Understanding the Costs of the DOL Welfare-to-Work Grants Program. Implications for Future Programs

08/01/2002

There are no current plans to reauthorize the WtW grants program, and whether states will continue to provide similar supplemental services to hard-to-employ TANF recipients is unknown. However, recent developments suggest that states may have strong incentives to continue to focus on hard-to-employ individuals or even to intensify past efforts. Earlier steep declines in TANF caseloads, which enabled many states to meet aggregate work requirements, have leveled off, and some states have experienced slight increases--possibly as a result of the economic slowdown of late 2001. Furthermore, the President's welfare reform proposals made in early 2002 urge Congress to require substantially more welfare recipients to get jobs and work longer hours.(5)

States' future ability to meet existing or expanded work mandates may depend on their ability to engage not only the most work-ready, but also a substantial proportion of hard-to-employ individuals on their caseloads, in approved work activities. Depending on the strength of the economy and other factors, states may find that a high proportion of the individuals on their caseloads need assistance meeting expanded work requirements. As our review has shown, doing "what it takes" to help these individuals is likely to have cost implications.

While it is impossible to predict the direction of future efforts, we see at least two adjustments that the operators of programs that target the hard-to-employ may decide to pursue. First, program operators may further intensify structured services and case management to help hard-to-employ individuals prepare for, secure, and succeed in employment, while simultaneously meeting work activity requirements. Future programs that target the hard-to-employ and use this approach may cost as much as, or more than, WtW programs. Second, state calls for increased flexibility in program design may allow programs to place more emphasis on education and training, while still retaining a work-first focus. The cost implications of this second potential shift are more uncertain.

Costs of education and training are more uncertain in part because WtW programs did not emphasize them. Long-term education and training were excluded as approved work activities under TANF, and short-term education and training were limited, at least initially, by the WtW regulations. Even after these restrictions were relaxed, and some programs made education and training services available, WtW participants did not use them extensively.(6) This was especially true when education and training activities had to be pursued concurrent with employment, instead of as part of the structured services offered by WtW programs.

Thus, the WtW process and cost analyses leave considerable uncertainty about how more emphasis on basic or occupational training would affect costs. Integrating education and training into structured services could increase participation in such activities and, therefore, the costs of programs that target hard-to-employ individuals.(7) However, to the extent that new policies require participants to pursue education and training activities concurrent with employment, participation may continue to be limited (as it has been in WtW programs) and cost increases therefore less pronounced.

Endnotes

1.  Appendix B provides details on the services offered by these programs and their costs.

2.  JOBS participation was mandatory for those without children under age 3, but individuals could be deferred for illness, remoteness from the program, lack of child care, or other acceptable reasons. This was similar to WIN deferral policies, except that the age of the youngest child under WIN was age 6, rather than age 3 (U.S. General Accounting Office 1999).

3.  WtW payments of wages or stipends were partly offset by decreases in TANF cash assistance, but usually not on a dollar-for-dollar basis. Thus, compared to earlier unpaid work experience programs, WtW programs offering paid work experience would still be more costly from a societal perspective. WtW regulations required WtW programs to compensate participants for the hours spent in work experience. To be compensated, participants could work up to the number of hours calculated by dividing their TANF grant by the minimum wage (the same strategy as many of the WIN and JOBS programs that we have characterized as unpaid), but the payment of wages was explicitly preferred. Yet, the greater use of subsidized work experience under WtW may also reflect a shift toward providing more work experience and other opportunities for transitional employment (such as OJT) in the private rather than the public or nonprofit sectors. For example, WtW programs like Chicago-Pyramid or West Virginia-HRD had to pay or, at least, partially subsidize participants' wages to secure such placements.

4.  As demonstration programs, both Supported Work and MFSP programs may also have incurred some additional costs compared to WIN, JOBS and WtW, for several reasons. First, because they were not explicitly linked to welfare, the programs had to build their own referral linkages to and from other community resources. Second, both demonstrations also included many participants who were not receiving AFDC, so programs had to make a wide range of services available to them.

5.  Key components of the President's welfare reform agenda are (1) increasing minimum work requirements so that, by 2007, 70 percent of welfare families are required to participate in work and other activities designed to help them achieve self-sufficiency; and (2) requiring welfare recipients to work 40 hours per week, either at a job or in programs designed to help them achieve independence (www.whitehouse.gov/news/releases/2002/02/20020226.html).

6.  Nightingale, et al. 2002.

7.  The cost estimates for GAIN programs, which emphasized education and training, can be used to estimate the magnitude of this potential increase in costs. The mean cost per participant for GAIN program services other than education and training (namely, orientation, assessment, appraisal, and job search) was $1,610. Program costs increase to $2,996 when the average costs of basic education (ABE and ESL) are added and to $4,190 when the costs of postsecondary and vocational education are also added (Riccio et al. 1994). Thus, adding education and training activities, if pursued by a high proportion of participants, could add $3,000 or more to the per-participant costs of programs.

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