Moving People from Welfare to Work. Lessons from the National Evaluation of Welfare-to-Work Strategies.. Costs: What contributes to the cost of welfare-to-work programs?

07/01/2002

Different types of five-year costs were estimated for the NEWWS programs. The gross cost per program group member is a comprehensive measure of all the costs associated with providing employment services and related support services to people while they were enrolled in a welfare-to-work program as well as after they left the program and/or the welfare rolls; similarly, the gross cost per control group member is the corresponding estimate for the control group. The net cost of the program is the difference between these two estimates; in other words, the cost for the control group is the benchmark used to determine the size of the additional cost of running the program (on a per-person basis).

The costs of providing job search, education, and training -- whether within welfare-to-work programs or when individuals enrolled in these activities on their own -- as well as the costs of case management and support services contribute to both gross and net costs. For example, if a substantial and similar proportion of program and control group members participate in high-cost activities like vocational training and postsecondary education, it is likely that the gross costs for both groups will be high but that the program's net cost will be relatively low. In contrast, if most program group members participate in low-cost job search activities and few control group members do so, it is likely that the gross costs for both groups will be low but that the program's net cost will be relatively high.

  • Taking into account all the services that sample members received over the five-year follow-up period, the NEWWS programs were expensive relative to other studied programs.

Averaged across all the NEWWS programs, the five-year gross cost per program group member, which included a substantial amount of self-initiated activities that sample members engaged in after leaving welfare, was approximately $7,600. Subtracting the gross cost per control group member yields the average five-year net cost per program group member, or about $3,600. The average net cost per program group member over the first two years, during which time many sample members were still on welfare, was about $2,000. The NEWWS programs' average cost was higher than that of other welfare-to-work programs studied by MDRC and comparable to that of programs such as the Alameda and Los Angeles Greater Avenues for Independence (GAIN) programs operated in the late 1980s and early 1990s, which provided extensive education and training services. It is important to note that the NEWWS programs were not mandatory for the entire welfare caseload (as is nearly always the case now, under TANF rules). Thus, the NEWWS costs are per person for a segment of the caseload -- not averaged across the whole caseload -- and do not include women with infant children, who typically have the highest child care costs.

  • Employment-promoting activities accounted for more than half of the average five-year gross cost of the NEWWS programs.

All the NEWWS programs provided job search, education, and training activities as well as child care and transportation services to support participation in these activities. The programs' operating costs -- which included expenditures for case management services, overhead, and program orientation as well as job search, education, and training program activities -- were considerably higher than their support service costs, which included expenditures for child care, transportation, and other needs such as uniforms, tools, and books. Operating costs accounted for about four-fifths of the five-year gross cost, while support services accounted for about one-fifth. Another way to examine program costs is to look solely at the cost of providing in-program activities -- employment-promoting activities (and support services) that people engaged in while on welfare and in the programs -- as opposed to including the costs of self-initiated activities in which people participated after they had left welfare. Averaged across the programs, the in-program cost was approximately 70 percent of the five-year gross cost.

  • On average, welfare departments carried less than half of the gross program costs; other government and community agencies covered the remainder of program expenses.

In NEWWS, welfare departments most often directly provided and funded case management, job search activities, and support services (primarily child care and bus passes) for people in program activities. Welfare departments generally did not pay for services such as basic education or vocational training. These costs, which accounted for the majority of the gross cost of most programs, were covered by schools and community agencies.

  • Education-focused programs cost more than employment-focused programs.

In all three sites where a side-by-side comparison of an employment-focused program and an education-focused program was conducted, the education-focused program was from one-third more expensive to nearly twice as expensive as the employment-focused program. This is largely because program group members in education-focused programs were more likely to participate in vocational training (a high-cost activity) and because education and training assignments typically lasted longer than job search. Both the welfare department and other agencies had to pay additional expenses for education-focused programs: Whereas the welfare department spent more on case management, nonwelfare agencies spent more on classroom instruction and related expenses.

  • Gross and net costs per person were higher for graduates than nongraduates.

Recipients who entered NEWWS with a high school diploma or GED were more likely to participate in more expensive activities such as postsecondary education and vocational training, whereas those lacking these credentials were more likely to participate in less expensive activities such as basic education. Control group members' rates of (self-initiated) participation in postsecondary education and vocational training were somewhat lower than those for program group members, while their rates of participation in basic education were much lower. As a result, gross costs were much higher for those with a high school diploma or GED than for those lacking this credential, while the differences in net costs between the two subgroups were less pronounced.