Job training that’s free until you’re hired could be a blueprint for Biden
Bill Barber saw an ad on Facebook last year for American Diesel Training Centers, a school in Ohio that prepares people for careers as diesel mechanics. It came with an unusual pitch: He would pay for the schooling only if it landed him a job, thanks to a nonprofit called Social Finance.
After making sure it was not a scam, he signed up. After going through the immersive five-week program, he got a job with starting pay of $39,000 a year — about $10,000 more than he made before as a cable TV installer.
“I figured this was my best opportunity to succeed,” Barber, 23, said.
American Diesel Training is part of a new model of workforce training — one that bases pay for training programs partly on whether students get hired. Early results are promising, and experts say the approach makes far more economic sense than the traditional method, in which programs are paid based on how many people enroll.
Right now, there are only a relative handful of these pay-for-success programs that train low-income Americans for betterpaying careers. The challenge has been to align funding and incentives so that students, training programs and employers all benefit.
But Social Finance, founded a decade ago to develop new ways to finance results-focused social programs, is showing how the idea could grow quickly just as the pandemic made job-training programs more important than ever. The coronavirus put millions of people out of work, upended industries and accelerated automation.
State and federal officials are now looking for new ways to improve workforce development. President Joe Biden’s $2 trillion infrastructure and jobs plan, announced last week, includes billions for workforce development with an emphasis on “next-generation training programs” that embrace “evidencebased approaches.”
The Social Finance effort is powered by a fund of more than $40 million raised from philanthropic investors. The money goes toward paying for lowincome students, as well as minority candidates and veterans, to enter the training programs. The group is not related to the online lender SoFi.
Social Finance is advising Ohio on pay-forsuccess programs and is in talks with several other states. The financing arranged by Social Finance from investors is called a career impact bond, while the state-backed initiatives are called pay-it-forward funds — since payments from job-holding graduates help pay for new students.
Social Finance is also preparing a proposal for the new labor secretary, Martin Walsh, recommending that the federal government provide matching funds to accelerate state programs.
A few nonprofits have a track record of lifting lowincome Americans into higher-paying jobs, including Year Up, Per Scholas and Project Quest. But there are too few of them, and they struggle for sustainable financing.
Social Finance is seeking, designing and supporting new programs — forprofit or nonprofit — that follow that training formula but then apply a different funding model.
“The goal is to create a tool for impact, to get more people on the economic escalator,” said
Tracy Palandjian, cofounder and CEO of Social Finance.