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Across the United States, more than 1,000 organizations are implementing a groundbreaking workforce development model: the employment social enterprise (ESE). ESEs are businesses built to do good: they offer jobs, training, and support to people who are getting back on their feet after experiences like incarceration or homelessness. A growing, rigorous evidence base demonstrates that ESEs can make an impressive impact on employees’ lives while strengthening local economies. 

At every step, REDF, a national intermediary and venture philanthropy, has helped develop, strengthen, and champion the ESE model. REDF invests in ESEs through direct grantmaking and through loans via the REDF Impact Investing Fund, a community development financial institution(CDFI). REDF also provides technical assistance to foster the ESE community’s growth and engagement in systems change. For example, REDF played a critical role in implementing innovative initiatives under the Workforce Innovation and Opportunity Act (WIOA) as well as the SNAP Employment and Training (SNAP E&T) program.

Moving forward, our nation’s public workforce system could dramatically improve its effectiveness and improve employment outcomes – particularly for individuals facing higher barriers to employment – by increasing its engagement and alignment with ESEs. As the conversation below illuminates, three key steps for policymakers are:

1. Reauthorize WIOA and strengthen training and support provisions to create an economy that works for everyone, ranging from support for transitional jobs to investing in innovation.
2. Fund the Reentry Employment Opportunities program to encourage successful reentry for justice-impacted individuals.
3. Leverage WIOA Governor Reserve funding to employ talented individuals with barriers to employment in ESEs and supportive employers across the country.

REDF is a longtime member of the America Forward Coalition, a collective advocacy network of over 100 of our nation’s most impactful and innovative non-governmental organizations. To illustrate the operations and impact of ESEs relative to our public workforce system, America Forward recently spoke with two REDF leaders with deep experience in workforce development policy and practice: Manie Grewal, Head of Policy, and Adrienne Chuck, Manager, Government Partnerships & Policy.

ESEs play a unique role, engaging across workforce development, small business, and economic development, and serving distinct populations. What should policymakers know about ESEs and their dual capability to empower their participants and strengthen the economy?

Manie Grewal: Policymakers need to know that ESEs are employers, and they are human-centered employers with a mission to employ talented people with high barriers to employment. They are supportive employers in our labor market who are often providing the first jobs to individuals with justice involvement or experiences of homelessness, as an example. 

We’ve thought hard about ESE’s role on the economic mobility ladder – and often, ESEs serve as the bottom rung that helps people ascend. We particularly think about ESEs’ role in the context of economic power: gaining the access, knowledge, resources, and capabilities to build wealth and exercise control over one’s life and well-being. After extensive external research, internal dialogue, and engagement with practitioners, we developed a definition of economic power that reflects REDF’s unique perspective and experience supporting ESEs within the wider field of economic mobility.

We see the three drivers of economic power as work, wealth, and well-being. When we’re looking at work, not only do ESEs provide a job to individuals who face the toughest barriers to employment, but they also receive a paycheck early in their return to the workforce. Looking at the driver of wealth, access to sound financial resources often looks like helping an individual get a checking account, understand their credit score, and learn budgeting skills. But critically, it also looks like helping an individual manage an unexpected financial emergency. So again, we keep our focus on the economic mobility ladder: we’re meeting folks where they are.

The last driver of economic power is well-being. According to ESE leaders, the most common issues experienced by ESE employees occur in housing, transportation, childcare, and healthcare. Many ESEs exist within bigger housing or social service agencies and can offer their workers wraparound services under one roof, while other ESEs invest in community partnerships and effective referral programs. That is to say, to create an economy for everyone, ESEs are critical partners to address workforce and economic development challenges in an effective, durable way.

Can you share a couple examples of what ESEs look like in practice?

Adrienne Chuck: ESEs play both triage and trampoline roles. They provide the path of least resistance in serving an individual with the highest barriers by providing them with significant stabilizing support services, trust, and critical first employment. For instance, Coalfield Development in West Virginia, which runs several businesses including solar, recycling, agriculture, and construction enterprises, operates on a guiding philosophy to meet individuals where they are and address their needs, rather than prescribing what they should do. They serve individuals struggling with substance use challenges and long-term unemployment, offering flexible models that allow an individual to access barrier removal services, training, and/or work as needed. 

ESEs can also trampoline an individual’s path to economic mobility when that individual is a bit more stably situated, by providing additional services such as occupational training, credential attainment, and financial coaching. Coalfield encourages individuals working in their businesses to earn associates degrees or competitive trade certifications to boost their advancement potential. Another example is Rise Up Industries in San Diego, which operates a Computer Numerical Control (CNC) machine shop and runs an 18-month registered apprenticeship program for formerly incarcerated gang members. Their outcomes are phenomenal – nearly all of their participants complete their apprenticeships and find jobs, and earn very close to the local living wage.

How do you think about building evidence around effective workforce strategies, in the context of ESEs?

Manie Grewal: A few years ago, the Social Innovation Fund supported an important, rigorous study by Mathematica Policy Research that demonstrated ESEs substantially boost employees’ earnings and employment while reducing their dependence on public benefits. We’ve learned a lot since that study was done, and have thought about the role of research in supporting ESEs at all stages – some are ready to participate in a randomized controlled trial, while others benefit from earlier evidence-building. In our next 5-year strategic period, REDF is looking to do a larger third-party evaluation of the ESE field.

Supporting effective re-entry is a major bipartisan priority. How are ESEs helping people successfully transition after incarceration, and what role can public funding like the Re-entry Employment Opportunities (REO) program play in sustaining that work?

