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Developing a Methodology for Costing the Impact of Digital Exclusion. Dr Leandro Carrera and Chris Gilson LSE Public Policy Group. Structure of this presentation. Identifying the digitally excluded Estimating the ‘benefits foregone’ of digital exclusion - PowerPoint PPT Presentation
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Developing a Methodology for Costing the Impact of Digital Exclusion
Dr Leandro Carrera and Chris GilsonLSE Public Policy Group
Structure of this presentation
1. Identifying the digitally excluded2. Estimating the ‘benefits foregone’
of digital exclusion3. What would tackling Digital
Exclusion cost the government?4. Applying a cost-benefit analysis to
assess the feasibility of tackling digital exclusion
5. Conclusions
1. Identifying the digitally excluded
Identifying clusters
The study team started with a principal component analysis of OxIS’s survey data (Helsper and Margetts) to identify key groups or ‘clusters’ of the population which suffer from digital exclusion
From these data the main groups identified were: those who are economically disadvantaged
(unemployed and low income ) those who are disadvantaged in relation to age and
mobility those who are educationally disadvantaged
Estimating the size of the clusters
For the three groups, our estimates show that around 6m people are digitally excluded
Other studies, have shown that the scale of digital and social exclusion is around 4-6m (CLG, Digital Inclusion Team)
Thus, our estimates are representative of the scale of digital exclusion suffered by under-privileged groups
Total number in group (millions)
Number not using internet (million)
Percentage not using internet
Low income unemployed 2.2 1.2 53
Elderly and disabled 2.8 2.3 80
Educationally Disadvantaged
(Employed/Basic Education)
8.6 2.5 29
Total 13.6 5.9 43
2. Estimating the ‘benefits foregone’ of digital exclusion
Conservative estimate of total benefits forgone for citizens who are digitally excluded
Estimated total per
person per year (£)
Estimated total Benefit
(£ million)
Low income unemployed
Time lag in finding a job from unemployment – missing web search 441 310
Probability of missing JSA payments due to lack of information 64 13
Missed savings from being unable to compare prices online 283 135
Elderly and disabled
Missed savings from being unable to compare prices online 283 358
Greater costs incurred through potentially unnecessary GP visits 2.5 5
Delay in receiving attendance allowance through lack of information 112 48
Educationally Disadvantaged
(Employed/Basic Education)
Missing out on opportunities for promotion and for better paid jobs through lack of 'digital' skills
995 1,855
Missing out on the positive pay and promotion consequences through e-learning
832 559
Missed savings from being unable to compare prices online 283 542
Total 3,824
Estimated benefits forgone for government
InitiativeTotal Benefit
(£ million)
Low Income UnemployedReduced admin costs through
placing JSA online9
Elderly disabledSavings to NHS for reduced number of potentially unneeded elderly GP
appointments12
Educationally Disadvantaged
Reduced costs through providing outreach online rather than in person
(e.g. JCP has 9,300 personal advisors that meet with customers)
18
Total 39
Estimated benefits forgone for the economy
InitiativeTotal Benefit
(£ million)
Low Income Unemployed
Estimated output gains through increased employment and productivity
310
Elderly
Helping informal carers to stay in work through telecare or other forms of digital monitoring, e.g. email/webcam
42
Educationally Disadvantaged
Labour market (incl. pay scale mobility) improvements through e-learning
1,856
Labour market improvements (incl. greater job and promotion opportunities) through increased digital skills, e.g. email and internet search
560
Total
2,767
Estimating the benefits foregone
To estimate the costs of digital exclusion, it is necessary to focus on the activities most frequently performed by each group that could be performed online rather than in person
For each of our clusters, we identified three specific activities that these groups would be most likely to benefit financially from being able to do online
On-line activities which would benefit the digitally excluded
Cluster 1: Unemployed, low income Online job search Finding benefits information online Saving money through online shopping, price comparison
sites Cluster 2: Elderly disabled and retired
Using the Internet to look for health information and reduce number of GP visits
Finding benefit information online Saving money through online shopping, price comparison
sites Cluster 3: Educationally disadvantaged,
