| This is the last CSR Newsletter of the Spring semester. Have a great summer and I will see you in the Fall! |
The article in the url below outlines how a new nonprofit, Social Finance, is using impact investing to build an innovative approach to vocational training:
"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 wasn't 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."
The idea is that, rather than being rewarded for how many students enroll in a program or graduate from it, the training organization is rewarded based on how many students get well-paid jobs in their area of study:
"Right now, there are only a relative handful of these pay-for-success programs that train low-income Americans for better-paying careers. The challenge has been to align funding and incentives so that students, training programs and employers all benefit."
The nonprofit is backed by investors who purchase "career impact bonds," which raise the money needed to support the initial training:
"The Social Finance effort is powered by a fund of more than $40 million raised from philanthropic investors. The money goes toward paying for low-income students, as well as minority candidates and veterans, to enter the training programs. The group is not related to the online lender SoFi. It has supported four job training programs, including American Diesel Training, in the past year. It has plans to have double that number a year from now."
And the bonds generate a return once the students who get a job start repaying their training costs:
"The Social Finance income-share agreement with students ranges from about 5 percent to 9 percent depending on their earnings — less from $30,000 to $40,000, and generally more above $40,000. The monthly payments last four years. If you lose your job, the payment obligation stops."
What is most intriguing is that Social Finance is beginning to consult on how the model can be implemented at scale:
"Social Finance is advising Ohio on pay-for-success 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 J. Walsh, recommending that the federal government provide matching funds to accelerate state programs."
And the results so far appear to be promising. For example, in the case of American Diesel Training (based in Ohio and featured in the article), the funding model appears to provide an effective mix of incentives and rewards for the students and their trainers:
"The first group of Social Finance-funded students started the five-week course last September. There are now about 70 students in each course. That is about four times as many as a year ago. Social Finance pays American Diesel Training just over 60 percent of its fee initially. The rest comes later, after a student lands and keeps a job. … A total of 229 students supported by Social Finance have been enrolled. The graduation rate is nearly 100 percent, and 89 percent have jobs. Their average annual income is $36,500, and the average gain from income before the program is $12,400."
Take care
David
David Chandler
© Sage Publications, 2020
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
Greasing the Wheels of Opportunity
By Steve Lohr
April 8, 2021
The New York Times
Late Edition – Final
B1, B6
