The Real Wicked Problem of Poverty: How Government Contractors Capture $1 Trillion and Fail 50 Million

Last week, I shared the story of four generations trapped in Newark's South Ward—Rosa, Carla, Maria, and Sofia Carter. Today, I'll show you a system that profits more from their poverty than their prosperity.

The Persistent Reality: Newark's South Ward

Twelve miles from Wall Street, fifty thousand Americans live a shackled reality:

• Children: 76% under 5 in poverty.

• Youth: 50% of teens unemployed. Only 5% college-ready. 25% in juvenile justice system.

• Adults: 31% unemployed—triple state average. 45% earn under $20,000.

• Elderly: 60% in poverty.

This isn't just Newark's tragedy. It's the predictable outcome of a system designed to profit from poverty rather than end it.

The Human Crisis

Consider the scale of abandonment: 5 million youth are jobless and not in school. In New Jersey alone, 100,000 young people drift without purpose—7,000 in Newark. Meanwhile, 8 million jobs sit unfilled across America.

This isn't just inefficiency. It's systematic abandonment.

Today, I'll expose how this system works—the hidden machinery that keeps millions trapped in poverty while contractors profit from their desperation.

Understanding the Workforce System: A Case Study in Systematic Failure

I'm about to deconstruct the systems that sustain poverty by examining the federal workforce development system. But understand this: The patterns I'll reveal exist across the entire $1 trillion in public service contracts—from healthcare to housing, education to social services.

America's Workforce System: What is WIOA?

The Workforce Innovation and Opportunity Act (WIOA) is America's main federal workforce law, enacted in 2014 to help people find jobs and training. It's supposed to operate through:

• 2,400 American Job Centers: Physical locations offering employment services, training programs, and support

• Target Groups: Unemployed youth, laid-off workers, adults needing skills, people with disabilities, veterans

• Services: Job training, career counseling, job search help, plus support like childcare and transportation

WIOA channels ~ $4 billion annually through 500+ workforce boards to 7,000+ training providers. The promise: lift millions from poverty. The reality: a machine that maintains it.

The Confession That Changes Everything

On May 11, 2023, John Pallasch did something extraordinary. The former Assistant Secretary of Labor who once ran America's workforce system—a Senate-confirmed official who'd spent his career inside the machine—broke ranks. Presenting before Congress, he revealed what insiders had hidden from the public for decades:

Eight out of ten young people who enter the taxpayer funded job training programs emerge with nothing.

His most damning admission about the agency he once helped lead:

"The Department lacks the talent, technology, structure, and appropriate resource allocation to provide both assistance and accountability to [contractors]. Although sanctions authority for DOL exists in WIOA, it has never been successfully exercised."

The Failed Promise

Pallasch further admitted what everyone knows:

"For more than fifty years, the public workforce system has been working toward conceptual alignment but with very little forward progress. In the meantime, it is workforce system customers who pay the price when trying to navigate a confusing web of bureaucracies and service providers."

Congress's response to this confession?

The system remains unchanged, operating under funding extensions without addressing the fundamental failures Pallasch highlighted. This is how systematic betrayal works: Document failure, acknowledge it, then preserve it.

The Architecture of Profitable Failure

I've spent the past 5 years studying how the $1 trillion annual "poverty-fighting" industry actually works. What I found wasn't incompetence or underfunding. It was something far more sinister: four interlocking mechanisms designed to profit from the very poverty they claim to solve. This is how the Carters—and 50 million Americans—remain trapped not by accident, but by emergent design:

1. Payment Without Performance: The $1 Trillion Black Hole

The Business Model: U.S. government agencies award contracts that reward activity, not outcomes. Like hospitals paid per procedure regardless of patient health, workforce contractors get funded for running programs whether participants find jobs or not.

The Waste at Scale: What Happens Without Performance Accountability

When contractors get paid regardless of results, this is what happens:

New Jersey's JOBS Re-Entry Program spent $187,500 for each formerly incarcerated person trained and placed into a job.

But that's efficient compared to Governor Murphy's flagship Lifelong Learning Accounts (LiLA)—a $9 million initiative promising "life-changing opportunities for underserved residents." The reality:

• 35 total participants enrolled from a state with 100,000 disconnected youth

• Only 4 actively in training as of 2024

• $257,143 per enrolled participant ($9 million ÷ 35 participants)

• $2.25 million per active participant if counting only those in training

Governor Murphy proclaimed this "exemplifies what it means to build a stronger, fairer economy for all." In truth, it exemplifies how to burn $9 million while serving 0.035% of those in need.

Meanwhile, 100,000 youth remain disconnected statewide, including 7,000 in Newark.

Why does this persist? New Jersey admits:

"Neither the State or any local [Workforce Development Board] area is using pay-for-performance strategies. The State is considering conducting a feasibility study to determine if pay-for-performance contracting would be an effective strategy for serving individuals with barriers to employment."

Translation: After decades of failure, they're 'considering' whether to 'study' if accountability might help.

Pallasch revealed why this persists:

"WIOA allows the Local Workforce Boards to expend 10% of all WIOA funds on administration, while up to 15% can be cordoned off by the State... Given the extremely broad authority for allowable expenses... up to one quarter of all WIOA funds may never reach the job seeker."

