Closing the skills gap with the Pay-for-Success Act


At a time when federal dollars are stretched thin, we need to shift to models that pay for outcomes, rather than paying for services that may or may not be working. This is the type of approach that can and should apply to a range of government services. It’s also the type of approach Republican Sen. Rob Portman and I took when crafting the recently passed Pay-for-Success Act — which works to make federal job training programs more effective and responsive to what employers want.

When I meet with business owners from all across the state, from the Western Slope to the San Luis Valley, from large manufacturers to small information technology companies, there is one thing that they have in common: a challenge finding workers with skills that match their business needs. At Western Slope Industries in Grand Junction they stressed how difficult it was to find employees with the proper training. Diversified Machine Systems in Colorado Springs is rapidly expanding with high customer demand, yet they are not able to hire qualified employees fast enough. In Loveland, Leed Fabrication’s need is so great they had to build their own training facility.

It’s not that there aren’t enough workers, it’s that they aren’t trained in the fields that are hiring. This problem, commonly referred to as the “skills gap,” is driving unemployment and stifling economic growth in Colorado and across the nation. A 2011 report found that 74 percent of manufacturers are experiencing workforce shortages or skills deficiencies that are significantly hindering their ability to expand operations and improve productivity. They aren’t alone. Employers across the country — particularly in the information technology sector and throughout other high growth industries in this economy — are facing a lack of skilled workers, even as tens of thousands of Coloradans continue to look for work.

The Pay-for-Success Act creates a new model for workforce development that helps address this problem and close the skills gap by improving federal job training programs. State and local workforce boards will now have the flexibility to enter into contracts with job training providers who will be reimbursed for their services only if they deliver on agreed-upon outcomes.

For instance, a Colorado job training provider tasked with training a certain number of workers to fill high-need positions in a specific region or a rapidly growing industry would not be paid if the jobs aren’t filled. The result is workforce development training that is more aligned to regional needs and employer demands.

In Colorado, roughly 10 percent of core federal job training funds, or $3.24 million, will be available for workforce boards to steer toward these innovative type of pay-for-success contracts. This will help state and local workforce boards better serve the roughly 9,000 Coloradans that use their services to gain new skills to get back to work.

The Pay-for-Success Act is the type of model that promotes innovation by rewarding results and penalizing complacency. This commonsense reform ensures that job training programs are more responsive to the needs of employers and are preparing more workers for a 21st century economy.