JTPA Evaluation 1

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
AveragePost-HighSchool 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
AverageHigh 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.”

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).

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.

[3] See Harrison, Juris, Stern, and Stern (2008) for an analysis.

[4]Commission on Children and Families