Unemployed E-learning activities Using the Internet for work related tasks (like job search) Saving money through online shopping, price comparison
sites
Estimating the “benefits foregone” from a lack of involvement in online activities
We assumed that the costs of being digitally excluded can also be seen as ‘benefits foregone’
We also assumed that the ‘benefits foregone’ can be divided among those for the citizen, the government and the economy
For example, for the low income unemployed, finding that they are entitled to an extra-week of JSA online can be also taken as a benefit for government as DWP will save money from removing the phone section from the JSA application process
Our assumptions for this section were based on best data and literature available. Subsequently, these assumptions were discussed in a specialised online discussion forum from which we obtained useful insights to improve some of them
Our estimates show the total ‘benefits foregone’ over the course of a five-year period
Benefits foregone for Cluster 1: low income unemployed
Benefits foregone to the Citizen: Missing Jobseeker’s Allowance (JSA) entitlement for the
Low Income Unemployed Group Finding a job through online job search Price comparison
Benefits foregone to Government Savings thanks to on-line applications for Jobseekers
Allowance
Benefits foregone to the Economy: Productivity gains from reduced unemployment
Benefits foregone for Cluster 2: elderly, disabled and retired
Benefits foregone to the Citizen: Attendance Allowance Price comparison Reducing GP visits
Benefits foregone to Government Reduced GP time
Benefits foregone to the Economy: Reduced costs for informal social care for dementia
sufferers
Benefits foregone for Cluster 3: educationally disadvantaged and employed
Benefits foregone to the Citizen: Pay scale mobility through digital inclusion Pay scale mobility through e-learning Price comparison
Benefits foregone to Government Reduced costs of providing training on-line to this group
Benefits foregone to the Economy: Productivity gains from enhanced e-learning activities and
promotional and job possibilities with digital skills
3. Estimating the costs for government of tackling digital exclusion
Estimating the costs of a government initiative to tackle digital exclusion
Year 1 (£ million)
Year 2 (£ million)
Year 3 (£ million)
Year 4 (£ million)
Year 5 (£ million)
Total Cost (£ million)
Low income unemployed
Moving JSA online8 60 30 30 23 150
Cost of providing internet access 261 80 80 80 80 580
Elderly and disabled
Cost of providing internet access 646 194 194 194 194 1,423
Educationally Disadvantaged (Employed/Basic Education)
Extra-provision of e-learning courses
0 0 55 148 166 369
Cost of providing internet access
565 172 172 172 172 1,253
Total Costs 1,480 506 531 624 635 3,775
Costs to govt per group per year for providing online access
0
100
200
300
400
500
600
700
Year 1 Cost Year 2 Cost Year 3 Cost Year 4 Cost Year 5 Cost
Cost (£millions)
Low income unemployed Elderly and disabled Educationally Disadvantaged (Employed/Basic Education)
Maximum total benefits obtained from digitally including all groups
Year
(£million) Year 2
(£million)Year 3
(£million)Year 4
(£million)Year 5
(£million) Total
(£million)
Benefits to Citizen 650 463 502 1,087 1,123 3,824
Benefits to Economy
164 148 386 974 1,095 2,767
Benefits to Government
15 15 4 4 1 39
Total Benefits 829 626 892 2,065 2,219 6,631
Benefits per group per year in providing online access
0
500
1,000
1,500
2,000
2,500
Year 1 Benefit Year 2 Benefit Year 3 Benefit Year 4 Benefit Year 5 Benefit
Benefit (£millions)
Low income unemployed Elderly and disabled Educationally Disadvantaged (Employed/Basic Education)
4. Assessing the feasibility of tackling digital exclusion
A benefit-cost analysis
To assess whether it makes sense for government to intervene, we applied a benefit-cost analysis
The discount rate was assumed to be 5% per year
A positive Net Present Value (NPV) will indicate that the project is worth implementing
The Net Present Value of fully tackling digital exclusion
Net Present Values over 5 years (estimated)
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
Year 1 Year 2 Year 3 Year 4 Year 5
NPV (£ Million)
Net Present Cost Net present benefit NPV
Conclusions and insights
The total NPV is positive, totalling £2.3 billion over the course of the five years
This indicates that the project is worth being implemented
Even modelling a 50% reduction in benefits at the end of the project would yield over £500 million NPV
Conclusions and insights
Our estimates have been conservative in not considering the impact of alternative new technologies such as i-pad, i-phone, etc
However, there may be a residualization problem in dealing with those that are still digitally excluded