Appendix A: Methodology
Official title: Evaluation of the Labour Market Development Agreements
Qualitative data reported in the Skills Development (SD), Skills Development-Apprentices (SD-A), Targeted Wage Subsidies (TWS) and Employment Assistance Services (EAS) studies were collected from key informant interviews with managers and service providers and a document/ literature review. As well, questionnaires were completed by provincial/ territorial government representatives for the SD, SD-A and TWS studies. Table A1 provides the number of key informants interviewed by province and territory.
Key informant interviews for the EAS study were conducted in 2013 while those for the SD, SD-A and TWS studies were conducted in 2015.
Table A1. Number of key informants interviews and P/Ts covered by the LMDA studies
|Number of key informant interviews|
|P/Ts covered by the qualitative findings|
|Newfoundland and Labrador||X||X||X||X*|
|Prince Edward Island||n/a||n/a||X||X|
|Total number of province/territories||10||10||9||8|
* No report was generated for this province/territory.
n/a: P/T opted not to participate in these studies
All quantitative analyses were conducted using linked administrative data from EI Part I (EI claim), EI Part II (EBSM participation data) and T1 and T4 taxation files on up to 100% of participants.
The incremental impact analysis compared the labour market experience of participants before and after their participation with that of a comparison group. The goal was to determine the direct effect of program participation on key labour market indicators (see Figure 1).
For active claimants, incremental impacts were measured relative to a comparison group of active claimants who could have participated in the EBSMs but did not. Former claimants can be underemployed and unable to requalify for EI, out of the labour force for various reasons or on Social Assistance. Based on previous evaluation methodologies, on expert advice and given the difficulty in generating a suitable comparison for former claimants using administrative data alone, the comparison group for former claimants was created using individuals who participated in low-intensity Employment Assistance Services only during the reference period. This is a conservative approach given the fact that participation in Employment Assistance Services can lead to limited effects on labour market outcomes.
Participants and non-participants were matched based on a wide array of variables including age, sex, location, skill level required by the last occupation held prior to participation, reason for separation from employment, industry in which they were previously employed as well as employment earnings and use of EI and Social Assistance (SA) for each of the five years before participation.
All analyses were conducted using a unit of analysis called the Action Plan Equivalent, which combines all EBSMs given to an individual within no more than six months of each other. For reporting purposes, incremental impacts were attributed to the longest intervention of the Action Plan Equivalent when SD, TWS, Job Creation Partnerships or Self-Employment was the longest intervention. Impacts for EAS were calculated for Action Plan Equivalent that contained only EAS with no Employment Benefits. These were referred to as EAS-only.
The incremental impact estimates were produced using non-experimental methods, namely propensity score matching, using the Kernel Matching method, along with Difference-in-Differences method to estimate program impacts. Alternative matching techniques (in other words, Nearest Neighbour and Inverse Propensity Weighting) were also used for validation purposes.
Incremental impacts were measured for the following indicators:
- Employment/self-employment earnings represent the total earnings an individual had from paid employment and/or self-employment. (This information is available by calendar year and is obtained from T1 and T4 tax return records.)
- Incidence of employment/self-employment represents the incidence of having earnings from employment and/or self-employment.
- Amount of EI benefits received represent the average amount of EI benefits received.
- Weeks in receipt of EI benefits represent the average number of weeks during which EI benefits were received.
- Social Assistance benefits represent the average amount of SA benefits received. (This information is available by calendar year and is obtained from T1 tax return records.)
- Dependence on income support represents the ratio of participant’s income that came from EI and SA benefits (in other words, EI benefits + SA benefits / (EI benefits + SA benefits + earnings from employment/self/employment)).
Incremental impacts were estimated for different cohorts of participants:
- All active and all former claimants as well as youth (under 30 years old) and older workers (55 years old and over) who started their EBSM participation between April 1, 2002 and March 31, 2005.
- All active and all former claimants who stated their EBSM participation between January 1, 2007 and December 31, 2008.
