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

Structure of this presentation 1. Identifying the digitally excluded 2. Estimating the ‘benefits foregone’ of digital exclusion 3. 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 Elderly and disabled Educationally Disadvantaged (Employed/Basic Education) Total

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 Probability of missing JSA payments due to lack of information 6413 Missed savings from being unable to compare prices online Elderly and disabled Missed savings from being unable to compare prices online Greater costs incurred through potentially unnecessary GP visits 2.55 Delay in receiving attendance allowance through lack of information Educationally Disadvantaged (Employed/Basic Education) Missing out on opportunities for promotion and for better paid jobs through lack of 'digital' skills 9951,855 Missing out on the positive pay and promotion consequences through e- learning Missed savings from being unable to compare prices online Total 3,824

Estimated benefits forgone for government Initiative Total Benefit (£ million) Low Income Unemployed Reduced admin costs through placing JSA online 9 Elderly disabled Savings to NHS for reduced number of potentially unneeded elderly GP appointments 12 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 Initiative Total 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. /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. 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 online Cost of providing internet access Elderly and disabled Cost of providing internet access ,423 Educationally Disadvantaged (Employed/Ba sic Education) Extra-provision of e- learning courses Cost of providing internet access ,253 Total Costs 1, ,775

Costs to govt per group per year for providing online access

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 ,0871,1233,824 Benefits to Economy ,0952,767 Benefits to Government Total Benefits ,0652,2196,631

Benefits per group per year in providing online access

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

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