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learn$ave Project: Final ReportChapter 8Cost-effectiveness analysisThus far the demonstration has been evaluated to learnabout its implementation (Chapter 4) and to learn aboutits impacts (Chapters 5 through 7). A comprehensiveevaluation of the project needs to include an analysisof whether or not the delivery of IDAs as they weredelivered under learn$ave represents a good and efficientuse of public funds. This chapter presents an analysis ofthe cost-effectiveness of the project. Cost-effectivenessanalysis provides information about the cost of an interventionrelative to other means of achieving the samedesirable policy or program outcomes. Ideally, thoroughcost–benefit analysis would have been conducted toassess the net benefits provided by learn$ave, but thiswas not possible (see Box 8.1). Specifically, this chapterexplores the following questions:• What were the costs of the various components oflearn$ave?• How does the cost-efficiency of learn$ave compare toother social programs? Given that learn$ave’s mainobjective is to induce low-income people to participate ineducation or small business as a way of increasing theireconomic welfare, was learn$ave more or less efficientthan other initiatives in encouraging skill development?• Is learn$ave cost-effective in encouraging education? Islearn$ave cost-effective in encouraging self employment?• Would it be possible to improve the cost-effectiveness oflearn$ave by targeting a certain group of participants?The methodology and framework applied to thiscost-effectiveness analysis are described below.MethodologyThis chapter presents learn$ave cost figures over theentire 54-month period based on data from the threeexperimental sites (Vancouver, Toronto and Halifax). Atthe other seven sites, there were insufficient data to breakcosts down into their detailed components. All programand control group members — not just those who activelyparticipated in the program — were included in thecalculations. Because learn$ave was a new project, certaincosts were incurred during the development and start-upof the project. These developmental and start-up costs areexcluded from the analysis to allow a better comparisonwith ongoing programs. Generally unobserved costs werealso excluded. These include, for example, the opportunitycosts to participants of taking time out of work to attendlearn$ave financial training classes or the costs of forgoneconsumption to save more in a learn$ave account.Box 8.1Cost-effectiveness vs. cost-benefit analysisWhile a cost-effectiveness study can tell us whether the program wasrelatively expensive or not compared to other available policy alternativesor programs, only a cost-benefit analysis can really tell us whetherthe total costs of learn$ave were “worth it” given all the benefits itgenerated. A cost-benefit analysis has to include a full accounting for allcosts to all players — participants, the host organizations, government,participating financial institutions and others — as well as all thebenefits generated by the project to those same players. If the totalcosts to all are less than the total benefits to all, then the project is seento be a good use of funds. Combined with a cost-effectiveness study,a cost-benefit study can tell whether a particular policy is a good useof resources in light of the benefits generated and relative to all otheralternative uses for the same resources.While many of the costs and benefits in learn$ave can be observed orimputed, the available data do not allow us to calculate the total projectbenefits. Specifically, any increases in earnings due to learn$ave’simpact on education cannot be calculated using the available information.A robust projection of any returns in earnings would require not onlyinformation on the participants themselves, but also on local labourmarkets, the exact course taken or qualifications gained as a resultof learn$ave and average earnings for other similar members of thelabour force with comparable qualifications. Even this approach ispotentially complicated by the fact that many participants already hadpost-secondary education when they enrolled in the project and so theirlow earnings would have to be explained by other factors. An alternativeapproach would be to take advantage of rates of return to educationderived in past research. However, in learn$ave’s case, where mostparticipants entered post-secondary education of some kind, cost-benefitanalysis would have been particularly difficult to conduct as estimates ofreturns to education in the literature are typically expressed relative to ahigh school certificate.For these reasons, a cost-benefit analysis was not conducted for thelearn$ave project and a cost-effectiveness analysis was carried outinstead. Table G in Appendix G presents the differences between acost-benefit analysis and cost-effectiveness analysis in tabular form, alongwith an indication of the largest expected costs and benefits as well asthose costs that can and were estimated in this study. It is important tonote that a cost-effectiveness study does provide at least the benchmarkon costs which benefits must either meet or exceed to have a positivecost-benefit outcome.Social Research and Demonstration Corporation Chapter 8 | 91