NFG Jobs Toolbox: A Funder's Guide to Jobs

Background and History

Neighborhood-oriented employment programs can be traced back to the early 1900s, when urban settlement houses helped new immigrants assimilate to American life. The recent history of neighborhood workforce development goes back to the early 1960s when Philadelphia's Reverend Leon Sullivan began a youth employment service at his Zion Baptist Church. 

Frustrated with employers who discriminated against African-American job seekers, Sullivan and other ministers organized boycotts against those businesses. As job opportunities were offered in response to this pressure, his youth employment program eventually evolved into the Opportunities Industrialization Center (OIC), a nonprofit organization providing job placement and skills training for youth and adults. The OIC model was replicated in a number of cities and eventually became a network of over 100 centers throughout the United States. 

The War on Poverty

Another early impetus for workforce development programs was the federal Economic Opportunity Act of 1964 (EOA), the cornerstone of President Johnson's War on Poverty. Many of the local Community Action Programs (CAPs) funded under the EOA conducted neighborhood-based employment and training programs. The EOA also prioritized the "maximum feasible participation" of local neighborhoods in program design and implementation, which introduced notions of community input, governance and control. In the late 1960s, community development corporations (CDCs) began to take root, with funding from the Office of Economic Opportunity. The early CDCs often included employment and training programs as part of their strategy to rebuild the economies of distressed neighborhoods, building the community infrastructure for job-related services. 

During the late 1970s and 1980s, CDCs gradually moved away from job strategies and concentrated on affordable housing production. Several factors drove this transition. First, federal affordable housing funds became more abundant, while workforce development funding shrank and became more restrictive. Another factor was research and anecdotal experience suggesting that CDCs were most successful as affordable housing producers, somewhat less successful as commercial and industrial real estate project developers, and least successful in economic development activities.12

The Move to Housing Production

Consequently, "conventional wisdom" developed that CDCs were most competent as affordable housing developers; therefore, they should specialize in housing production. The support systems that emerged during this same period - intermediary groups such as Local Initiatives Support Corporation (LISC) and Enterprise Foundation, in conjunction with federal tax credits, helped perpetuate this housing focus. In the process, "community development" was redefined in the minds of many policymakers as affordable housing development, not economic development. 

Interestingly, the early focus of federal workforce development programs was not poverty. When Congress passed the Manpower Development and Training Act (MDTA) in 1962, its major concern was "structural unemployment." Policymakers perceived that old industries were dying and new industries were taking their place. Consequently, federal resources were marshaled to re-train workers for new jobs in new industries. 

Focus on the Private Sector

In the early 1970s, the Comprehensive Employment and Training Act (CETA), with its explicit focus on poverty alleviation, superseded the MDTA. CETA was, in turn, superseded by the Job Training Partnership Act which focused on low-income people, and gave a much more prominent decision-making role to the private sector. In addition, JTPA created a new local governance structure (the Private Industry Councils or PICs) and eliminated public sector employment, a core element of CETA. 

The Workforce Investment Act of 1998 is the most recent overhaul of federal employment and training programs. This new law makes four fundamental changes: 

  • Consolidation of numerous federal funding programs into three block grants to states and local government; 
  • Stronger employer control over local workforce systems; 
  • Consolidation of services into "one-stop" centers; and 
  • Creation of "individual training accounts" that provide training vouchers individuals can use to pay for needed programs and services.
The creation of "individual training accounts" significantly changes job training program financing, although the extent to which vouchers are employed will vary from state to state. Vouchers, which give program resources directly to trainees, are an alternative to PICs contracts with training providers. In each state, training agencies must now be approved by the governor in order to be eligible to receive vouchers. This new provision could affect the status of neighborhood-based nonprofits within the workforce development system. While post-secondary institutions' participation is now automatic, the ability of other agencies to receive vouchers (and hence, financial support) is a matter of state and local discretion. 

In 1999, the federal Department of Labor is expected to publish interim regulations for implementation of the new Workforce Investment Act. Many state governments expect to make the transition from JTPA to the new program by summer 1999, although the federal deadline is July 2000. 

Making Workforce Development Programs Effective

These major transformations in workforce policy have come about in part because of dissatisfaction with past programs. The substantial body of literature about workforce development presents a discouraging picture of its effectiveness. Some of the basic conclusions are: 
  • Workforce program participants generally do show gains in income, as measured in annual income. But, when compared to a control group, these gains are modest, and they tend to wash out over time. 
  • The number of people served is small compared to the need. Historically, JTPA serves less than two percent of those who are eligible each year. 
  • Most workforce programs make short-term, shallow investments in people and yield marginal results. Many programs seek only to minimize the cost-per-placement ratio. 
  • Efforts to minimize cost have led to "creaming" - that is, serving those who are job-ready (and, hence, easily placed), rather than those with more difficult problems. 
  • Private employers tend not to use or trust the governmental labor force development system because they do not believe it performs very well. 
  • Employment and training agencies are seldom well connected to employers or good information about employment and hiring trends. 
  • The system as a whole is complex and fragmented, involving dozens of programs, funding sources and institutions. The client's challenge is navigating the system to find real assistance.
These findings have contributed to a sense of frustration about workforce development programs and a desire to change them. The changes brought about by the Workforce Investment Act create the opportunity to confront ineffective programs and try new approaches. As some of the less productive aspects of JTPA are swept away, foundations have the opportunity to combine restructured federal financing with private resources to create effective neighborhood-based programs. 

Philanthropy's Role in Creating Effective Programs

An encouraging number of neighborhood-based employment and training programs have proven effective. However, funding patterns have shaped the scale and distribution of these initiatives around the nation. While neighborhood programs have proliferated in some cities and rural communities, they are lacking in others. Generally speaking, the pre-condition for neighborhood-based workforce development has been the availability of funding from public or philanthropic sources. 

Under JTPA, PICs determined federal funding allocation. Some PICs chose to contract-out employment services to neighborhood-based agencies, while others centralized services in a handful of city-wide agencies or provided services with in-house PICs staff. Similarly, philanthropic resources have not been evenly distributed among communities. In communities with foundations, United Ways or other institutions committed to neighborhood-focused employment, there is a much stronger infrastructure. 

Many of the strongest and most innovative workforce development efforts have been initiated by neighborhood-based or other nonprofit organizations. Project QUEST, STRIVE, the Center for Employment Training and Detroit's Focus: HOPE are described later in the Toolbox. Other noteworthy initiatives include Boston's CityYear, Savannah's Youth Futures Authority, and YouthBuild USA. 

Nonprofit initiatives generally surpassed PICs-sponsored counterparts because JTPA placed many constraints on funding. To meet JTPA performance standards, PICs-sponsored agencies tended to cream clients and emphasize process over program outcomes. These standards allowed little room for innovation, experimentation - or error. 

Philanthropic dollars, intelligently invested, give organizations the opportunity to experiment, make mistakes, undertake a wider range of services (including more costly ones), and learn and grow. Even organizations receiving most of their funding from federal or public sources, benefit immeasurably from the additional flexibility afforded by philanthropic funding.

12 For example, Neil S. Mayer. Neighborhood Organizations and Community Development: Making Revitalization Work. Washington, DC: The Urban Institute Press. 1984. 
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