Return on Investment for Virginia’s Workforce Programs

Return on Investment for Virginia's Workforce Programs

Elsie Harper-Anderson, PhD Myung Jin, PhD

April 3, 2014

Virginia Commonwealth University

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Return on Investment

This report was made possible by the support of the Virginia Longitudinal Data System (VLDS). The VLDS is a pioneering collaboration for Virginia's future, giving the Commonwealth an unprecedented and cost-effective mechanism for extracting, shaping and analyzing educational and workforce development data and more in an environment that ensures the highest levels of privacy. Funded by the 2009 Statewide Longitudinal Data Systems Grant Program of the U.S. Department of Education, VLDS is comprised of several component technologies that support secure, authorized research addressing today's key educational and workforce training questions. VLDS is the result of a shared effort by several Virginia government agencies.

Virginia Commonwealth University

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Return on Investment

Table of Contents

I. Introduction and Overview of Report.......................................................................................... 1 A. Key Findings ............................................................................................................................ 1 B. Report Overview ..................................................................................................................... 3 C. ROI and Workforce Development ........................................................................................... 3 1. Methods of Calculating ROI ................................................................................................. 4 2. Data Issues with ROI ............................................................................................................ 5 D. Overview of the Virginia Workforce System .......................................................................... 6 E. Overview of WIA, TAA and WP Programs ............................................................................... 6

II. Methodology and Data ............................................................................................................... 9 A. Overview of Study Approach .................................................................................................. 9 B. Data ....................................................................................................................................... 11 1. Variable Definitions ........................................................................................................... 11 C. Measuring Costs and Benefits............................................................................................... 12 1. Costs................................................................................................................................... 12 2. Benefits .............................................................................................................................. 12 D. Analysis ................................................................................................................................. 14 E. Study Limitations ................................................................................................................... 16

III. Results ...................................................................................................................................... 17 A. Demographics of Participants in WIA, TAA and WP Programs............................................. 17 B. Program Outcomes ............................................................................................................... 19 1. WIA Outcomes ................................................................................................................... 19 2. TAA Outcomes ................................................................................................................... 23 3. Wagner Peyser Program Outcomes .................................................................................. 28 ROI by Age Group .................................................................................................................. 29 C. To What Extent Do Demographic, Achievement and Service-Related Factors Influence Wages and Employment? ......................................................................................................... 30 1. Earnings Models ................................................................................................................ 30 2. Employment Models.......................................................................................................... 33

IV. Discussion and Conclusions ..................................................................................................... 36 V. Policy Recommendations ......................................................................................................... 38 Appendix A: Data Processing ....................................................................................................... 46 Appendix B: Local Workforce Boards ........................................................................................... 48 Appendix C: Measures of Variables .............................................................................................. 52 Appendix D: Propensity Score Matching ..................................................................................... 56 Appendix E: Baseline Characteristics of the TAA Study Samples Before and After Matching ..... 60 Appendix F: Baseline Characteristics of the WIA Study Samples Before and After Matching ..... 64 Appendix G: Propensity Score Matching ROI 5 and 10 Year Calculations .................................... 69 Appendix H: ROI by WIB ............................................................................................................... 74

I. Introduction and Overview of Report

The two primary goals of the public workforce system are to connect jobseekers to employment and to help businesses connect to the workers they need to be competitive. Developing competitive workforce and making sure that businesses have the talent they need is critical for any state wishing to maintain a strong economy. However, funding for most public workforce programs has been dwindling. Therefore policy makers must make well informed decisions on the most productive use of taxpayer dollars to ensure that their investment yields a return. The state of Virginia is one of only a few states that require a return on investment analysis (ROI) be performed on its public workforce programs. In 2012, the state's total allocation for its 24 workforce programs was $362.8 million. The funds came from a combination of federal allocations (60.2%), state allocations (36.9%) and local sources (2.5%).1 Understanding the returns on investment in public workforce programs and how those returns differ across various populations and service models is critical for ensuring continuous improvement and efficiency.

This report analyzes return-on-investment (ROI) for three of Virginia's publicly funded workforce programs: Workforce Investment Act (WIA), Wagner Peyser (WP), and Trade Adjustment Assistance (TAA). The goal is to evaluate the impact of the programs from a government budgetary perspective using administrative data for program exiters during the 2008 to 2012 program years. The analysis employs a combination of before-and-after models and propensity matching models to calculate ROI. We also use OLS and logistic regression analysis to estimate the dollar influence of each demographic and service related variable on earnings and employment outcomes. The three key research questions for this study and a brief synopsis of our findings for each follow.

A. Key Findings

In summary, WIA and WP generally show positive returns on investment while TAA shows negative return. We find that even when the ROI is negative, certain service related factors such as training and earning credentials can improve ROI outcomes. The three programs differ tremendously in terms of the characteristics of the clients they serve. Both after-program earnings outcomes and employment odds are influenced by the demographic (race, gender, education) and qualification (employment and wages prior) variables that have been thoroughly discussed in previous literature as highly influential on labor market outcomes. The regression results triangulate and offer further explanation for the ROI outcomes by estimating the dollar influence of each variable on earnings and each variable's specific impact on odds of employment.

Research Question #1: What is the return on investment to government for providing public workforce development services to VA jobs seekers?

1Graham & Harper-Anderson, 2013

Virginia Commonwealth University

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Return on Investment

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