The thriving stock market has hidden the wide gaps in the U.S. economy and growing labor markets are threatening a full recovery from the COVID-19 pandemic. Many low-income workers expect their jobs to never come back and are looking at the skills needed to enter the workforce “New normal”.
Economic empowerment through workforce development, education and upskilling programs is the tool needed after COVID-19 and racial inequality. While the decline of the COVID-19 has hurt workers across the labor market, people of color and those without a college degree have been feeling the pinch the most. This Brookings Institution study looks at the disproportionate decline in employment for Black and Hispanic workers, and argues for workforce programs that empower employees to change businesses and occupations.
There are many benefits to preparing people with the skills necessary to access high quality, sustainable jobs. The ‘skills gap’ referred to here, as “almost 40% of American employers say they can’t find people with the skills they need, even for jobs at entry level, ”according to McKinsey.
So the private sector has an opportunity to put capital to work and help make individuals retool and re-skill for the mobile labor market.
Three methods of investment
Here are three specific investment methods to empower unemployed individuals with the opportunity to develop and enhance their skills:
Social Finance is a non-profit organization that develops financing strategies to improve lives. The group has launched the Career Impact Bond, which brings together student-friendly income-sharing agreements and cover support to help individuals upskill or re-train. skills.
Tron Property UP, Social Finance is seeking to raise $ 40 million to $ 50 million to fund eight to 12 Career Impact Bonds. Currently, there are over 1,000 students enrolled in the four active Social Finance Career Impact Bands. With this model, investors provide capital to cover face-to-face training and support services for students that typically block access such as limited income and credit , immigration status, or involvement in the criminal justice system.
Those who gain employment after graduation repay a program as a percentage of their income over time. All parties sign a Student Rights Bill to ensure student protection, and repayment is limited to a certain amount of dollars over a set number of months with no extension. Unlike traditional education funding, those who do not earn are above a certain income threshold in any month during the term of the free repayment.
Over the life of the 10-year fund, Social Finance aims to prepare more than 6,000 students for careers in areas of demand such as IT and green energy.
Pursuit’s Bond 2.0 takes a similar approach but specifically focuses on technology training for low-income people without college degrees and blue-collar workers in New York City. Founded in 2011, Pursuit is dedicated to creating economic transformation by training less able adults with the skills necessary to become software engineers. The Pursuit Alliance is an intensive two-step, four-year journey that begins with hard training to build computer programming skills.
The program also assists graduates to complete their first jobs and provides career support and guidance over the first three years of employment. Affiliates range from making an $ 18,000 preprogram to over $ 85,000 post-programming, on average.
Over the past five years, Pursuit has trained more than 450 associates and generated more than $ 500 million in incremental salary benefits. To expand its reach, Pursuit is seeking $ 10 million in investment capital through its Pursuit Bond 2.0.
These funds allow Pursuit to double the number of members it serves each year and invest the capital raised to train, mentor and support allied societies in the future. future. Reimbursement for these services takes the form of income division agreements where students return a percentage of their salary based on their income. The income sharing payment term is 48 months and expires, meaning those who do not get paid work do not pay well.
Pursuit offers a 10-year investment opportunity with annual interest payments. Over the tenure of this fund, Pursuit hopes to generate more than $ 1 billion in lifetime wage benefits among its futures. Historically, 100% of Pursuit members come from low-income numbers; half are female, 70% are black or Hispanic, 40% are immigrants, and 60% do not have a bachelor’s degree.
Top-down model
Achieving Colleagues’ Putting America Back into Labor Funds also uses a unique approach to close America’s skills gap. While Social Finance and Pursuit focus on student training, Achieve Partners is targeting the employee industry to close the link between an individual and an employer. The Partner Achievement module aims to establish new “employer down” pathways to good jobs, rather than the “education up” model which begins with developing the skill set of the prospective employee.
Putting America Back to Work Partners Fund seeks to acquire up to 10 mid-market business services and workforce companies in technology and healthcare where clients are short of talent. Through its final Mile Training module, Achieve equips these businesses to provide entry-level training and development for potential candidates, and then puts these skilled newcomers into businesses with skills gaps. are clearly marked. Achieve makes this approach work by adding new business activities to the companies it acquires, including talent discovery, screening, “last mile training,” and action. transformational sales.
The Achieve team believes the benefits of a down-to-employer apprenticeship model are clear for both portfolio companies and their applicants. In addition to upside funding, the fund seeks to put 100,000 Americans into high-end jobs in growing sectors, with starting salaries at $ 50,000.
Over the past 12 months, the country has been watching COVID-19 plunder the health and economic security of millions. The recent rapid rollout of vaccines hopes the end of the pandemic is yet to be seen, but economic consequences are far from over. Investment funds that support the most disengaged people with the skills necessary for long-term success offer a unique approach to a meaningful economic and labor market recovery.
Adam Rein is a co-founder and president of CapShift, an impact investment platform, and managing director for MissionPoint Partners, an impact consulting and asset management firm. Charlotte Cipolletti is director of impact investments at CapShift. The authors or their company has no investment in any of the companies mentioned in this statement.