Understanding the Costs of the DOL Welfare-to-Work Grants Program

The Welfare-to-Work (WtW) grants program is one of several major federally funded initiatives to help welfare recipients and other low-income parents move into employment. In 1997, the Balanced Budget Act authorized the U.S. Department of Labor 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.

This report examines the costs of selected WtW programs that operated with federal grant support. The main objectives of the WtW cost analysis were to understand the cost structure of these programs and factors that influenced their 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. The WtW cost analysis was part of a comprehensive, congressionally mandated evaluation of the WtW federal grants program featuring a descriptive assessment of grantee efforts nationwide, a process and implementation study, and outcomes analysis.

Programs Included in the Cost Analysis.  The cost analysis focused on a subset of programs that received operational support through WtW grant funds. Eighteen WtW programs from nine in-depth evaluation sites were included. These programs differed in their number of service locations, target populations, and service emphasis, and their costs varied in ways that were consistent with these differences (see Table 1). This variation was a rich source of information that yielded insights into WtW program operations.

Total WtW Program Costs.  The objective when estimating total costs was to measure the market value of all resources used to serve WtW participants, not just WtW grant funds. On an aggregate basis, the 18 WtW programs included in the analysis cost an estimated $22.6 million over one year. Total costs for one year of WtW operations across individual programs ranged from just over $200,000 to more than $7 million. Participation in the WtW programs ranged from just under 100 to more than 2,000 individuals ever active during the year. Much of this variation was by design and reflected the diverse organizational context of the WtW programs. Large programs tended to operate in large metropolitan areas and were developed specifically to help large numbers of WtW-eligible individuals move into employment. Smaller programs tended to be a part of larger-scale WtW initiatives involving multiple providers, each offering tailored services to a relatively small number of WtW-eligible participants.

WtW Resource Allocation.  The WtW programs allocated resources to specific services and activities. This cross-component allocation revealed important characteristics of the WtW initiative. For example, activities such as job readiness classes; intake, assessment, and general preemployment case management; job development and placement services; and postplacement followup were present in all of the WtW programs and thus made up the core of WtW services.

These core services accounted for almost two-thirds of the total costs in the average WtW program and for 34 to 84 percent of the total costs for individual WtW programs.

Across individual programs, variations in the allocation of WtW costs across components reflected differences in their emphasis or operations. For instance, both the availability and extent of use of paid work experience differentiated some WtW programs that offered it. While paid work experience accounted for 16 percent of total costs in the average WtW program, only half of the programs in the cost analysis offered their participants paid work experience. For five programs, however, the costs of work experience represented the largest proportion of WtW costs, ranging from 37 to 41 percent. Other programs devoted more modest resources to paid work experience or did not offer such placements at all.

WtW Costs per Participant.  The decision to enroll an individual in WtW represented an offer of job readiness, employment placement, case management, supportive services, retention and advancement followup, and other assistance. Because not all participants needed or used all services, the WtW programs did not need the capacity to provide all participants with all services. The average cost per participant therefore describes the average value of the package of services that individuals who enrolled actually received over the course of their participation. The average WtW program spent a total of $3,607 to serve each participant. The least costly program spent $1,887 per participant, while the most costly spent $6,641.

On average, WtW costs per participant 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. Most Transitional Employment programs, which sought to more systematically enhance participants' employability, either 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 individuals who were already employed. 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 (for example, the duration of work experience activities or how much participants were paid while in work experience) help to explain such cost differences.

WtW Costs per Placement.  An important objective of WtW programs was to place participants in unsubsidized employment to help them make strides toward economic self-sufficiency. The cost of achieving this objective can be summarized as the cost per placement--the resources that programs had to invest, on average, to have one participant reach unsubsidized employment. Estimates of cost per placement for WtW programs cover a wide range, from $3,501 to $13,778. These estimates should not be interpreted as measures of programs' efficiency or effectiveness, for several reasons. Differences in costs per placement partly reflect differences in the mix of services that WtW programs offered. For programs that offered similar services, differences in cost per placement may reflect important differences in the populations served or the local contexts for operations and, therefore, the relative ease or difficulty with which programs could achieve placements. Differences in cost per placement do not take into account potentially important differences in the quality or long-term success of programs' placements. Thus, differences in costs per placement probably bear no relation to differences in outcomes or impacts across programs.

WtW Costs in Context.  Over the past 40 years, welfare policies have increasingly emphasized work. Several generations of programs to help welfare recipients prepare for and enter employment have been implemented, reformed, rethought, and replaced. Programs funded under the WtW grants program are another step in this evolution.

On average, WtW programs cost more than WIN (average cost of $2,147), less than Supported Work (average cost of $11,572), and about the same as JOBS programs (average cost of $3,327). 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 earlier 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 still 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, WtW programs expanded case management and other services. Nevertheless, WtW efforts were not as comprehensive as those undertaken by Supported Work programs.

Implications for Future Programs.  Although the WtW grants program is ending, expanded individual and aggregate TANF work requirements may motivate states to continue to focus on hard-to-employ individuals, and even intensify past efforts. This suggests that future programs could cost as much as, or more than, WtW. Intensifying program elements that were used extensively in WtW (such as structured job readiness, paid work experience, or postplacement case management) in order to address the needs of hard-to-employ individuals could raise average program costs. State calls for increased flexibility in program design may lead to greater use of education and training activities, which could also be costly.