Return on Investment in the Engineers and Technologists Integration Program (ETIP) As administered by the Edmonton Mennonite Centre for Newcomers 9/11/2015 JoAnn Kingston-Riechers, PhD* * Please send correspondence to jkriechers@gmail.com.
Executive Summary Introduction The population of Canada is aging. We are becoming increasingly reliant on the influx of new Canadians to meet the demands of our labour force, produce goods and services for our consumption and to pay for sales and income taxes to fund our social programs. It takes time, however, for new Canadians to contribute fully to our communities and our economy. With respect to the latter, working-aged immigrants need time to adjust to the demands and expectations of the Canadian workplace. The Engineers and Technologists Integration Program (ETIP) administered by the Edmonton Mennonite Centre for Newcomers (EMCN) is a program that aims at reducing that adjustment period. The purpose of this paper is to gauge the return on investment in ETIP by comparing the costs of the program against the impact it has made on the graduates income paths. Results My results were based on 109 participants from the four most recent ETIP sessions. I estimated the return on investment in ETIP was i) about $2.69 of increased in participant income for every dollar that was spent on the program and ii) equivalent to a return of 21.93% annually over a five year period. By way of comparison, investors should expect, according to Warren Buffet, a six to seven percent return in the stock market. 1 I believe that ETIP provides significant private and social contributions to society. It appears to have been quite successful in goals to speed the process at which its graduates acclimatize to the Canadian workplace, adapt their technical skills to Canadian standards and practices and build social and business networks. I believe my estimates of the net benefit of ETIP are quite conservative for a number of reasons. These include my assumptions that: a. ETIP had no impact on the individuals on whom the EMCN had no employment information; b. The participants who were unemployed prior to entering ETIP would have become employed immediately had they not entered ETIP; and c. The participants would have earned the same as an immigrant ETT in Year 5 if they had not entered the ETIP program. 1 As quoted in http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1.nedmy8deu (last accessed September 9th, 2015). 11-Sept-15 Page i
In addition, it is quite possible that ETIP can have a long term impact on participant s earnings. For example, by kick-starting their careers, ETIP may provide its graduates with opportunities for promotions that they otherwise may have missed or for which they would have had to wait longer. 11-Sept-15 Page ii
Table of Contents Title Page # Introduction... 1 Background... 1 Data... 4 Methodology... 6 Results... 11 Conclusion... 16 List of Figures Title Page # Figure 1: Estimated Median Age of Canadians... 1 Figure 2: Average Number of Children Born Per Woman in Canada from 1871 to 2011... 2 Figure 3: Life Expectancy in Years at Birth by Sex... 2 Figure 4: Estimated Age at Retirement... 3 Figure 5: Estimated Number of Years Spent in Retirement... 3 Figure 6: Step 1 - Identification of Impact Group... 6 Figure 7: Step 2 - Estimation of Intervention Income Stream... 7 Figure 8: The Average Income of Immigrant ETT in Alberta... 8 Figure 9: Estimated Earnings of an Individual with and without ETIP... 8 Figure 10: Step 3 - Estimation of Benchmark Income Stream... 9 Figure 11: Change in Earnings due to ETIP... 10 Figure 12: Average Income of Immigrant Engineers and Technologists in Alberta... 13 Figure 13: Comparison of the Intervention and the Benchmark Income Streams... 14 List of Tables Title Page # Table 1: Cost Information of the ETIP Sessions... 5 Table 2: Return on an Investment of $100,000... 11 Table 3: Estimated Costs of Each ETIP Session... 12 Table 4: Estimated Impact of Engineers' and Technologists' Integration Program (ETIP) over Five Years... 15 11-Sept-15 Page iii
