Understanding the Costs of the DOL Welfare-to-Work Grants Program. I. Introduction


The Welfare-to-Work (WtW) grants program is one of several major federally funded initiatives whose purpose is to help welfare recipients and other low-income parents move into employment. In 1997, the Balanced Budget Act (BBA) authorized the U.S. Department of Labor (DOL) to award $3 billion in WtW grants to states and local organizations. These grants were intended to support efforts to help the hardest-to-employ recipients of Temporary Assistance for Needy Families (TANF), as well as noncustodial parents, prepare for employment, find jobs, stay employed, and advance in the job market. The WtW grants program built on the earlier enactment, in 1996, of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which created the work-focused, time-limited TANF program. PRWORA was designed to move people off the welfare rolls and into employment more quickly. WtW grants provided resources targeted to state and local efforts to help particularly disadvantaged individuals who were likely to have great difficulty making that transition.

This report examines the costs of WtW programs in nine sites that operated with federal grant support. The WtW cost analysis is part of a comprehensive, congressionally mandated evaluation, which is being conducted by Mathematica Policy Research, Inc. (MPR), the Urban Institute, and Support Services International, Inc. under a contract from the U.S. Department of Health and Human Services.

The main objectives of the WtW cost analysis were to understand the cost structure of selected programs and factors that influence program costs. Program evaluators and planners should find this information useful in assessing the outcomes of WtW programs and in making decisions about future programs with similar objectives. Table I.1 summarizes the main findings from the cost study.


Table I.1
Summary Findings from the Wtw Cost Study
  • WtW costs per participant reflected meaningful differences in program design.В  On average, variations in costs per participantВ  which ranged from $1,887 to $6,641В  reflected three dominant service approaches. Enhanced Direct Employment programs (average cost of $3,559) emphasized quick entry to employment while also offering preemployment preparation and postplacement assistance. Seeking to enhance participants' employability more systematically, Transitional Employment programs emphasized paid work experience (average cost of $4,346) or helped WtW participants prepare for jobs with employer partners (average cost of $4,513). Postemployment Services programs cost less (average cost of $2,178) because they mostly provided intensive case management to already employed individuals. For programs following the same approach, costs per participant still varied considerably, despite offering a similar mix of services. Differences in how much they emphasized paid work experience and/or postplacement support, and in how these program elements were structured, appeared to be important factors in explaining such cost differences.
  • On average, WtW programs cost more than WIN, less than Supported Work, and about the same as JOBS programs.В  Differences in WtW costs per participant compared to these earlier interventions reflected three factors. First, WtW programs targeted hard-to-employ individuals who were excluded from participation mandates (as in WIN) or often deferred from participation (as in WIN and JOBS). Second, although WtW programs did not emphasize education and training (as in JOBS), they sought to build a foundation for employment through direct work experience and other skill upgrade activities more closely linked to employment. Third, to maintain their simultaneous focus on employment and human capital development for hard-to-employ individuals, programs expanded case management and other services. Nevertheless, WtW efforts were not as comprehensive as those undertaken by Supported Work programs.
  • Future efforts could cost as much as, or more than, WtW.В  Although the WtW grants program is ending, expanded individual and aggregate Temporary Assistance for Needy Families work requirements may motivate states to continue to focus on hard-to-employ individuals, and even intensify past efforts. Intensifying WtW elements such as structured job readiness, paid work experience, or postplacement case management to address the needs of these individuals could raise average costs. State calls for increased flexibility in program design may also lead to greater use of education and training activities, which could be costly. However, observations from the WtW process and cost analyses suggest that, to the extent that new policies require education and training activities to be pursued concurrent with employment, participation may be limited and cost increases, therefore, less pronounced.

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