Developing a Methodology for Costing the Impact of Digital Exclusion

1. Developing a Methodology for Costing the Impact of Digital Exclusion Dr Leandro Carrera and Chris Gilson LSE Public Policy Group

2. Structure of this presentation • Identifying the digitally excluded • Estimating the ‘benefits foregone’ of digital exclusion • What would tackling Digital Exclusion cost the government? • Applying a cost-benefit analysis to assess the feasibility of tackling digital exclusion • Conclusions

3. 1. Identifying the digitally excluded

4. 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

5. 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

6. 2. Estimating the ‘benefits foregone’ of digital exclusion

7. Conservative estimate of total benefits forgone for citizens who are digitally excluded

8. Estimated benefits forgone for government

9. Estimated benefits forgone for the economy

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 3. Estimating the costs for government of tackling digital exclusion

17. Estimating the costs of a government initiative to tackle digital exclusion

18. Costs to govt per group per year for providing online access

19. Maximum total benefits obtained from digitally including all groups

20. Benefits per group per year in providing online access

21. 4. Assessing the feasibility of tackling digital exclusion

22. 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

23. The Net Present Value of fully tackling digital exclusion

24. 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

25. 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