Introduction The population of Canada is aging. We are becoming increasingly reliant on the influx of new Canadians to meet the demands of our labour force, produce goods and services for our consumption and to pay for sales and income taxes to fund our social programs. It takes time, however, for new Canadians to contribute fully to our communities and our economy. With respect to the latter, working-aged immigrants need time to adjust to the demands and expectations of the Canadian workplace. The Engineers and Technologists Integration Program (ETIP) administered by the Edmonton Mennonite Centre for Newcomers (EMCN) is a program that aims at reducing that adjustment period. The purpose of this paper is to gauge the return on investment in ETIP by comparing the costs of the program against the impact it has made on the graduates income paths. Background The median age of Canadians has increased from about 26.2 years in 1971 to about 40.4 years in 2014, as shown in Figure 1 below, an increase of 13.6 years. The aging of the Canadian population is due to two main trends declining birthrates and expanding life expectancies. The challenges presented by these trends have become more acute because Canadians continue to retire at roughly the same age as their parents. Figure 1: Estimated Median Age of Canadians Median Age (years) Estimated Median Age of Canadians (1971 to 2010) 45 40 35 30 25 20 1970 1980 1990 2000 2010 Year Source: Statistics Canada (2014) As Figure 2 below shows, birth rates, which had been declining since the post-wwii baby boom, dipped below the replacement rate 2 of 2.1 births per female in the early 1970s - where they 2 The replacement rate is the average number of children that women of one generation must have in order to generate a population of the same size in the next generation. 11-Sept-15 Page i
have remained. Since there are fewer babies to replace the older individuals who die, without sufficient immigration, low birth rates could alone increase the median age of our population. Figure 2: Average Number of Children Born Per Woman in Canada from 1871 to 2011 Source: Health Canada (2005), page 8 Expanding life expectancies have pushed the median age of Canadians even higher. As shown in Figure 3 below, the average life expectancies at birth for males and females have increased by 11 and 8 years, respectively, since the early 1970s. Figure 3: Life Expectancy in Years at Birth by Sex Life Expectancy at Birth (years) 85 80 75 70 Life Expectancy in Years at Birth by Sex (1970 to 2010) 65 1970 1980 1990 2000 2010 Year Females Males Source: Statistics Canada (2012a) 11-Sept-15 Page 2
The average age that Canadians retire has fallen by about 2.5 years for both males and females since the mid-1970s, as depicted in Figure 4, despite the increase in average life expectancies. Figure 4: Estimated Age at Retirement 66.0 Estimated Age at Retirement (1976 to 2010) Age (years) 65.0 64.0 63.0 62.0 61.0 60.0 1975 1985 1995 2005 Years Males Females Source: Statistics Canada (2015a) The combination of living longer and retiring at the roughly the same as earlier generations means, as shown in Figure 5 below, that Canadians are spending more of their lives in retirement than ever before. Figure 5: Estimated Number of Years Spent in Retirement Estimated Number of Years Spent in Retirement (1976 to 2010) Years Spent in Retirment 25 Females 20 Males 15 10 5 0 1975 1980 1985 1990 1995 2000 2005 2010 Year Source: Statistics Canada (2012a) and Statistics Canada (2015a) 11-Sept-15 Page 3
As its population ages, without an influx of working age individuals from other countries, the inflationary pressures can rise in the Canadian economy. Inflationary pressures build up in the labour markets as businesses compete for a decreasing number of workers. Inflationary pressures build up in the product and services market by the extent that businesses can pass on their higher labour costs to consumers. In addition, the average income of working age individuals is higher than that of people of other age groups (Statistics Canada, 2013); thus, fewer working age people means fewer income and sales taxes to fund our social programs. As a result, the government may be faced with the choice of increasing tax rates, cutting funding to health, education, etc., or a combination of both. Inflation, higher taxes and/or cuts to our social programs affects our standard of living. The average employment rate and labour income of Canadian born individuals are both higher than those of immigrants; however, these differences decline with the time since immigration. 3 A number of factors influence this convergence. Over time, immigrants become more fluent in French and/or English, acclimatize to the Canadian workplace and build social and business networks. 