- Active and former claimants who were long-tenured workers and who started their EBSM participation between January 1, 2007 and December 31, 2009. The long-tenured workers covered in this study are individuals who have established an EI regular or fishing benefit claimants and who had paid at least 30% of the annual maximum employee EI premiums in seven of the ten years preceding their EI claim and who had collected 35 or fewer weeks of EI regular or fishing benefits in the five years preceding their claim. This definition is similar to the EI claimant category long-tenured workers introduced under Connecting Canadians with Available Jobs.
The cost-benefit analysis compared how much it cost for individuals to participate in the programs and how much it costs the government to deliver those programs with the benefits both the participants and the government drew from those programs. The analysis was carried out from the society perspective which combines the costs and the benefits for both the participants and the government.
Costs and benefits included in the calculations were as follows:
- Program costs included the administration cost and the direct cost of the EBSMs. The cost for each EBSM was calculated at the Action Plan Equivalent level. The costs were determined based on the average composition of the Action Plan Equivalent.
- The Marginal Social Cost of Public Funds represented the loss incurred by society when raising additional revenues such as taxes to fund government spending. The value was estimated as 20% of the program cost, sales taxes, income taxes, impacts on EI and impacts on SA paid or collected by the government.
- Employment earnings consisted of incremental impacts on participants’ earnings during and after participation. The calculation accounts for the participant’s forgone earnings during participation (in other words, opportunity cost). These are based on incremental impacts for the 2002-2005 participants.
- Fringe benefits included benefits such as employer-paid health and life insurance as well as pension contributions. The rate used to calculate the fringe benefits was 15% of the incremental impact on earnings.
The program effects on EI and SA use, and the sale and income tax revenues were not included in the calculations since these costs and benefits cancel each other out from the social perspective by definition. For example, while EI and SA are benefits received by participants, they represent a cost for the government. However, as indicated above, these effects are accounted for in the calculation of the Marginal Social Cost of Public Funds.
When producing the results, to bring all costs and benefits to a common base and to account for inflation and interest on foregone government investment, the estimates for the second year of participation and up to the sixth year post-program were discounted by 5% per year. As well, when the benefits were still lower than the costs six years after program end, the payback period was calculated by assuming that the average benefit or cost measured over the fifth and six year post-program would persist over time (discounted at a 5% annual rate).
Strengths and limitations from the studies
Overall, the number of key informants interviewed was relatively small in some P/Ts. The key informants’ responses were representative of their own experience and their own region but it is unclear if they were fully representative of the entire province and territory.
The matching process led to the creation of comparison groups closely matched to the LMDA participants in terms of their background characteristics. Results obtained with Kernel Matching were validated with the use of two other techniques (in other words, Inverse Propensity Weighting and Nearest Neighbour), increasing the level of confidence in the results. However, readers should be aware that incremental impacts may be affected by factors not captured by the matching process. For example, the motivation to seek employment was not directly measured except to the extent it was captured in prior income and labour market attachment patterns.
Readers should also keep in mind that it is not possible to compare the results obtained for each claimant type since the results for active claimants represent the effects of the EBSMs relative to non-participation while the results for former claimants represents the Employment Benefits relative to a limited treatment (in other words, EAS).
This definition of long-tenured workers differs from the definition used in the literature as it does not consider the number of years the worker remained employed with the same employer.
The cost-benefit analysis was limited in the sense that it only took into account the quantifiable benefits and costs that were directly linked to EBSM delivery and participation and that could be estimated using available administrative data and the EI Monitoring and Assessment Report. The analysis did not capture “intangible”, non-pecuniary and indirect benefits. It did not consider the multiplier effect that improving participant’s income may have on the economy and did not account for the effect of EI Part II investment on sustaining a service delivery infrastructure and creating jobs among the governmental program service providers. As well, this analysis did not consider the displacement effect where participants may take away jobs that would otherwise be filled by other unemployed individuals. Finally, this analysis did not consider the possible effect of EBSMs on increasing skill prices.
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