English Language Training to Adult Immigrants

The authors estimate that the initial average cost of providing the full language training program (3.2 semesters on average) is $4,500 per student. Next, the authors incorporate the impact of the program on government revenue. They estimate that the program increases the annual earnings of participants by an average $2,400, or 56 percent. They assume that the $2,400 of increased annual earnings are sustained for 27 years, which corresponds to the average time a FAESL+ graduate works before turning 65. Using the NBER TAXSIM 27 tool, authors conclude these extra earnings lead to an extra $162 per year in federal income taxes, $103 in state income taxes, and $434 in FICA payments. Assuming a discount rate of 3 percent per year this income to the government exceeds initial costs and the program therefore pays for itself. The authors note that this negative cost holds true even without considering any of the FICA payments as part of the fiscal externality. (In their preferred specification, the authors assume that only 19% of FICA revenue serves to reduce the net cost of the policy. This is because 19% of FICA payments fund Medicare while 81% fund Social Security. Social Security benefits are returned to taxpayers later in life and so FICA payments funding Social Security represent both an and a liability.) The estimated negative cost of the program also holds for interest rates as high as 6 percent.

The program’s MVPF is infinite because the willingness to pay for the program is positive WTP but the program has a negative net cost to the government.