4 Programs, such as the Engineers and Technologists Integration Program (ETIP), can help speed this adjustment process. The mission of ETIP is to assist internationally educated engineering professionals to quickly and successfully adapt to the Alberta engineering labour market. Participants begin by learning how the Canadian engineering workplace operates, how to assimilate and how to interact with coworkers. Once familiar with the intricacies and expectations of the workplace, the participants are given help to adapt their technical skills to Canadian standards and practices. Time is dedicated at the end of each course for professional career counsellors to assist the participants during their job search in their chosen field. With the strategic partnership of Northern Alberta Institute of Technology (NAIT), Association of Science and Engineering Technology Professionals of Alberta (ASET), Alberta Human Services, and Edmonton Mennonite Centre for Newcomers (EMCN), the ETIP has been helping foreign educated engineering professionals adapt to the Canadian job market for almost 20 years. The goal of this study is to gauge the success of ETIP by comparing the costs of the program against the impact it has made on the graduates income paths. Data The EMNC provided me with the costs of operating ETIP session over the fiscal years of 2011-12 to 2013-14. A detailed list of the costs can be found in Table 1 below. 3 Yssaad (2012), page 12. 4 Ibid, page 14. 11-Sept-15 Page 4
Table 1: Cost Information of the ETIP Sessions Fiscal Year 2013-2014 2012-2013 2011-2012 Rent and Utilities $132,030 $132,030 $132,030 Telephone $1,500 $1,350 $1,400 Resources $2,800 $2,800 $2,300 Office Supplies $2,520 $2,430 $2,490 Printing and Photocopy $2,695 $2,700 $2,190 Travel Staff $1,080 $1,500 $1,400 Graduation $1,700 $1,700 $1,550 Professional Development $2,500 $2,500 $1,500 Books $85,844 $81,552 $77,260 Salaries $356,967 $321,271 $303,422 NAIT and Other Fees $308,455 $293,033 $277,610 Total expenses $898,091 $842,866 $ 803,152 Source: EMNC, 2014 The EMNC also provided me with their participant data for four recent ETIP sessions - January to November 2012, June 2012 to April 2013, January to November 2013 and June 2013 to April 2014. In total, 110 individuals participated in these sessions 109 of whom were included in this study. 5 The 109 participants were from a total of 33 countries and 98 (89.9%) were men. The average of age of the participants was 38.6 years. The average time between immigration to Canada and entry into ETIP was 1.9 years. Prior to entering the program, 71 (65.1%) of the participants were employed. These individuals earned between about $12,000 and $42,000 per year and had average earnings of about $26,312 per year. 6 The remaining 38 (34.9%) participants were unemployed prior to the commencement of their session. After completion of the program, 70 (64.2%) of the participants were working in the engineering field and their income was known. These individuals were earning between $42,750 and $102,600 per year with average earnings of about $63,318 per year. Of the remaining graduates, four (3.7%) were continuing their studies at NAIT or at the University of Alberta, one (1.0%) was unemployed, one (1.0%) was on maturity leave, while the employment status of the remaining 33 (30.3%) others was unknown. 5 One male participant was dropped from the study because he had immigrated 19 years prior to taking the ETIP course; therefore, his transition to the Canadian labour force was assumed to be completed. The exclusion of this individual had no significant impact on the results of this study. 6 The participants earned between $10 and $21 per hour. The annual earnings were calculated by assuming a 1710 hour work year. 11-Sept-15 Page 5
Methodology The return on investment in ETIP was calculated by weighing the costs of ETIP against the estimated impact of the program on the graduates incomes. The study period was five years. My method for estimating these two factors is described in this section. a) Estimate the per session cost of the ETIP. The annual cost of holding the ETIP courses is detailed in Table 1 above. In each of the three years, three different ETIP courses were in session with three different start and end dates. Each course was 11 months long and overlapped with other sessions - one at the beginning and one at the end of the session. Using this information, I estimated the cost of each 11-month session. b) Estimate the impact of ETIP on the participants earnings. The participant data included each participant s age, place of emigration and year of immigration, along with their employment status and income prior to entering ETIP. In this study, I called the participant s income prior to entry into ETIP their pre-etip income. The data also included all available information on each graduate s employment status after graduation from ETIP including title and salary. 