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Pay For Success In Workforce Development


3/19/2014

New report from the Nonprofit Finance Fund explores new funding model and its application to skills training.

Pay For Success is a funding model in which private investors pay to implement a social service program and are then reimbursed by government agencies when the program has been successful. Rather than pay initial up-front costs, government agencies only pay when the predetermined goal has been achieved.

For the past three years, interest in the Pay for Success (PFS) concept has grown considerably in the United States, and, in June 2012, the US Department of Labor announced a new grant competition for workforce related PFS projects. With so much interest in these types of programs, the Joyce Foundation and Nonprofit Finance Fund convened those around the country who have developed or attempted to develop PFS projects to support workforce development goals to share lessons learned from a broad range of topics and identify opportunities for growth within workforce development. Findings from this convening were published in the newly released “Pay for Success in Workforce Development: What We’ve Learned and What’s Next."

The report identified five key lessons learned from initial PFS programs

  1. Early efforts have focused on projects and models that have a track record of success.
  2. The two projects funded by the US DOL shared certain characteristics with each other including support from state governments and momentum, proven programs with rigorous performance data, intermediary involvement, and complementary goals such as reducing recidivism and increasing employment.
  3. The workforce development community lacks a common agreement on long-term, outcome/impact metrics necessary for PFS projects
  4.  Investors - whether an individual or philanthropy - have diverse reasons for supporting PFS projects, but share a preference for solid due diligence and a “hands-on” approach to project development
  5. Government interest in PFS programs catalyzes activity.

To see PFS programs grow within the workforce development field, the report called for increased capacity buildings, increased flexibility for the design and implementation of PFS programs, and continued support from the government and philanthropy.

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