,884 1,947 1,938
Child care 407 337 71
Other support services 61 17 45
Total 4,354 2,300 2,053

Oklahoma City

Orientation and appraisal n/a n/a n/a
Formal assessment n/a n/a n/a
Job search 127 46 80
Basic education 553 276 277
Post-secondary education 814 738 77
Vocational training 1,048 625 423
Work experience 34 14 20
Subtotal (operating) 2,576 1,698 878
Child care 593 506 87
Other support services 87 n/a 87
Total 3,255 2,204 1,051


Orientation and appraisal 149 n/a 149
Formal assessment n/a n/a n/a
Job search 468 47 422
Basic education 543 337 206
Vocational training and post-secondary education 1,358 1,159 199
Work experience 247 37 210
Subtotal (operating) 2,766 1,580 1,186
Child care 1,582 629 953
Other support services 79 6 73
Total 4,427 2,215 2,212
SOURCES:  MDRC calculations based on fiscal and participation data from the following: Atlanta - the Fulton County Department of Family and Children Services, the Georgia Department of Human Resources, the Georgia Department of Technical and Adult Education, the Board of Regents University System of Georgia; Grand Rapids - the Michigan Department of Social Services, the Michigan Department of Education Office of Extended Learning Services, the Grand Rapids Community College, the Wyoming Community Education Center; Riverside - the California Department of Social Services, the California Department of Education, the Chancellors Office of California Community Colleges; Columbus - the Franklin County Department of Human Services, the Ohio Department of Education, the Office of Vocational and Adult Education, the Ohio Board of Regents, the National Center for Education Statistics; Detroit - the Michigan Family Independence Agency, the Michigan Department of Education, the Michigan Jobs Commission; Portland - the Oregon Department of Human Resources, Adult and Family Services Division, the Oregon Office of Community College Services; in all sites - information collected on tuition charged at proprietary schools attended by sample members, from MDRC-collected JOBS case file data, the MDRC Two-Year Client Survey, and the MDRC Five-Year Client Survey. MDRC child care and other support service calculations from Fulton County, Kent County, Riverside County, Ohio Department of Human Services, Wayne County, Washington County, and Multnomah County(District 2) payment data, other support service data from country records.

NOTES:  Rounding may cause slight discrepancies in calculating sums and differences.
N/a = not applicable.
a Owing to data limitations, in Detroit it was not possible to separate vocational training, post-secondary education, and basic education costs. Thus, the gross costs of all three activities are included in the cost of "education and training." Furthermore, in this site orientation and assessment costs are spread across these three activities.

As described in the earlier reports, costs per sample member are the product of unit costs and behavioral variables. 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 (one month or one hour, for example). In general, unit costs were calculated by dividing expenditures for an activity (or service) during a steady-state period by the total number of participant-months in that activity during the same period. The number of participant-months was obtained by counting the number of participants in an activity in each month of the steady-state period and summing across the months.(2) Once the unit cost of an activity was determined, it was multiplied by the average number of months that sample members spent in the activity, called the behavioral variable, to determine the average cost incurred per program group member or control group member during the follow-up period.

The costs presented here were calculated using the same unit costs calculated at the two-year point. However, the behavioral variables used in this analysis cover the five-year period following each sample member's entry into the study. Behavioral variables for years 3 to 5 of follow-up were estimated using Two-Year and Five-Year Client Survey data, as well as administrative records data. The Five-Year Client Survey was not administered in Columbus and Detroit. Therefore, in Columbus, behavioral variables were estimated using participation trends from the two-year and five-year follow-up points in the education-focused sites where longer-term data were available. Because Detroit shifted program focus from education to employment mid-follow-up, it was considered inappropriate to estimate participation for this program using data from the other education-focused programs. Three years of participation data were available from the management information system maintained by the Detroit Work First program. Participation in years 4 and 5 of the follow-up period was estimated based on patterns of participation and welfare receipt in the earlier period.

As discussed in Chapter 2, in several sites service embargoes for control group members were lifted during the follow-up period. As a result, in those sites some control group members were required to participate in employment-related activities in follow-up year 4 or 5. Welfare receipt data were used to determine whether participation should be counted as in-program or out-of-program for both program group members and control group members for whom embargoes were lifted. In addition to the cost of providing the activity, in-program participation incurs an additional cost for case management.

As noted above, costs are estimated for the five-year period following sample members' entrance into the study. Later in the chapter, to assess whether the programs in the NEWWS Evaluation were cost-effective from the perspective of the government's budget, this five-year net cost is compared with the value of any budgetary savings during the same period (for example, from lower welfare or Food Stamp payments) and of any tax revenue increases associated with the additional earnings of program group members.

The costs presented here include the costs of program services as well as the costs of employment-related services that sample members used outside the programs when they were not receiving welfare. The off-welfare costs are important because they represent an additional investment of resources that could have differentially affected program and control group members' future earnings and welfare receipt (effects that are accounted for in the benefit-cost analysis).

All sample members, not just those who participated in mandatory welfare-to-work program services, were included in calculating the net costs because the requirement to participate may have affected some recipients' behavior: Some people may have chosen to avoid the participation mandate by finding a job on their own or by leaving the welfare rolls. In addition, sample members who did not participate in welfare-to-work program services may have taken part in education and training services on their own, and these costs need to be taken into account as well.(3)

Owing to the fact that findings might be expected to differ according to sample members' educational background, all results are presented for the full samples for each program and then separately for those with and without a high school diploma or GED at the time they entered the evaluation. As noted in earlier chapters, all HCDs in Riverside had no high school diploma or GED. Therefore, the Riverside LFA-HCD comparisons include only those without a high school diploma or GED.