7 In this study, I called the participant s income after graduation from ETIP their post-etip income. There were seven main steps to my estimation of the impact of ETIP on the graduates earnings. Figure 6: Step 1 - Identification of Impact Group No Yes 7 After the completion of the program, the EMCN routinely follows up on graduates to find out whether they have found employment and, if so, their new title and salary. The EMCN are not able to ascertain this data for all graduates either because the EMCN cannot make contact with them, or the graduates are not forthcoming about this information. 11-Sept-15 Page 6
Step 1 is depicted in Figure 1 above. I divided the participants into two groups based on whether the participant s post-etip income was known. If the post-etip income was not known, I assumed that the ETIP made no difference to the participant s earning capacity; therefore, I set the impact of ETIP for this group to zero and I subjected the group to no further analysis. I continued my analysis on the other group. Figure 7: Step 2 - Estimation of Intervention Income Stream No Yes Step 2 is depicted in 7 above. First, I estimated the average income of engineers, technicians or technologists (ETT) in Alberta. Next, I calculated the earnings gap between all skilled workers in Alberta and skilled immigrant workers in Alberta. With these two estimates, I estimated the average income of an immigrant ETT in Alberta. I divided the participants into two groups based on whether their post-etip income was higher than the estimated average income of an immigrant ETT in Alberta. If their income was higher, I assumed that they would receive annual increases at the same rate as other skilled workers in Alberta. Therefore, I calculated the average annual increases for skilled workers in Alberta over the past five years. I used that rate to estimate the participants income streams over the five year study period. For the group with lower incomes, I assumed that their income would converge to the average income for immigrants who work as ETT in Alberta over the subsequent five years. Further, as depicted in Figure 8, I assumed that the average income of an immigrant ETT would increase annually at the same rate as for other skilled workers in Alberta. 11-Sept-15 Page 7
Figure 8: The Average Income of Immigrant ETT in Alberta (Assuming annual increases equal to the average rate at which skilled worker annual incomes have increased over the previous 5 years) Average income per year 1 2 3 4 5 Study Period (Years) I concatenated the two groups from Step 2 to once again form one database. I called the estimated earnings for the five years after graduation the intervention income stream. The intervention income stream is depicted in Figure 9 below. Figure 9: Estimated Earnings of an Individual with and without ETIP 11-Sept-15 Page 8
Figure 10: Step 3 - Estimation of Benchmark Income Stream No Yes Step 3 is depicted in Figure 10 above. I divided the data into two groups depending on whether the participant was employed prior to the ETIP course. If the individual was not employed, I assumed, if the participant had not taken the ETIP course, they would have become employed immediately. In the first year, I assumed that they would have earned the average income of a skilled immigrant in Alberta of the same age and number of years in Canada. 8 If the participants were employed prior to entering ETIP, I assumed that their income would remain at that level for the first year of the study period. For last four years of the study period, I assumed that each participant s income, if they had not entered ETIP, would have increased such that it would be equal to their estimated intervention income by Year 5 of the study. I called the estimated earnings per year, had the participant not entered ETIP, the benchmark income stream. The benchmark income stream is depicted in Figure 9 above. Step 3 is based on my assumption that ETIP has no impact on earnings five years after graduation. That is, I assumed the primary effect of ETIP was to increase income immediately following graduation from what it would have been without ETIP. After five years, I assumed that, whether the individual graduated from ETIP or not, the individual would have earned the 88 Based on Statistics Canada, 2015b. 11-Sept-15 Page 9
