The decline in economic mobility in the US demands bold, innovative solutions to get more people into stable, well-paying jobs. But when such efforts are pursued in isolation — by governments, employers, job training providers, or other stakeholders — the risks land disproportionately on the shoulders of workers, who are often forced to use their own limited time and money for training programs that may not lead to a better job. The challenge is made more acute by the rapid rise of artificial intelligence and other technologies transforming the American economy.
Leaders across the US are piloting innovative ways to fund workforce development that shift risk and share responsibility. These models are generating measurably better outcomes for workers, employers, and their communities.
In July, our team at the Social Finance Institute collaborated with the regional Federal Reserve Banks of Atlanta, Chicago, Philadelphia and Richmond to release a new volume of Workforce Realigned, a collection of case studies exploring how outcomes-based partnerships and innovative finance approaches can reorient our workforce to meet the needs of workers, employers, and communities. Volume II builds on the original 2021 volume, with 21 examples from nearly a dozen states, led by a range of public, philanthropic, and private-sector leaders.
Each chapter has a different author or set of authors. Collaboration, incentives, and community engagement form common threads throughout the book. As many of the authors observe, it is more essential than ever to build a strong, supportive, and sustainable ecosystem that connects employer-relevant training with emerging talent. The most compelling examples bring employers into the funding equation, by tying the financing of skills development to successful hiring and retention of the workers who are trained.
Building an employer-backed nursing pipeline
The ReNEW Fund, for example, is helping to address the nationwide nursing shortage – as detailed in a chapter co-authored by Western Governors University president Scott Pulsipher and Central Health’s Jeannie Virden.
The fund provides zero-interest loans to Western Governors University nursing students with repayment terms tied to outcomes. Employer partners like the Central Health hospital system hire these nursing graduates and make payments into the Fund on the nurse’s behalf over a three-year period; if the nurse leaves the employer partner before the end of the three-year period or accepts a job elsewhere that pays more than $60,000 annually, the nurse makes the payments into the Fund instead.
The recouped funds benefit nurses in future cohorts, ensuring a pipeline of well-trained nurses for health care systems that might otherwise struggle to hire or retain enough nurses to meet community needs.
Zero-interest loans for training – with wraparound student support
Google’s Career Certificate Fund offers another illustration of the value of recycling repayment capital. The fund’s zero-interest loan products cover costs for learner-workers enrolled in skills-based training. Learners repay the loan, with no interest, if they land a job earning a minimum amount, with the repayments funding new learners. Crucially, the fund works with training providers that offer wraparound support to their enrollees, such as counseling services or living stipends, in addition to job-specific technical training.
The $100 million fund was capitalized with a mix of grant funding from Google.org and debt financing from Google Treasury. As Grow with Google founder Lisa Gevelber wrote in the chapter, Google recognized that successful programs include both skills development and tangible support to individuals during training.
“It would be hard for traditional philanthropy to scale up enough to deliver on the opportunity,” she writes. “This ushered in the question: How could we use philanthropy as risk capital to invite nontraditional pools of capital into the workforce development arena and reach scale sustainably?”
Pay for performance in Philadelphia
In Philadelphia, the workforce training nonprofit The Skills Initiative launched an employer-financed pay-for-success initiative. Participating companies pay a service fee that is tied to their retention of employees trained through the program – rewarding outcomes while providing future funding to invest in workers.
As detailed by CEO Cait Garozzo, who co-authored the chapter along with the Philadelphia Federal Reserve Bank’s Ashley Putnam and PhillyWorks’ Tyrone Hampton Jr., the fees represent “a strategic hiring approach that generates tangible cost savings, productivity gains, and long-term workforce stability. High turnover rates cost companies thousands of dollars per employee, with expenses tied to recruitment, onboarding, lost productivity, and retraining.”
Employing formerly incarcerated or unhoused workers
Staffing agency and social enterprise First Step Staffing leverages philanthropic capital with fee-for-service contracts with employers to fund its work serving people who are formerly justice-involved or unhoused – workers who are typically not placed by for-profit staffing firms.
In a collaboration with San Bernardino County, First Step Staffing was paid up front to place job candidates referred from the county’s social services office, with a clawback provision if agreed-upon outcomes were not met. The organization successfully placed more than 2,000 people. Given the organization’s focus on some of the hardest to employ, scale is a necessity for impact.
As First Step Staffing CEO Amelia Nickerson writes in her chapter, “Governments and philanthropists are often wary of committing to programs that will require continual infusions of capital. Social programs such as FSS that can generate sufficient revenue to cover their operational expenses and require only startup capital present a cost-effective way of expanding high-quality programs.”
Reimagining workforce development
From social enterprise staffing agencies to “talent finance” initiatives that blend funds and recycle capital through outcomes-based repayments, to employer agreements to repay training costs after they successfully retain trainees they’ve hired, Workforce Realigned, Vol. II offers models for practitioners and policymakers who see the gaps in the existing system and want to reimagine job training for the 21st century.
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Meg Massey is the director of policy and communications and David Socolow is the head of policy at Social Finance Institute. Find the full volume at workforcerealigned.org.
