Many of the low-income employees who lost their jobs when white-collar workers stopped commuting may never get those jobs back, according to some economists, who point to COVID’s lasting impacts on the labor market. Now a national initiative by Social Finance, a Boston-based nonprofit cofounded by Tracy Palandjian (MBA 1997), could create a lifeline for many of these low-wage workers, according to an article in the Boston Globe. Social Finance’s pilot program helps train low-income people for jobs that are in high demand. Individuals pay nothing up front for the training—and they pay nothing at all until they succeed in surpassing a certain income threshold.

The Globe article offers the example of Jeo Tovar, a 35-year-old father of three who earned about $30,000 a year as a personal trainer before the pandemic. “There’s no way I’m going back into a gym,” he says. Instead, Tovar enrolled in a four-month user-experience design course underwritten by Social Finance, which also provided access to emergency funds for basic necessities such as food, housing, and child care, as well as access to a social worker and job coach. Tovar doesn’t have to repay the $15,000 tuition until he lands a job earning at least $40,000 a year. Salaries for the kind of software jobs he’s aiming for pay about double his previous salary.

“The training is funded by ‘career impact bonds,’ drawn from a $40 million fund provided by philanthropic investors who care more about making a difference than getting rich, Palandjian said. Investors face a risk if students don’t find jobs and are unable to pay what they owe, but they also get the reward of seeing the good their money is doing, via a quarterly report detailing job-placement rates and average earnings,” Katie Johnston writes in the Globe.

“Instead of traditional loans, these programs use income-share agreements that are repaid based on future salaries, with graduates earning higher wages subsidizing the cost for those not working or making less. Graduates making at least $40,000 a year pay back 10 percent of their salary for 48 months, or until they reach a cap of $22,500. The hope is that a large share of participants become high enough earners to compensate for those who don’t have to pay—and to generate a modest return for investors.”

“This is hopefully a tool to help people take that reskilling journey with no risk to them,” CEO Palandjian says. “And they only repay if their lives are much better than before.”

The full article, which may be behind a paywall, can be found on the Boston Globe site.

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