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 $2,523 for the education-focused programs. Similarly, the net costs were 1.5 to 2.6 times greater for the HCD programs than for the LFA programs. The earlier reports presented only program costs because a full cost-benefit accounting with only two years of data was considered premature, in that the total return on program investments would be evident only after several years.
Program and Component
|Total Gross Cost per Program Group Member ($)||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|
|Other support services||193||17||176|
Atlanta Human Capital Development
|Orientation and appraisal||72||n/a||72|
|Other support services||413||17||397|
Grand Rapids Labor Force Attachment
|Orientation and appraisal||18||n/a||18|
|Other support services||30||n/a||30|
Grand Rapids Human Capital Development
|Orientation and appraisal||18||n/a||18|
|Other support services||37||n/a||37|
Riverside Labor Force Attachment
|Orientation and appraisal||111||n/a||111|
|Other support services||54||n/a||54|
Riverside Human Capital Development(without a high school diploma or GED)
|Orientation and appraisal||107||n/a||107|
|Other support services||82||n/a||82|
|Orientation and appraisal||17||n/a||17|
|Other support services||221||11||211|
|Orientation and appraisal||9||n/a||9|
|Other support services||148||11||138|
|Education and training a||3,541||1,890||1,651|
|Other support services||61||17||45|
|Orientation and appraisal||n/a||n/a||n/a|
|Other support services||87||n/a||87|
|Orientation and appraisal||149||n/a||149|
|Vocational training and post-secondary education||1,358||1,159||199|
|Other support services||79||6||73|
|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.
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.