A Cost-Benefit Analysis of the U.K. Employment Retention and Advancement (ERA) Demonstration

Abstract

This paper presents a cost-benefit analysis of Britain’s Employment Retention and Advancement (ERA) demonstration, which was evaluated though the first large-scale randomized control trial in the United Kingdom (over 16,000 people were randomly assigned). Aimed at helping three separate target groups of low-income individuals sustain employment and progress in work, ERA was distinguished by a combination of job coaching and financial incentives that it offered to participants once they were working. The ERA demonstration project began operations in late 2003 as a pilot programs administered by federally operated Jobcentre Plus offices in six regions of Great Britain. In the cost-benefit analysis, ERA’s effects on monetary benefits and costs were estimated through impact analyses, which exploited the experimental design and used a variety of both administrative and survey data, while non-financial effects were assessed through a diversity of methods. The administrative and survey data covered a five year observation period and benefits and costs were projected for an additional five years. Uncertainty, as implied by the standard errors of the estimated impacts, was addressed through a Monte Carlo analysis, an approach that has seldom been previously used in cost-benefit analyses of social programs. The cost-benefit results vary considerably among the three ERA target groups. For example, ERA seemed to be cost-beneficial for long-term unemployed adult men, but not for single mothers, some of whom were working when they began participating in ERA and others of whom were not. The key findings appear robust to sensitivity tests.