Cost-Benefit Evaluation of Job Training Partnership Act Programs

Nia Harrison, Nikola Juris, Dori Stern, and Steven Stern

 

 

            The Job Training Partnership Act (JTPA) of 1983 was designed to improve the employment status of disadvantaged young adults, dislocated workers, and individuals facing barriers to employment.  The Act consists of on-the-job training, job search assistance, general education and work experience, and improving participants’ occupational skills (JTPA, 2004).  There have been many evaluations of the JTPA (see, for example, Heckman, Ichimura, and Todd). Using an evaluation of the program by Bloom et al. (1997), we evaluated the costs and the benefits of the program.  These evaluations are shown below in Table 1. We performed a number of sensitivity analyses, shown in Table 2, to measure the robustness of our results.[1]

           

           

Table 1

 

 

 

Boys

Girls

Effect on Annual Earnings

-$589

$135

Effect on Probability of Receiving a High School Diploma/GED

0.005

0.077

Effect on the Probability of Getting Arrested

0.071

0.017

Probability of Getting Arrested Given a Crime was committed

0.088

0.088

Average Post-High School Wage Rate per Hour

$15

$13.50

Annual Earnings

$30,000

$27,000

Cost of the Program

$2,377

$2,377

Annual Benefit of Not Being Arrested

$41,080

$40,228

Annual Benefit of Not Committing a Crime

$37,841

$37,841

Discount Factor

0.9

0.9

Long Term Benefit of Not Getting Arrested

$29,167

$6,839

Long Term Benefit of Earnings

-$5,890

$1,350

Net Benefit

$23,857

$6,455

 

Bloom et al. (1997) estimate that the JTPA increases the probability of a program participant’s achieving a GED or High School diploma by 7.7% (0.5%) for females (males).  They also estimate that the program’s effect on annual income earnings is -$589 ($135) for males (females)[2] and that the program also decreases the probability of getting arrested by 1.7% (7.1%) for females (males).  In addition, they report that the cost of the program as $2,377 for both females and males. We assumed that an average female (male) high school graduate earns $13.50 ($15.00) per hour. Assuming one works 2000 hours per year, we have base annual earnings of $27,000 ($30,000) for females (males). The probability of getting convicted conditional on committing a crime is 8.8%.[3] The annual benefit of not being arrested was calculated by adding the local cost of jail, $32,560,[4] to the amount that one’s annual earnings would be reduced as a result of being imprisoned. The annual benefit of not committing a crime was calculated as the cost of crime ($3330) divided by the probability of committing a crime given that a crime was committed (8.8%), resulting in $37,841 for both girls and boys.

 

In order to translate these calculations into long-term benefits, we assumed that the annual discount factor was 0.9 and that costs are incurred for only one year. The long-term benefit of not getting arrested was calculated as the program’s effect on the probability of getting arrested multiplied by the annual benefit of not getting arrested, discounted for the remainder of one’s life. Similarly, the long-term benefit of the change in earnings was calculated by adding the discounted stream of changed future earnings over the remainder of one’s life. Adding up the long-term benefits and the benefit of no crime multiplied by the program’s effect on the probability of being arrested, and then subtracting the cost of the program yields a net benefit of $6,455 ($23,857) for girls (boys).

 

 

Table 2

 

 

Net Benefit of the Program

Average High School Wage Rate per Hour

Boys

$15

$23,587

 

 

$30

$29,636

 

Girls

$13.50

$6,455

 

 

$27

$7,759

Annual Benefit of Not Committing a Crime

Boys

$37,841

$23,587

 

 

$18,920

$22,243

 

Girls

$37,841

$6,455

 

 

$18,921

$6,133

Discount Factor

Boys

0.9

$23,587

 

 

0.8

$11,948

 

Girls

0.9

$6,455

 

 

0.8

$2,361

Effect on Annual Earnings

Boys

-$589

$23,587

 

 

$0

$29,477

 

Girls

$135

$6,455

 

 

$0

$5,105

 

            In Table 2, we changed various assumptions we had made for the base case – one at a time while holding the others constant – in order to measure the sensitivity of the base case analysis. First, changing the hourly wage received by a high school graduate to double the base assumption yields a new net benefit of $7,759 ($29,636) for girls (boys). Reducing the annual benefit of not committing a crime by half results in a new net benefit of $6,133 ($22,243) for girls (boys). Next, changing the discount factor from 0.9 to 0.8 results in a net benefit for girls (boys) of $2,361 ($11,948). Assuming that there is no effect on annual earnings yields net benefits of $5,105 ($29,477) for girls (boys). These analyses show that the Job Training Partnership Act is quite robust to the assumptions made and that, even with a negative base case effect on annual earnings for boys, the program can yield high monetary benefits.    The source of the large benefits are the program’s large effects on crime reduction and the large costs of crime.

 

References

 

Bloom, H., L. Orr, S. Bell, G. Cave, F. Doolittle, W. Lin, and J. Bos (1997). “The Benefits and Costs of JTPA Title II-A Programs: Key Findings from the National Job Training Partnership Act Study.” Journal of Human Resources. 32 (3): 549-576.

Harrison, Nia, Nikola Juris, Dori Stern, and Steven Stern (2008). “Methodology for Youth Development Cost-Benefit Analyses.”  http://www.people.virginia.edu/~sns5r/ccfstf/youthdevmethodology.pdf.

Heckman, James, Hidehiko Ichimura, and Petra Todd (1997). “Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Program.” Review of Economic Studies. 64: 605-654.

“Job Training Partnership Act” (2004). http://www.childtrends.org/Lifecourse/programs/ JobTrainingPartnershipAct.htm.



[1] Details of Methodology are available at Harrison, Juris, Stern, and Stern (2008).

[2] Many other analyses find that the program increases earnings though by modest amounts.

[4] Commission on Children and Families