Innovative Ways to Finance Workforce Development

A new paper by senior community and economic development adviser Stuart Andreason examines innovative ways for programs to attract new capital to workforce development programs. Training efforts have been challenged in recent years because of rapidly changing, and often declining, federal funding. New workforce development programs, including sector partnerships, frequently have difficulty matching their programs to existing federal funding. These programs must turn to philanthropic and business investment to fund their training programs, which can be a limiting factor as programs look to scale.

Several new models of financing could help to attract new returns-seeking investment to workforce development programs. In "Financing Workforce Development in a Devolutionary Era," the author discusses the potential of new incremental bonding on unemployment insurance or payroll taxes, social impact bonds, and income-share agreements as ways to drive new investments into workforce development.

The states of Missouri and Iowa have developed programs of incremental bonding revenue to train workers in large plant locations. Social impact bonds across the country have included components of workforce development, but haven't solely focused on these programs; a number of projects may focus directly on workforce development in the near future. Income-share agreements have been promoted as a way to finance college education, and they are likely applicable to workforce development programs as well.

These three models, among others, could provide opportunities for new investments in workforce development, help to scale effective workforce development programs, and broadly help to expand the funding available to the workforce development system.