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A Micro Perspective www.bobp.biz.  M ICROECONOMICS focuses on the behavior of individuals in making decisions about the allocation of limited resources.

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Presentation on theme: "A Micro Perspective www.bobp.biz.  M ICROECONOMICS focuses on the behavior of individuals in making decisions about the allocation of limited resources."— Presentation transcript:

1 A Micro Perspective

2  M ICROECONOMICS focuses on the behavior of individuals in making decisions about the allocation of limited resources.  M ACROECONOMICS looks at the performance, structure, behavior, and decision-making of the whole economic system.

3  A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.  Basic formula is: !!! Return on Investment and Economic Impact are two different measurements. ROI = (Gain from Investment-Cost of Investment) Cost of Investment

4 Type of Return Return on Total Tax Dollars Invested for the entire systemMacro Return on program cost within a schoolMacro Return on investment for companies using Career Tech servicesMacro Return on investment for the studentMicro

5  Return on Investment and Economic Impact for Career Tech programs has been an important topic in recent years. Much of the discussion has focused on attempting to show the macroeconomic impact of training programs to taxpayers, communities, and all stakeholders. These discussions are important and relevant, but the many facets and moving parts involved in macroeconomics often makes it difficult to make definitive conclusions about economic impact and concrete returns on investment.

6 Company #Training CostNew WorkersPayroll Increase A$2,05819$657,234 AA$117,332197$10,450,296 AAA$4,9944$236,000 AB$34,614180$6,720,000 ABC$12,42614$499,200 ABBA$1,89016$335,920 ACME$30,42512$312,495 ADA$1,5543$150,000 ACA$94,234349$7,831,560 TOTALS $299,527794$27,192,705 *Samples taken from an Impact study

7 IMPACT SUMMARY Number of Companies Served65 Number of Companies Reporting65 Total BUDGET Expended$1,371, Number of New Workers2,173 Total Payroll Increase$76,062, Average Budget per Company$21, Average Training Cost per Worker$ Average Payroll per Worker$35, Projected State Personal Income Tax Increase$3,993,271 *Taken from a Beta Impact study for TIP Programs $3,993,271 - $1,371, / $1,371, = $1.91

8  Microeconomics is about the direct impact of decisions to the individual. This presentation will focus on the micro, instead of the macro, impact to stakeholders and students using Career Tech programs. In macroeconomics, the concern is the overall level or rate of economic activity, and the activities that that cause it to change. Microeconomics is concerned with choices among alternatives, and their impact on an individual.

9  Daughter Lindsey: Typical successful student and perfect daughter. Finished college in four years with a degree and a certification that allowed her to be employed as a school teacher.  Son-in-Law Matt: Typical imperfect boy “who’s not really good enough for my daughter” but somehow convinced her marry him anyway. Started college, but fortunately dropped out with only one semester’s bills to pay. Was successful working at an $9 an hour sales job (plus some commissions), but decided to enroll in a Career Tech Machining program. ◦ Started August, ◦ On-The-Job Training by March, and ◦ Employed as a machinist by May. ◦ Dad happier!

10  If I asked you to loan me $1,000 and I promise to pay you back $1,000 plus $500 interest, would this be a good deal?  Answer should be, “It depends.”  If you’re getting your $1,500 back in one year, you’d be getting a 50% return…I’d take it.  If you’re getting your $1,500 back in one hundred years, you’d be getting a return more like.2%...and you better start exercising and eating better.  Time matters in Return on Investment.  Rule of 72.

11  Lindsey’s investment: $12, per semester times 8 for a total of $99,900. (Not counting books, fees, and interest.)  Matt’s investment: $800 per semester times 2 for a total of $1,600 dollars. (Matt did pay an additional $870 for tools and books.)  The Eye Opener: Perfect daughter Lindsey and that Matt kid did not qualify for financial aid for Matt’s education so they had to write a check for tuition and materials. After starting his job at $16.50 an hour and working overtime, his first check was about $1,350. Daughter said, “Dad, did you know Matt will earn almost all of his school cost back after working three weeks? Do you know how long I’ll have to work make back my educational cost?”  My Answer: “Yes dear, I’m still paying for your college.”

12  At the same time my son-in-law was starting his new career, a leadership team at school was working on identifying and defining performance measures. This group met for several months and had lively and mostly constructive conversations.  The Holy Grail of performance measures was to find out how to gauge Economic Impact.  We made some progress, but the Grail is still elusive.

13  Some performance measures can be determined based information we already collected  Some measure are important for internal planning  Some performance measures must be extrapolated from information into reports  Some measures might be important for potential customers

14 DATA organized becomes INFORMATION when understood becomes KNOWLEDGE applied and used becomes INTELLIGENCE Tempered with experience becomes BETTER DECISIONS Evolution of Information “Conflicts will occur…. when opinion is confused for truth.”

