THE LEISURE BIAS IN COST-BENEFIT ANALYSES OF EMPLOYMENT AND TRAINING-PROGRAMS

Although increases in earnings that result from Employment and Trainin g (E&T) programs typically come at the cost of losses of leisure to pa rticipants, this is almost never taken into account in cost-benefit an alyses of E&T programs. This paper develops a method for adjusting for this bias and illustrates how the method can be used to reassess find ings from earlier E&T cost-benefit analyses. Results in the paper sugg est that the bias from ignoring lost leisure is likely to be sizable u nless the E&T program that is subject to cost-benefit analysis increas es earnings mainly by raising wage rates or participant reservation wa ges are near zero, Ignoring the bias will favor E&T programs that emph asize increases in hours of work by focusing on job search or work req uirements at the expense of programs that increase wage rates through investments in human capital.