A Jobs Program Broke the Rules to Succeed. Now the Rules May Change.

Pursuit, a nonprofit job-training program in Queens, was in trouble.

After months of back and forth, the New York State Department of Education sent the nonprofit a sharply worded letter last year warning that it would be hit with a cease-and-desist order, and possibly criminal prosecution, unless it quickly overhauled its program to conform to the agency’s school requirements.

“It was scary,” recalled Jukay Hsu, Pursuit’s co-founder and chief executive. “It felt like staring into the abyss.”

While small, Pursuit has a track record of success, helping to lift low-income workers into good-paying jobs as software engineers. Experts say it is at the forefront of emerging trends in upward mobility programs for low-income Americans.

But Pursuit’s innovation was nearly its undoing. Its model of coursework, mentorship and financing does not look like a traditional school. Its technical instruction is constantly updated to meet employers’ needs and tailored to individual learners. And Pursuit teaches “soft skills” like communication, teamwork and resilience.

At the time, Pursuit was seeking approval from the state’s Department of Labor to become a certified apprenticeship program for software development. It aimed to be another path to opportunity for its students, whom it calls fellows.

After discussions between the two agencies, the Department of Education agreed to step aside, said Betty A. Rosa, the state education commissioner. The Department of Labor took a more flexible stance, not requiring fixed courses and tuition payments of the traditional school model.

Since the unnerving experience, Pursuit has made a convincing case to state policymakers for something more than a one-time fix. Legislation was introduced this week in both the New York State Senate and Assembly to define rules and consumer safeguards for nontraditional work force programs like Pursuit.

The broad goal is to stimulate the creation and growth of programs proven to help low-income workers climb the economic ladder. The approach, forged mainly by a handful of nonprofits, is to deliver not only training but also good-paying jobs.

To expand such programs, the legislation also seeks to attract more funds to work-force development, including from private investors willing to accept modest profits from ventures focused on societal challenges. The money to repay investors would come largely from successful graduates paying a share of their salary for a few years.

Pursuit has honed that pay-for-success formula. The key, experts say, is to make sure payments are reasonable and only begin if a person gets a good job.

The legislation, for example, stipulates that graduates of approved programs would not owe anything unless they get a job that pays $50,000 or more.

“If we do this correctly, and it’s successful, it could become a national model,” said Senator Michael Gianaris, a Queens Democrat who is the deputy majority leader and the prime sponsor of the bill in the Senate.

Pursuit’s founders, Mr. Hsu and David Yang, grew up in Queens and attended New York City public high schools.

Mr. Hsu went on to Harvard, where he majored in economics and then served as a captain in the Army in Iraq. Mr. Yang studied architecture at Cornell and Yale.

They shunned careers in banking and architecture and returned home in 2011 to found a nonprofit social venture, then called Coalition for Queens.

Pursuit’s training and job-placement formula is similar to larger, older nonprofits that have helped low-income workers including Year Up, Per Scholas, NPower, Project Quest and WorkAdvance.

The programs combine technical training with basic professional skills like communications, teamwork, résumé writing and job interviewing. They also help members with so-called wraparound services such as transportation, housing and child care, usually through referrals to community organizations.

Pursuit stands out for the length of its program and the size of its reported income gains. The coursework and training typically last a year, though it can be extended to accommodate individual circumstances. That is followed by three years of mentorship and coaching after a graduate get a job.

The average salary of people entering the program is $19,000 and the average for graduates is $90,000. More than 40 percent of enrollees are women, nearly two-thirds are Black or Latino, and three-quarters do not have four-year college degrees.

Pursuit graduates have been hired at a wide range of companies including Citibank, Blackstone, Uber, Spotify and start-ups.

The evidence to date suggests that Pursuit is “an innovative, excellent and deeply committed program with tons of promise,” said Lawrence Katz, a Harvard labor economist who studies the impact of worker training efforts.

Pursuit started small with 24 people in its first class in 2013. Now, 200 people a year go through its program.

Erica Stevens had dropped out of college and worked as a retail salesperson before coming to Pursuit. The yearlong program wasn’t easy, and she went through stints of homelessness during that time.

But Pursuit, Ms. Stevens said, provided not only coding instruction but also persistent encouragement, an occasional place to stay and free monthly subway passes.

When she graduated in 2017, she was hired by Dow Jones, the business media company, as a software engineer making about $100,000 a year. Her payments, 12 percent of her salary for two years, were “big chunks of my check,” she said. “But it also felt good to be contributing to this program, to help it continue to do the same for other people.”

Today, Ms. Stevens lives in a modern, two-bedroom apartment in Brooklyn and owns a car. Restaurant meals and travel, once out-of-reach luxuries in her minimum-wage days, are affordable pleasures. She has a growing retirement account for herself and a college fund for her five-year-old daughter. She’s saving to buy a home.

More than most of its nonprofit peers, Pursuit has been a proponent of developing sources of private funding, beyond philanthropy. The work-force development field, Mr. Hsu insists, needs more capital if it is to grow to help far more low-income people.

Pursuit’s innovation is a kind of bond that repays investors if its graduates land good jobs and make payments. It has experimented with different payment formulas since its first bond in 2016. The current plan has staggered rates from 5 percent up to 15 percent, for workers with jobs paying $70,000 or more.

The financing formula seems to be working. The average salary of graduates is more than $85,000 and defaults are low, said Amy Wang, a managing director of Blue Earth Capital, the main investor in the current Pursuit bond.

Pursuit is still dependent on philanthropic contributors, but the investor funding is an important supplement. (Pursuit also has a for-profit public benefit corporation, whose activities include skills building programs for employees at companies.)

Student payments remain controversial — a legacy of the abuses of some for-profit colleges and commercial income-share tuition companies in years past.

Pursuit’s progressive payments, for example, raised concerns for the state education department. A person earning $50,000 and another making $100,000 do not pay the same amount, and they may not understand that when they enroll, said Ceylane Meyers-Ruff, the deputy commissioner for adult career and continuing education services. Pursuit said it tried to make the payment terms as clear as possible.

Yet attitudes are shifting. Having graduates pay to support the cost of training future students was not deemed an option by most nonprofit work force programs until recently. But Gerald Chertavian, the founder of Year Up, said the concept had the potential to be “an important source of long-term funding to support economic mobility,” if done fairly.

States are experimenting as well. In New Jersey, the government has funded a “pay it forward” program, while in Colorado a group of philanthropies are backing a similar initiative.

The authors of the New York State legislation, called the Good Jobs Guarantee Program Act, see it as a regulatory blueprint for outcomes-based jobs programs like Pursuit — designed to expand opportunity, attract more funding and protect consumers.

For the individual, the financial agreement includes no upfront costs, no interest and no one making $45,000 or more qualifies.

“The opportunity seeker is at the heart of it and the risk is on the training organizations and investors, not the individual,” said Assemblywoman Nily Rozic, a Queens Democrat who is the lead sponsor of the bill in the Assembly.

The legislation also calls for the creation of a $100 million reserve fund, which would limit losses for investors to attract private capital. Overseeing the program will be the state’s economic development agency, Empire State Development.

If enacted, the law promises a clearer and more welcoming regulatory environment for Pursuit and programs like it.

“We’re small,” Mr. Hsu said, “but the issue is much larger. We’re trying to change the model.”

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