same amount each year. ETIP helped the new Canadians adapt to the labour market more quickly - it has no affect after that transition period. This assumption is depicted in Figure 9 above by the convergence of the benchmark and intervention income streams being completed by Year 5. The difference in earnings attributed to ETIP is depicted as the yellow shaded area in Figure 11 below. Figure 11: Change in Earnings due to ETIP In Step 4, I discounted the benchmark and intervention earning streams back to the graduation date of each participant. This process takes into consideration the fact that receiving $100.00 today is more valuable than receiving $100.00 five years from now. I used a discount rate of 5% per year, which assumes that a person would be indifferent between receiving $100.00 today and receiving $127.63 five years from now. 9 I summed the total discounted benchmark income streams for all participants, as well as the total discounted intervention income streams for all participants. I called the former sum the total discounted benchmark income, while I called the latter the total discounted intervention income. In Step 5, I estimated the total impact of ETIP on the graduates incomes over a period of five years by subtracting the total discounted benchmark income from the total discounted 9 Five percent is the conventional rate used in economic analyses. Using a higher rate would generate higher rates of return to ETIP since the highest benefits of the program are assumed to occur immediately (i.e. the time when the difference between incomes with and without ETIP is the greatest), and vice versa. 11-Sept-15 Page 10
intervention income. The difference was my estimate of the impact that ETIP had on the participants earnings. In Step 6, I subtracted the total cost of ETIP from the estimated total impact of ETIP on the graduates incomes. I considered the difference to be the net benefit of ETIP. In Step 7, I calculated the return on investment in ETIP in two ways: i) on a per dollar spent basis and ii) on an annual compounded interest rate basis. i) Per dollar spent I calculated the return based on a dollar spent by dividing the estimated change in the net present value of the participants income stream due to ETIP by the cost of ETIP. An example of a return per dollar spent is depicted in Table 2 below. As demonstrated in that table, if $100.00 were invested today, a return of $2.00 means that the equivalent of receiving $200.00 today would be generated over the next five years. If I had not taken into consideration that a dollar received today is worth more than a dollar received sometime in the future, I would have overvalued the return at $2.32 per dollar spent. Table 2: Return on an Investment of $100,000 10 Return on Investment Years Since Investment 1 2 3 4 5 Total Return per $ Spent (1) Annual Compounded Interest Rate (2) Current Dollars $42 $44.10 $46.31 $48.62 51.05 $232.08 $2.32 18.34% Discounted Dollars (back to investment day) $40 $40 $40 $40 $40 $200.00 $2.00 14.87% ii) Annual compounded interest rate I estimated the return based on an annual compounded interest by calculating the annual interest rate that a bond would have to earn to provide the same return as ETIP. Extending the example in Table 2 above, an investment of $100.00 which would generate the equivalent of $200.00 today would be equivalent to a 14.87% annual return over five years. Again, if I had not taken into consideration that a dollar received today is worth more than a dollar received sometime in the future, I would have overvalued the average rate of return at 18.34% per year. Results In this section, I describe the results of my estimations of the cost of the ETIP sessions and the net impact on the graduates incomes. 10 Discounted at 5% per year. 11-Sept-15 Page 11
a) Estimation of the cost of the ETIP sessions The annual cost running the ETIP courses was presented in Table 1 above. During each year, three different ETIP courses were in session with three different start and end dates. Each course was 11 months long and overlapped with other sessions - one at the beginning and one at the end of the session. There was about a two month period during the 11 months when there was no other on-going session. Therefore, to estimate the costs of one ETIP session, I first divided the fiscal year s cost by twelve to obtain the monthly cost of a session. Second, I multiplied the monthly cost by two to estimate the total cost of the session when it is the only one in progress. For the other nine months, I divided the monthly rate by two and multiplied by nine to estimate the cost of the session when it is sharing resources with another session. Therefore, as shown in Table 3 below, I estimated cost of the