Findings from the Net Impact Study and Benefit- Cost Analysis of the Massachusetts Public Vocational Rehabilitation Program

Overview Context of the Study Description and Design of the Study Findings from the Net Impact Analysis Findings from the Benefit Cost Analyses Recap of Study Highlights

Profile of People with Disabilities According to the 2002 American Community Survey (ACS), there were 865,000 persons ages 5 and over with a disability in Massachusetts, about 15.0% of the total population age 5+. These individuals had disabilities that fell into one or more of the following categories: sensory disabilities (213,000), mobility disabilities (443,000), and cognitive disabilities (293,000). 445,000 of these 865,000 individuals with disabilities were of prime working ages (18-64).

Profile of People with Disabilities These individuals face multiple barriers to labor force participation, employment, and job retention and advancement. Only 49% (219,000) of working age adults with disabilities were in the labor market, compared to 70% for the entire working age population. Of the 219,000 who were in the labor force, 25,000 were unemployed but looking for work, an unemployment rate of over 11%, about two times the rate in 2002 for the MA working age population.

What Disabilities Do VR Consumers Have? Psychological Disabilities (33%) Substance Abuse (18%) Orthopedic Disabilities (16%) Learning Disabilities (7%) Mental Retardation (6%) Deaf and Hard of Hearing (7%) Neurological Disabilities (3%) Traumatic Brain Injury (3%) Other Disabilities (7%)

What Services Do Consumers Receive? Evaluation, Counseling and Guidance College/University Training Business and Vocational Training Adjustment and Other Training Restoration Services, incl. Technological Assessment Various Other Support Activities The MRC VR Program offers a wide array of services to meet the individual needs of each consumer:

Study Description & Design Study was designed to answer two key questions: What is the net impact of participation in the Public Vocational Rehabilitation Program on future employment and earnings of participants? What are the public and private benefits and costs associated with the MRC Vocational Rehabilitation Program?

Study Description & Design Data for the study were drawn from two datasets: The primary dataset was the MRC Annual Case Service Report (RSA-911) for FY 1999 & 2000 and includes background and services data for case closures. The second dataset was created from UI wage record matches provided by the MA Division of Unemployment Assistance. This dataset includes quarterly earnings from UI-covered employment in Massachusetts for the period of January September 2003, as reported by MA employers.

Findings from the Impact Analysis Employment Impact The effect of MRC services on employment is positive and quite large. The average net impact on annual employment rates of individuals in the program group in the 3 rd year after closure was 12.3 percentage points above the rates of individuals in the comparison group. This net impact varied by gender (8.7 percentage points for men and 14.0 for women) and can be interpreted as preventing employment declines. Results from “sensitivity analyses” suggest that the employment impact is robust for all consumers.

Findings from the Impact Analysis Earnings Impact There is a positive net impact of the VR Program on earnings from UI-covered employment in MA. The analysis involved three different methods of computing impact, all with positive results. MRC consumers in the program group experienced average annual earnings increases of $2,075 above those of comparison group in the 3 rd year after closure. Results from “sensitivity analyses” suggest that the earnings impact is robust for many consumers but possibly not for all consumers.

Figure 1: Quarterly earnings trajectories for typical MRC VR consumers whose cases were closed out three years after eligibility determination.

Findings from Benefit Cost Analyses Two methods for benefit-cost analyses were utilized: Florida State University conducted a study of the 1998 Public Vocational Rehabilitation Program in Florida. The method used in this study was replicated. This study projects benefits using only closure information from the Annual Federal RSA-911 Report. W.E. Upjohn Institute for Employment Research conducted a 2003 study of workforce programs in the State of Washington (for years ). The approach in this study makes use of net impact estimates based on longitudinal data. A similar approach was used.

Findings from BCA -1 Results from BCA Method 1 Compared to Florida Study Returns to TaxpayersMassachusettsFlorida Total Average Cost$3,280$2,917 Reduction in Public Assistance*$10,088$3,022 Increased Tax Revenues*$13,284$10,647 Total Benefits to Taxpayers$23,372$13,669 Benefit/Cost Ratio (30 years)75 *Over 30 year work life using 5% Discount Rate

Findings from BCA -1 Results from BCA Method 1 Compared to Florida Study Returns to SocietyMassachusettsFlorida Total Average Cost$3,280$2,917 Increased Annual Earnings$3,580$3,011 Increased Earnings - 30 Years*$57,785$46,291 Benefit/Cost Ratio (30 years)1816 * Using 5% Discount Rate

Findings from BCA -1 Results from BCA Method 1 Compared to Florida Study Additional Economic ImpactsMassachusettsFlorida Gross Earnings Gains in Year 1 (Avg Annual Increase times # of Cases)$43.7 million$88.7 million Multiplier Effect on Earnings Gains in Indirect/Induced Economic Outputs $48.1 million$103.2 million Potential Jobs Generated by Increase in Economic Output 5351,483 Annual VR Expenditures $51 million$115 million

Findings from BCA -2 Benefit-Cost Analysis 2 (Washington Method) Costs per Consumer Totals Program Costs per Case Closure$5,430 Foregone Earnings & Benefits$1,729 Loss of Taxes on Foregone Earnings $ Year* Benefits (3% discount rate*) Work Life Increased Earnings$62,444 Fringe Benefits on Earnings (25%)$15,611 Increased Tax Contributions (25%)$15,611 Reduction in Public Assistance Use$13,187

Findings from BCA -2 Results from BCA Method 2 Returns to Taxpayer (* Using 3% Discount Rate) First 10 Years Lifetime (until 65) Program Cost ($5,430) plus Loss of Taxes on Foregone Earnings ($346) $5,776 Reduction in Public Assistance*$5,738$13,187 Increased Tax Revenues*$3,866$15,611 Total Benefits to Taxpayers$9,604$28,798 Benefit/Cost Ratio (30 years)1.75

Findings from BCA -2 Results from BCA Method 2 Returns to SocietyMassachusetts Total Average Cost$5,430 Increased Earnings - 30 Years*$62,444 Fringe Benefits (25% of Earnings)$15,611 Foregone Earnings & Benefits($1,729) Total Net Earnings & Benefits$76,326 Benefit/Cost Ratio (30 years)14 * Using 3% Discount Rate

Recap of Study Highlights Returns to society range from $14 to $18 dollars for each $1 invested in the MRC Vocational Rehabilitation Program. $5 to $7 is returned to the government in the form of increased taxes and reduced public assistance payments for every $1 invested. Returns are substantial even in the first ten years.

Recap of Study Highlights The average increase in lifetime earnings of a successful VR participant is more than $60,000. Total increase in the annual earnings of consumers (average annual increase times the number of case closures) is $43.3 million in the first full year after completion of their VR program. The increase in economic activity resulting from MRC consumers becoming employed produces a $48 million dollar benefit for the economy as a result of increased employee spending and employer investments, possibly generating as many as 500 new jobs per year.

Recap of Study Highlights MRC services are cost-effective and valuable. Demand for Public Vocational Rehabilitation Programs far exceeds the supply, as evidenced by long waiting lists for services. MRC only serves about 8% of all persons with disabilities of working age in the Commonwealth. These findings support the need for adequate funding of Public Vocational Rehabilitation Programs.