Manie Grewal: An estimated 81% ESE employees have justice system involvement, a huge population whom ESEs are employing. For example, one of the largest reentry employers, the Center for Employment Opportunities, is an ESE. They operate in states all across the country, and their talent pipeline comes directly from probation and parole offices. ESEs provide the wraparound supportive services, like transportation or housing, to help people make the most of these opportunities.

REO provides critical support for this work – while WIOA funding in general does not center individuals with barriers to employment, REO does. It’s been a critical way for ESEs to leverage public funding. REO’s intermediary support is also important – intermediaries can help these locally-focused groups, sometimes with lower capacity, to access federal dollars. REDF has played a similar role under the Social Innovation Fund in the past.

Adrienne Chuck: REO is a good example of how discretionary funding, as opposed to formula funding, which is administered through Local Workforce Development Boards, can serve and target higher-barrier populations. WIOA formula funding can incentivize creaming – that is, consistently serving people with fewer barriers, higher levels of education, and generally more “work-ready” given limited resources and ambitious performance outcomes. So, REO discretionary funding is important because it provides a consistent, predictable, accessible source for ESEs. The same can be applied to the governor’s discretionary funding on the state level.

For the past few years, Congressional leaders have tried to reauthorize WIOA – and got very close to passing a bipartisan, bicameral bill last December, the A Stronger Workforce for America Act (ASWA). What are some of the most critical changes needed to make WIOA more effective for ESEs and the people they serve?

Adrienne Chuck: ASWA included some things we really liked. For instance, transitional jobs are an important first step for many people ESEs serve: training often isn’t enough. Their first priority is to get stable work and a stable income. WIOA currently caps local boards’ use of transitional jobs at 10 percent of their total funding; ASWA would raise the cap to 15 percent, which would make it easier to spend any more on transitional jobs. Similarly, ASWA raises the requirement for boards’ spending on youth work experience activities, which is a really promising space ESEs can fill.

We’d like to see the transitional jobs cap even higher and to encourage states to submit waivers that allow them to increase that allocation to up to 50% of Adult and Dislocated Worker funding (only one state currently utilizes this waiver). However, with ASWA’s new provision that would require that boards spend 50 percent of funds on training services (that don’t include Transitional Jobs), this might not be feasible. Without parallel investment in supportive services and work experience, retention in and efficacy of training will fall short.

We appreciated all the data improvements in ASWA, which would dramatically improve access to quality workforce data, along with ASWA’s priorities for evidence-based interventions. Moving forward, America Forward, REDF, and other members of the America Forward Coalition have also advocated for the creation of a Workforce Development Innovation Fund to support the development, testing, and expansion of evidence-based workforce programs – including ESEs. This fund would build on past models of federal innovation funding like the Workforce Innovation Fund, which provided seed funding for LA:RISE (Los Angeles Regional Initiative for Social Enterprise) that has now served nearly 10,000 people through ESEs, and the Social Innovation Fund, which provided critical investment for ESEs with REDF serving as an intermediary.

REDF has been involved in some transformative work in California leveraging the WIOA Governor’s Reserve, which provides states with flexibility for innovative, strategic investments. What should federal and state policymakers know about this effort?

Adrienne Chuck: A few years ago, California launched a unique program leveraging WIOA’s 15 percent Governor’s Reserve set-aside to explicitly fund ESEs. California’s Employment Development Department (EDD), in coordination with the California Labor and Workforce Development Agency (LWDA), allocated funding to serve the state’s most vulnerable populations through supported employment settings. With ESEs providing opportunities for the highest barriered individuals to earn wages, gain work experience, improve job skills, and access supportive services, EDD invested two rounds of $10 million each that went to ESEs in 2023 and 2025. Across the 13 total grantees, they’re serving 2,200 individuals with the highest barriers, such as individuals with justice involvement, struggling with homelessness, with disabilities, or people who speak English as a second language.

It’s a great mix of grantees: some ESEs who’ve never engaged with WIOA before; some have previous partnerships with their local workforce systems; and others are part of larger regional consortiums partnering with multiple ESEs to deliver services. It’s an important testing ground for us to see what works, and for us to get a stronger lens of which ESEs, and at what maturity, can best leverage WIOA discretionary funding.

California was able to do this because the legislature formally defined “employment social enterprise” as a workforce strategy. To shift culture within both the workforce and economic development systems, governments must understand what an employment social enterprise is to bring it on as a critical community partner. California’s state workforce board thought strategically about how to leverage workforce funding to support individuals with barriers to employment and with the ESE definition in statute, understood that ESEs were the solution.

Thinking of WIOA reauthorization, the opportunity with discretionary funding – whether it’s on a federal level, like REO, or on a state level, like we’re seeing the California ESE program – is really promising, because it acts as a testing ground to be able to trial innovative non-traditional workforce solutions. For example, last year’s WIOA reauthorization bill included a proposal to expand the Governor’s Reserve allocation for industry-aligned and career-aligned pathways and skills. We’d love to see states leverage an authority like that to support ESEs that are sector- and career-aligned. 

And on that point, I want to emphasize how important it is that Congress at last advance a strong WIOA reauthorization bill this Congress. It’s been more than a decade since the last reauthorization. We’ve learned so much since then about ways that ESEs can support economic mobility and how public-sector innovation can empower those efforts. It’s time to put those lessons into action.

To learn more about REDF and their work with programs like WIOA, visit REDF.org.