ETIP sessions to be from about $435,000 to $487,000 per session. Session Table 3: Estimated Costs of Each ETIP Session June 2013 to April 2014 January 2013 to June 2013 June 2012 to April 2013 January 2012 to June 2012 Rent and Utilities $71,516 $71,516 $71,516 $71,516 Telephone $813 $731 $758 $758 Resources $1,517 $1,517 $1,246 $1,246 Office Supplies $1,365 $1,316 $1,349 $1,349 Printing and Photocopy $1,460 $1,463 $1,186 $1,186 Travel Staff $585 $813 $758 $758 Graduation $921 $921 $840 $840 Professional Development $1,354 $1,354 $813 $813 Books $46,499 $44,174 $41,849 $41,849 Salaries $193,357 $174,022 $164,354 $164,354 NAIT and Other Fees $167,080 $158,726 $150,372 $150,372 Total expenses $486,466 $456,552 $435,041 $435,041 b) Estimation of the net impact on earnings. In Step 1, I divided the participants into two groups based on whether or not the participant s post-etip income was known. The post-etip income was not known for 39 of the participants; therefore, I assumed the impact of ETIP course on their income streams to be zero. I continued my analysis with the remaining 70 participants. In Step 2, I estimated first that the average income of an ETT in Alberta was $76,282 per year. 11 According to Statistics Canada, the average skilled immigrant s income was about 96% of the average income after five years in Canada 12 ; therefore, I assumed that the average immigrant 11 This is the average of income of industrial engineering and manufacturing technologists and technicians (NOC code 2233) of $64,334 per year and of industrial instrument technicians and mechanics (NOC code 2243) of $88,230.00 (OCCinfo, 2014). 12 Based on Statistics Canada, 2015b. 11-Sept-15 Page 12
working as an ETT in Alberta would earn about $73,231 per year. Over 2007 and 2011, the average annual increase in incomes of skilled professions working in Alberta was about 1.32%. 13 Thus, I assumed that the average income of an immigrant working as an ETT in Alberta would increase by 1.32% per year over the study period, as depicted in Figure 12 below. Figure 12: Average Income of Immigrant Engineers and Technologists in Alberta 14 Average Income per Year $78,000 $77,000 $76,000 $75,000 $74,000 $73,000 $72,000 $73,231 $74,194 $75,170 $76,159 $77,160 $71,000 1 2 3 4 5 Time Horizon Next, I divided the data based on whether the participant s post-etip income was more than or less than $73,231. Twelve individuals had higher incomes averaging $93,516 per year. I assumed that the incomes of these individuals would increase by about 1.32% annually over the study period. By Year 5, I estimated that their average income would be about $98,534 per year. For the other 58 individuals, I assumed that their incomes would converge to average income of an immigrant ETT in Alberta over the study period reaching $77,160 in Year 5. In Step 3, I found that 32 participants were employed prior to the commencement of their ETIP session. I assumed their income would remain at that level throughout Year 1 of the study period. Their average income was $26,313. Thirty-eight participants were unemployed prior to their ETIP session commencing. I assumed that they would have become employed immediately, had they not entered ETIP. Further, I assumed that they would have earned the average income of a skilled immigrant in Alberta of the same age and number of years in Canada. 15 I assumed their income would remain at that level throughout Year 1 of the study period. I estimated their average income to be about $28,566 per year approximately $2,254 higher than the average incomes of those who were employed pre-etip. 13 Based on the most recent information available (Statistics Canada, 2013). 14 Assuming annual increases equal to 1.32%. 15 Based on Statistics Canada, 2015b. 11-Sept-15 Page 13
I assumed each participant s benchmark income would converge to their estimated intervention income over the subsequent five years. For the 12 individuals for whom I estimated an average intervention income of $98,534 in Year 5, I estimated their benchmark income to be at that same level in Year 5. For all other participants, I estimated that each of them would have a benchmark income of $77,160 in Year 5. In summary, at the end of the study period, with or without graduating from ETIP, I assumed the participant s income would be the same. Again, as can be seen in Figure 13, these calculations were based on my assumption that that ETIP changes only the individual s starting income and has no residual effect five years after graduation. I assumed ETIP had an impact only on the speed at which