Through the feasibility assessment, Year Up explored the potential of using Pay for Success to scale its youth workforce development Professional Training Corps program.
Sub-Recipient: Year Up
With more than 5.5 million young adults across the U.S. between the ages of 16 and 24 out of work, out of school, and/or without opportunities to enter the mainstream economy,[1] there is a strong need for programs that address challenges facing these youths. Year Up is a nonprofit organization whose mission is to close the opportunity divide by providing urban young adults with the skills, experience, and support that will empower them to reach their potential through professional careers and higher education.
Year Up brings a track record of generating positive outcomes for these youth, having served over 10,000 young adults and provided interns for over 250 corporate partners. The Professional Training Corps (PTC) intervention is a one-year, intensive training program, where Year Up partners with community colleges to provide low-income young adults with professional and personal development skills to place them on a viable path to economic self-sufficiency.
Motivation for Exploring Pay for Success
Year Up was motivated to explore Pay for Success (PFS) as an approach to scaling their PTC intervention by engaging outside funding sources and improving their evidence base, ultimately increasing educational and employment outcomes for young adults.
In addition to exploring the potential for the first PFS project in workforce development in the U.S., this feasibility assessment outlined how a potential partnership between Year Up and government could lead to a sustainable model for improving the lives of youth in securing lasting jobs. This project also presented an opportunity to demonstrate how a workforce service provider can accelerate its own success through innovative contracting models such as PFS.
Findings and Insights
The feasibility assessment determined that the upfront funding needed to launch a new PTC site can allow the program to become self-sustaining, after a certain period of time. The PTC model is scalable, requiring upfront startup funding but little ongoing subsidy to maintain operations once at scale, supporting itself through revenue associated with successful placements of Year Up participants at company internships.
However, in order to fully determine the feasibility of executing a PFS contract, Year Up must clarify additional information, including key aspects of the target population criteria that affect evaluation methods, the contracting environment of the jurisdiction for this project, and methods of accessing relevant databases that share baseline data on regional disconnected young adults. Upon further engagement with potential end payers (i.e., an entity that agrees to pay a provider for the results achieved), including the California Workforce Development Board, an end payer of interest, this project can continue to explore how government and/or other end payers can support innovative youth workforce development activities in their jurisdictions in a manner that will align with everyone’s interests.
The feasibility assessment allowed Year Up to develop a PFS value proposition:
Service providers interested in PFS must have a clear and compelling value proposition that includes both financial and social benefit to project parties.
- Financial. PFS offers an opportunity to scale Year Up’s PTC program by providing governments the ability to support youth workforce development activities in their jurisdictions with lower funding requirements following the initial startup phase. The baseline budget model created during this assessment indicates that it is economically viable to use PFS to develop multiple self-sustaining PTC sites. From a PFS lens, a service provider’s value proposition is magnified if it demonstrates an alignment of financial interest with project parties, such as an end payer.
- Social. Year Up has a strong evidence base that demonstrates the effectiveness of its historic core program, which is similar in nature to the PTC. However, the PTC is a newer model with a different set of resource restrictions, and therefore, a more limited track record. While not all PFS projects include interventions with long, evidence-based track records, it can be advantageous for a service provider involved in PFS to have an evidence base behind the program it is interested in scaling.Year Up’s primary goal is to help its students join the workforce immediately after graduation from its PTC program. To successfully engage potential end payers, Year Up needed to ensure that they would be able to align incentives. In this case, potential stakeholders, such as the California Community College system, may not have the same priority of goals and outcomes as Year Up. There is particular tension between the outcomes of matriculation to a 4-year college or university versus engagement within the workforce, as near term success in both arenas often cannot be achieved simultaneously. One way of ensuring that a service provider’s goals are aligned with that of a potential end payer is to spend time upfront clarifying outcomes of interest and the timeline to achieve them.
The feasibility assessment also spurred Year Up to identify changes needed to drive better outcomes for young adults. These activities included:
Tailoring Referral Pathway for Pay for Success
Year Up served a target population whose main challenges were manageable with the existing intervention design, screening out many youths with criminal backgrounds, ongoing substance abuse issues, and lack of basic educational readiness. Any service provider with such a rigorous screening process who hopes to become involved in PFS should, first and foremost, evaluate the feasibility of a performance-driven contract with the population it serves. The service provider should develop a consistent and replicable process for identifying and referring individuals into the program using knowable and objective criteria. Having a clear referral pathway with objective eligibility standards can assure project parties that individuals served by the intervention match the intended target population. Having these eligibility standards also allow the service provider to ensure that its target population is large enough to support a rigorous evaluation that includes a reasonable comparison group and specific enough to merit a directed intervention, both of which are essential for a PFS project.
Identifying & Securing an End Payer
The upfront funding to support a PTC site in this project would be provided by an end payer who is willing to support the model upon the achievement of successful workforce outcomes. When identifying an end payer, a service provider must think critically about a number of readiness criteria, specifically alignment of goals, control of resources, and availability of funds for a performance-based contract. In this project, Year Up and Third Sector chose to focus on the California Workforce Development Board, who had aligned goals of improving outcomes for low-income youth, had significant control of community college and workforce development resources at the state level, and implemented its annual federal funding pool in line with the Workforce Innovation and Opportunity Act, opening up funding streams for performance-based contracting opportunities.
It is crucial to engage a potential end payer early in a project to develop a strong value proposition, as this process can take a significant amount of time. Service providers must continue to build relationships with local political leaders to generate excitement around the financial and social benefits that result from PFS. These conversations can provide clarity on the amount of resources government may need to provide and verify alignment of the project characteristics with their mandates, values, and economics. They can also help Year Up and other service providers finalize other aspects of a feasibility assessment, including determining needed access to appropriate databases, clarifying key aspects of the target population criteria that affect evaluation methods, and understanding the contracting environment.
Next Steps
To prepare for a potential PFS project, Year Up should (1) conduct an evaluation that will demonstrate the evidence base of its PTC program, (2) refine a consistent and replicable referral pathway with knowable and objective eligibility standards, and (3) identify and secure potential end payers.
Partners
- Abt Associates provided evaluation and programmatic expertise around workforce development to Year Up.
- The National League of Cities used its expertise on workforce development to provide recommendations on how to position a PFS project to local and/or state workforce development boards.