Third Pilot Project for “Social Impact Bond” StructureNippon Foundation and Amagasaki City Joining to Support Employment for Young Persons

The Nippon Foundation and Amagasaki City, Hyogo Prefecture, announced on July 16, 2015, that they will jointly implement Japan’s first Social Impact Bond (SIB) pilot project in the area of employment for young persons. The project will support employment for young persons (ages 15 to 39) in Amagasaki City who live in households receiving public assistance, to enable them to live independently over the long term. The program being supported will be led by Sodateage Net, an NGO with an extensive track record in assisting young people, particularly through outreach programs in which they work with caseworkers to encourage young people who remain at home and withdraw from society, and are difficult for government agencies to reach, to participate in society.

Approximately 1.59 million households in Japan receive public assistance (monthly average for 2013), and for 2013 spending on that assistance reached a record ¥3.6 trillion.^*1 Moreover, the fact that the number of young people receiving assistance is growing cannot be overlooked. The Ministry of Heath, Labour and Welfare estimates that if an “unemployed young person” between the ages of 15 and 34 who does not work, do housework, or go to school continues to receive assistance until the age of 25 to 65, the cost difference for social services with a person who continues to pay taxes during that time is roughly ¥150 million per person.*2 In addition, younger people are more likely to find a job, earn salary increases, and move off assistance,^*3 so in addition to Sodateage Net’s goal of providing support and guidance to enable young people to live independently, this is also an effective way to prevent social costs from arising in the future. Nevertheless, despite the fact that the overall number of young people in Japan is decreasing, the number of unemployed young people remains high, at 600,000,^*4 making this an urgent issue.

The number of people receiving public assistance in Amagasaki City in 2013 was 18,039 (monthly average), the second-highest^*1 among core cities nationwide, and in addition to the growing operational burden on the city government, the cost to the public has also become an issue. This project will seek early intervention with employable young people who have not previously been reached, to achieve their independence and social participation, and this is also expected to curtail future spending on public assistance.

Under this pilot project, Sodateage Net staff will work with city caseworkers to reach out to approximately 200 young people in city households receiving public assistance and provide a variety of programs, with the goal of six people becoming employed during the project’s one-year period. If the project can be verified to reduce costs to the government by reducing long-term future outlays for public assistance and increasing tax revenue, it will transition to a full-fledged SIB structure in or after fiscal 2016. As an intermediary supporting organization, the Nippon Foundation is participating in the overall planning and management to set up the program, and will provide operational expenses. This is the Nippon Foundation’s third SIB pilot project, following a project with the City of Yokosuka to promote special adoption programs and a project with Fukuoka and other cities in the area of dementia prevention.

A social impact investment model that reduces the public cost and uses private capital to carry out programs not yet enacted by local governments, with the local government paying compensation for the results achieved. The reduction in social costs and increase in tax and social security premium receipts resulting from the program become the source of returns paid to investors. This can be expected to increase the productivity of public services and reduce the burden borne by public agencies.