Process Study of the U.S. Department of Labor’s “Pay for Success” Pilots
- The Department of Labor (DOL) tested the use of the Pay for Success (PFS) approach for providing employment services to ex-offenders and parolees.
- Abt Global conducted a process study to examine the implementation and operation of two PFS programs, which would provide returns to investors if the pilots met employment and recidivism targets.
- The study found the pilots operationalized the complex partnerships needed to carry out their initiatives. However, the pilots did not detect impacts on participants’ employment or recidivism outcomes, and investors did not request payment from DOL.
The U.S. Department of Labor (DOL) tested the use of a Pay for Success (PFS) approach for funding and evaluating employment services. Under the PFS model, private and philanthropic investors cover the up-front costs of delivering an intervention. Then the government or others reimburse investors for those costs, providing potentially significant returns on the investment if programs meet specified outcomes or impacts as determined by a rigorous evaluation.
The theory was that the PFS approach could improve participant outcomes and provide corresponding government budgetary savings. PFS potentially offers a way to fund services that might otherwise be difficult because of limited budgets and to enable evidence-based practices to be scaled up, thus improving outcomes for people and communities. Budgetary benefits could come from reduced programmatic costs, more efficient spending, and increased employment and reduced recidivism, which would mean more tax revenue and reduced public expenditures.
These grants were the first effort by a federal agency to support the PFS approach.
DOL awarded grants to the Massachusetts Executive Office of Labor and Workforce Development and the New York State Department of Labor to operate pilot projects to test the use of a PFS approach. The programs aimed to increase employment and reduce recidivism for newly released ex-offenders and parolees. Both state governments committed their own funds to the project and hired an intermediary to develop and manage the project and seek investments from the private sector and philanthropies.
Abt Global conducted a process study to examine and document the implementation and operation of the two PFS pilots and provide information on the PFS approach to policymakers and program administrators.
The project used site visits and document reviews to detail the services the pilots provided to participants through the PFS interventions, the implementation and management of the evaluations, and the evaluation results, including whether the pilots met target outcomes.
The experiences indicate that the two pilots developed and operationalized the complex partnerships needed to carry out their initiatives, including implementing rigorous evaluations of the interventions. However, the pilots did not detect impacts on improved employment or recidivism outcomes, and investors did not request payment from DOL.