conveniently equal to one half the budgetary expenditure on the unemployed

# Conveniently equal to one half the budgetary

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conveniently equal to one-half the budgetary expenditure on the unemployed workers. Benefit-Cost Analysis, Employment, and Program Evalua:on
AccounHng Framework for Labor Costs, Benefits, and Transfers Haveman and Farrow (2011) structure. Accoun:ng structure for considering benefits of increased employment. Provides mul:ple op:ons for accoun:ng, but net effect is the same for each. Source: Haveman and Farrow (2011) Benefit-Cost Analysis, Employment, and Program Evalua:on
Employment Effects and Welfare: Example Suppose we are doing a project that creates one job for one year and the economy is at full employment. Assume that Benefits are \$110 W m =market wage (\$100) Net benefits = \$10 Now suppose that we are doing the same project, but it creates one job for one year for a currently unemployed worker. Assume that Benefits are \$110 W m =market wage (\$100) W r =reserva:on wage (\$80) No=ce that the worker is be>er off by \$20. This is a benefit. Net benefits = \$30 See Haveman and Farrow (2011) for a more detailed discussion. Benefit-Cost Analysis, Employment, and Program Evalua:on
AlternaHve presentaHons of unemployment and social net benefits Op:on 1: Opportunity cost method Benefits-Costs = \$110 – \$80 = \$30 Op:on 2: Surplus method (costs at their market price; worker gets transfer) B-C = \$110+\$20 – (\$80+\$20) = \$30 Op:on 3: Gross ﬂows method B (wkr + gov) = \$100+\$110 = \$210 C (wkr + gov) = \$80+\$100 = \$180 B-C = \$210 - \$180 = \$30 Source: Haveman and Farrow (2011) Benefit-Cost Analysis, Employment, and Program Evalua:on
Employment Effects and Welfare Measurements in a Benefit-Cost Analysis: Final Notes If the economy is near full-employment then there are likely no significant net employment effects or social benefits from the change in job structure. If there is structural unemployment, however, there may be significant net effects, and there are benefits from gains in total employment. Diﬃcult to empirically es:mate changes in employment due to a regula:on given limited data on labor markets and reserva:on wages. May make simplifying assump:ons (as in “Approach E”) May offer qualita:ve descrip:on of the theory (output and subs:tu:on effects) It is useful to dis:nguish between costs, included in a benefit-cost analysis, and changes in employment, included in an impact analysis. Benefit-Cost Analysis, Employment, and Program Evalua:on