15 Job Placement Continuing Education Placement Cost Per Student Enrollment Retention/Completion Academic Improvement HighSchool Graduation Rate High School Graduation Rate Satisfaction of Employers Wage Rates Student Satisfaction Industry Certification Pass Rate Info needed for economic impact Info we already collected Info we started collecting Info we need to collect

16 NetNumberNumber of Hourly Cost Projected Total Return Return on COSTofTrainingOther Wages per Annual TRP Payroll of Impact of on Program Program Cost ProgramStudentsRelatedPositive Related Student Wages TRP OPP Cost Per Student Placement (Individual) Net cost / # of students $338, $11.25 $6, $22, $337, $203, $201, $ Hourly wage X 2,000 Annual Wage X # of TRP students # of OPP X ($7.25 X 2 000) Total TRP Annual Wages + Total OPP Wages – Cost Total TRP Annual Wages + Total OPP Wages – Cost / # of students Limitations Did not calculate what a student might have made without training. Did not calculate longer-term return. Training is only one piece of the success puzzle. No multipliers used. TRP-Training Related Placement OPP-Other Positive Placement It did allow us to compare programs within our school for indications of impact. ROI=.59

17 $5,070, $14.31$5,937.48$28,613.33$5,465,146.67$2,537,500.00$2,932,035.67$2, NetNumber Hourly Cost Projected Total Return Return on COSTofof Trainingof Other Wages per Annual TRP Payroll of Impact of on Program Program Cost ActivityStudentsRelatedPostive Related Student Wages TRP OPP Cost Per Student Placement $175, $17.31$6,066.14$34,620.00$276,960.00$246,500.00$347,542.00$7, $556, $6,702.80$0.00 $507, $48, $8, $923, $21.45$6,283.21$42,900.00$943,800.00$14,500.00$34, $4, School Average High ROI Low ROI High Wage

18 The Game of Life taught us about choices… but it also taught us a little about luck. A micro look at ROI will focus on individual choices.

19  We DID NOT set out to develop this performance measure  But it seemed to be something that was relatively concrete  It also seem fairly easy to determine  ROI for the student might not satisfy all stakeholders, but might be useful for student recruitment and for student decision-making

20 TuitionHoursTimeTotalProjected HoursHours RequiredDollar ReturnDollar Return on CostRequiredInvestment 1 Investment 2 Hourly SalaryAnnual Salary 3 To RecoupTo Recoup Totalon TuitionTuition & Time Tuition 4 Tuition and TimeFor First Year $1, $7,613$9,443$13.47$28, $15.31$2.97 From School Catalog 1 Hours of Training times minimum wage 2 Tuition plus Time Investment From Wage Survey Report 3 Hourly Salary from Wage Survey Report X 40 hours X 52 weeks in a year 4 Tuition / Hourly wage Tuition + Time / Hourly wage Salary / Tuition Salary / (Tuition + Time) Lindsey had been wrong. When you calculated the time investment in a training program, it took a little longer than three weeks to earn all the investment back.

21 $35440$290$644$11.09$23, $65.16$35.82 TuitionHoursTimeTotalProjected HoursHours RequiredDollar ReturnDollar Return on CostRequiredInvestment 1 Investment 2 Hourly SalaryAnnual Salary 3 To RecoupTo Recoup Totalon TuitionTuition & Time Tuition 4 Tuition and TimeFor First Year $27996$696$975$8.50$17, $63.37$18.13 $35040$720$1,070$19.00$39, $112.91$36.93 $6, $11,419$18,371$22.00$45, $6.58$2.49 $1, $7,613$9,443$13.47$28, $15.31$2.97 Private Security ROI Certified Nurse Aide ROI PLC Programmer ROI A & P Aviation Mechanic ROI Welding ROI

22 $2, $7,613$10,083$17.00$35, $14.32$3.51 TuitionHoursTimeTotalProjected HoursHours RequiredDollar ReturnDollar Return on CostRequiredInvestment 1 Investment 2 Hourly SalaryAnnual Salary 3 To RecoupTo Recoup Totalon TuitionTuition & Time Tuition 4 Tuition and TimeFor First Year $26, $14,790$114,690$32.81$68, , ,495.58$0.68$0.60 Matt’s ROI Lindsey’s ROI* Accountant ROI Dentist ROI Dental Hygienist ROI $240, $29,580$269,580$70.64$146, , ,816.25$0.61-$0.55 $124, $18,488$143,363$12.00$24, , , $0.80-$0.83 Undecided ROI $26, $14,790$41,190$15.50$32, , ,657.42$0.22-$0.22 $26, $14,790$41,190$29.66$61, ,388.74$1.34$0.50

23 Private Security ROI Certified Nurse Aide ROI PLC Programmer ROI A & P Aviation Mechanic ROI Welding ROI 1st YearPer Year5 Year Return forImpactReturn for Tuition & Time $22,423.20$7,987.20$114, $16,705.00$2,600.00$87, $38,450.00$24,440.00$196, $27,389.25$30,680.00$210, $18,575.10$12,937.60$130, Per Year Impact calculated by taking annual salary minus annual minimum wage salary.

24 Matt’s ROI Lindsey’s ROI Accountant ROI Dentist ROI Dental Hygienist ROI Undecided ROI 1st YearPer Year5 Year Return forImpactReturn for Tuition & Time $25,277.50$20,280.00$166, $8,950.00$17,160.00$78, $20,502.80$46,612.80$226, $122,648.80$131,851.20$195, $27,054.80$53,164.80$258, $118,402.50$9, $161,925.00

25  Does not factor long-term earning potential  Does not consider previous learning and experiences  Training and education is still only a part of the puzzle related to student success in a career  A person’s pay is not the only indicator to success and fulfillment BUT  It does show a correlation between tuition cost, time investment, and wage rates  It does give a student more information to make intelligent educational choices  It does give policy makers comparisons to make program decisions and could help students make better decisions for their future

26  Students can be successful in a many ways.  We need to be brutally honest when we provide career counseling.  Do we need to talk about educational ROI for students? More Questions contact:  Bob Perry  Marty


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