Massachusetts Pathways to Economic Advancement - A Next Generation Pay for Success Project

Published Wednesday, August 30, 2017 | by Jewish Vocational Service, Social Finance

Quick Facts

Issue Area

The recently launched Massachusetts Pathways to Economic Advancement project aims to improve the lives of 2,000 immigrants and refugees in Greater Boston. It also represents an evolving approach to Pay for Success.

In June 2017, Jewish Vocational Service (JVS) and Social Finance launched the Massachusetts Pathways to Economic Advancement Pay for Success project (MA Pathways). This $12.43M initiative seeks to help 2,000 immigrants and refugees in Greater Boston progress up the economic ladder through vocational English classes, integrated with job search assistance and coaching. This Pay for Success (PFS) project is the first globally to focus exclusively on workforce development for immigrants and refugees.

 According to a recent MIT report titled “Boston’s Immigrants: An Essential Component of a Strong Economy," many industries in the Boston area are heavily dependent on immigrants. Immigrants constitute over 20% of the workforce in 18 industries, and immigrants make up almost 30% of the adult working age civilian population in the Greater Boston area. With the Massachusetts economy near full employment, immigrants also make up a growing source of its labor force: 54% of working age people moving into the Boston area in 2015 were immigrants.

However, as Dr. Osterman notes in the MIT report, immigrants face many challenges as they seek to enter the workforce in Boston. Thirty eight percent of immigrants reported that their English language skills are poor and 40% of immigrants have no more than a high school education. In these uncertain times, JVS and Social Finance are proud to be investing in a population that critically contributes to Massachusetts’ economy. With over $12M in capital from 40 impact investors, JVS gains access to flexible funding to provide increased access to services, meet the needs of more adult learners, and fuel our collective prosperity.

The MA Pathways project builds on lessons learned in Pay for Success, a concept that was introduced in the United States in 2011, and introduces several innovations that are new to the field:

Multi-track program, with customized evaluations, provides multiple pathways to outcome payments. JVS’s theory of change centers on its ability to deliver the right services, to the right people, at the right time in their lives. As JVS has learned from over 80 years of on the ground experience, complex life situations can hinder successful program completion. In response, JVS proposed a multi-track program, customized to client needs, to ensure that those who seek services are able to fully engage in a program that puts them on a path to success. These services reflect the varying skill levels of English language learners: from Rapid Employment for low-level English speakers with little to no job experience in the U.S. to Bridges to College, which is designed to launch higher level English speakers into higher quality jobs and the knowledge economy.  

In defining success for a multi-track program, we sought to streamline how we measure outcomes for the project (i.e., for three of four program tracks, measuring whether participant earnings increased two years after enrolling in JVS), but vary the measurement methodology based on each program track goal. Skills Training, for example, which focuses on moving adult learners into better paying jobs, will look at what a participant earned post-JVS relative to what they earned prior to enrolling, whereas English for Advancement, most analogous to other government-funded English programs in the Commonwealth, will assess how JVS participants are performing relative to a control group of similar individuals who did not receive JVS services. This allows the project to measure success in a manner that reflects program intent and JVS’s theory of change, represents meaningful indicators of success to Massachusetts, and gives investors multiple pathways to outcome payments.

Includes increased participant earnings as an outcome. To date, Pay for Success projects have focused on costs averted, but the MA Pathways project shows that projects can capture the value of revenue generation as well. Unique to this project, and to the PFS field, is the project’s focus on increased participant earnings over time, and the associated fiscal and social value for the Commonwealth of Massachusetts from employing adult learners and helping them transition into higher education.

Studies show that on average, adults with limited English earn $24,000 less annually than individuals with similar credentials who are fluent in English. Improved access to high-quality education programs can help adults in need gain the language and job skills necessary to achieve economic advancement, with ripple effects for households and society at large.

Establishing a track record grounded in government data reduced the risk profile of the project. At the core of PFS is a focus on evidence and scaling what works. In this project, Social Finance cross-referenced JVS data and wage and college credit data from Massachusetts to independently build a track record for JVS programs. This enabled us to project program performance by using localized data and replicating the measurement that will be performed during project implementation. Ultimately, this equipped us to build a clear and compelling investment thesis for the 40 investors who participated to support the project.

Rapid feedback loops can generate scalable learning to inform policy and future funding initiatives. Quarterly measurement and payment points will provide a rapid flow of information to facilitate continuous improvement of JVS program services and lower cost of capital for investors and government alike. We worked with three Commonwealth agencies – finance, labor and workforce development, and education – to design a project informed by the Commonwealth’s priorities. In engaging our government partners early and often, we set up a cross-agency working group that will persist into project implementation, and inform Massachusetts’ interagency “Workforce Skills Cabinet” as it infuses an outcomes focus into the Commonwealth’s workforce systems. We hope that by setting up cross-agency data flows, and convening stakeholders across government to discuss shared outcomes of interest, PFS can bring systems change to measurably improve the lives of Commonwealth residents.

Unlocking capital from new investor partners, including donor-advised funds. PFS taps into private capital to move the needle on pressing social challenges. This project represents the second time that a PFS financing was structured as an equity offering, providing broad distribution through existing mainstream capital markets. This allowed individuals (like those who donate through Combined Jewish Philanthropies’ donor-advised funds) to invest directly in the project, alongside institutional investors new to PFS (like Prudential Financial and Maycomb Capital). Scalable access to capital markets will go a long way in helping cornerstone organizations, like JVS, access the capital they need to deliver impactful human services.

We look forward to sharing lessons learned to others designing PFS projects, and further evolving this innovative multi-sector approach for social impact.