The Framingham Adult ESL Plus (FAESL+) program provides English language training to over 750 immigrant students per year in Framingham, Massachusetts. Heller and Mumma 2020 estimate the impact of providing this training to adult immigrants in the US. The authors link administrative data from the FAESL+ program in the city of Framingham, MA to employer-reported earnings data. To identity the program's impact on earnings, the authors exploit random variation generated by the program's enrollment lottery.
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.
Willingness to Pay
Enrollment in the FAESL+ is voluntary. This means that the WTP is positive. The authors also note that the program has large excess demand, has positive impacts on future earnings, and is similar to language training programs provided by for-profit companies which charge for their services. The net costs of the program are negative and so the authors do not quantify the WTP explicitly. Rather, they simply note that the MVPF is infinite.
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.
Heller, Blake, and Kirsten Slungaard Mumma. "Immigrant Integration in the United States: The Role of Adult English Language Training." Working Paper. (2020).