immigrants adjust to the Canadian workplace. Figure 13: Comparison of the Intervention and the Benchmark Income Streams In Step 4, I discounted each participant s benchmark and intervention streams back to their graduation date and I summed each income stream across all participants. I estimated the total discounted benchmark income to be $34.7 million and the total discounted intervention income to be $39.6 million. In Step 5, I subtracted the total discounted benchmark income from the total discounted intervention income to estimate total impact of ETIP on the graduates incomes over the study period. As shown in Table 4 (line 1 of column 5), I estimated that impact to be about $4.9 million. In Step 6, I subtracted the total cost of all ETIP courses, $1.8 million, from the estimated total impact of ETIP on the graduates incomes to estimate the net benefit of ETIP. As can be seen in Table 4 (line 3 of column 5), I estimated the net benefit to be about $3.1 million. On a per participant basis, as one can see in Table 4 (line 8 of column 5), I estimated the net benefit to be 11-Sept-15 Page 14
about $28,000 over the five year period. It should be noted that this per participant estimate includes all participants, even the 39 participants that I assumed were not impacted by ETIP. Table 4: Estimated Impact of Engineers' and Technologists' Integration Program (ETIP) over Five Years (Rounded to the nearest thousand dollars) Per Session June 2013 to April 2014 (1) January 2013 to June 2013 (2) June 2012 to April 2013 (3) January 2012 to November 2012 (4) Total change in earning $795,000 $2,173,000 $556,000 $1,390,000 $4,914,000 Total cost $486,000 $457,000 $446,000 $435,000 $1,824,000 Total net benefit $308,000 $1,716,000 $111,000 $955,000 $3,090,000 Number of Participants 14 56 14 25 109 Per Participant Average change in earnings $57,000 $39,000 $40,000 $56,000 $45,000 Average cost $35,000 $8,000 $32,000 $17,000 $17,000 Average net benefit $22,000 $31,000 $8,000 $38,000 $28,000 Return on Investment Per dollar spent $1.63 $4.76 $1.25 $3.20 $2.69 Annual compounded interest rate 10.32% 36.62% 4.53% 26.16% 21.93% All (5) In Step 7, I used two different methods to express the return on investment in ETIP: i) on a per dollar spent basis and ii) on an annual compounded interest rate basis. i) Per dollar spent I estimated the return based on a per dollar spent basis by dividing the estimated change in the participants income due to ETIP by the cost of ETIP. I estimated the return on the four sessions to be about $2.69 of increased in participant income for every dollar that was spent on the program. ii) Annual compounded interest rate I estimated the return based on an annual compounded interest basis by calculating the annual interest rate that a bond would have to earn to provide the same return as ETIP. I estimated that that interest rate would have to be 21.93% annually over a five year period. By way of comparison, investors should expect, according to Warren Buffet, a six to seven percent return in the stock market. 16 16 As quoted in http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1.nedmy8deu (last accessed September 9 th, 2015). 11-Sept-15 Page 15
Conclusion I estimated the return on investment in ETIP was about $2.69 of increased in participant income for every dollar that was spent on the program and equivalent to a return of 21.93% annually over a five year period. I believe that ETIP provides significant private and social contributions to society. It appears to have been quite successful in goals to speed the process at which its graduates acclimatize to the Canadian workplace, adapt their technical skills to Canadian standards and practices and build social and business networks. I believe my estimates of the net benefit of ETIP are quite conservative for a number of reasons. These include my assumptions that: a. ETIP had no impact on the individuals on whom the EMCN had no employment information, b. The participants who were unemployed prior to entering ETIP would have become employed immediately had they not entered ETIP; and c. The participants would have earned the same as an immigrant ETT in Year 5 if they had not entered the ETIP program. In addition, it is quite possible that ETIP can have a long term impact on participant s earnings. For example, by kick-starting their careers, ETIP may provide its graduates with opportunities for promotions that they otherwise may have missed or for which they would have had to wait longer. 11-Sept-15 Page 16
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