Twenty-five percent skimmed off the top before a single person gets help. This isn't failure. It's how the system works.

2. Cartels of Incumbent Contractors with Outdated Solutions

The federal government relies on contractors to deliver vital services to vulnerable populations. In theory, this approach leverages specialized expertise and community connections. In practice, it's created something else entirely.

Congress is considering reauthorizing WIOA, potentially pumping $6.4 billion annually into the system. This economic opportunity is captured by an interlocking network of incumbent contractors who have transformed workforce development into their private revenue stream. Together with their ecosystem of consultants, academic partners, nonprofits, and think tanks, they form a self-reinforcing cartel that profits from perpetual failure. This isn't just market concentration—it's the financial engine that creates incentives and organizes the entire poverty management theater.

The Billion-Dollar Boys Club

Job Corps represents WIOA's largest direct contracting mechanism—a $1.7 billion annual program designed as the last hope for America's most vulnerable youth. These are teenagers and young adults who've already been failed by schools, families, and communities. They arrive at Job Corps centers seeking job training, education, and a path out of poverty. For many, it's their final chance before the streets, prison, or worse.

The concentration of power over these young lives reveals itself in who controls the money. Just four corporations have captured this billion-dollar lifeline:

1. Equus Workforce Solutions (formerly Res-Care): ~ 30% share, $500 million

2. Career Systems Development Corporation: ~ 20% share, $400 million

3. Adams and Associates, Inc.: ~20% share, $300 million

4. MINACT, Inc.: ~10% share, $200 million

These four companies alone control 85% of Job Corps funding—over $1.4 billion annually. Single contracts reach $160 million. This isn't competitive bidding; it's an oligopoly feeding on the desperation of youth who have nowhere else to turn.

Year after year, the same contractors deliver the same failures to new generations of vulnerable young people. But their billion-dollar stronghold remains secure, built not on successful outcomes but on successfully capturing government contracts. The youth may fail, but the contractors never do.

1. Incumbency

In functioning markets, competition drives innovation. New entrants challenge established players with better ideas, forcing constant improvement. Amazon disrupted retail. Netflix disrupted Blockbuster. Startups regularly topple giants by serving customers better.

But government contracting inverts this natural order. Instead of rewarding innovation, the system erects barriers that protect incumbents from competition. The Department of Labor's 2024 Pathway Home 5 reentry grants ($52 million) illustrate how these anti-competitive mechanisms work.

Here are the specific requirements from the Request for Proposals that kill competition:

Prior Performance Advantage (26 points):

"If you've completed a REO grant: Submit performance data showing high employment rates (90%+ gets full points)"

Translation: If you haven't already won federal grants, you start 26 points behind those who have.

Resource Barriers:

"Must employ one full-time Project Director/Manager at 100% FTE"

Consider the absurdity: You must pay someone full-time to manage a contract you haven't won. That's $60,000-$80,000 in salary for someone to manage... nothing... while your application sits in review for months.

Only incumbent contractors can afford this—they simply shift staff from existing contracts. New entrants must burn capital they don't have for contracts they might not win. The result? A requirement that ensures only those already feeding at the federal trough can compete for more. This transforms merit-based competition into a private club with a very high price of admission.

2. Outdated Solutions

While Amazon tracks every package in real-time and Netflix predicts your next binge, New Jersey's workforce system runs on software older than the people it's supposed to help. The state's own report confesses the truth:

"The current performance reporting does not yet provide a comprehensive picture of the outcomes and impact of the state's workforce investments."

Translation: We spend millions but can't tell you if anyone actually got a job.

They're still using AOSOS (America's One-Stop Operating System v7.3.9)—software so ancient that nine years after WIOA passed, they admit they're still "working diligently" to make it comply with the law.

This isn't just a technology problem. It's a accountability problem. Outdated systems mean outcomes vanish, failures hide, and contractors keep getting paid. When you can't track results, you can't demand them.

3. No Citizen Feedback: The Profitable Darkness

The system's crowning achievement of betrayal: Those it purports to empower—the very individuals ensnared in its web—are utterly voiceless when it comes to evaluating its so-called performance. This silence isn't accidental; it's engineered to shield the profitable machinery from scrutiny, ensuring that failure thrives in the shadows. Yet, as former DOL Assistant Secretary John Pallasch testified in 2023, he actively tried to combat this opacity during his tenure, launching initiatives for greater transparency.

The Fragmented Wasteland: 75,442 Programs, Zero True Accountability.

Fresh research from the Harvard Project on Workforce's "Navigating Public Job Training" report lays bare the staggering scope of this orchestrated obscurity. Spanning the nation, the workforce landscape comprises:

• Over 7,100 training providers qualified for federal dollars

• A staggering 75,442 distinct programs scattered across more than 700 occupational fields

This isn't a coherent system—it's deliberate disarray, a labyrinth designed to confound. As the investigators starkly conclude:

"The landscape of ETP offerings is vast and hard to navigate... a highly fragmented system, where strong programs are not differentiated from weak ones."

In this chaos, accountability evaporates, allowing subpar providers to siphon funds indefinitely while the vulnerable wander lost.

The Data Black Hole: Engineered Opacity

Even the Department of Labor's vaunted TrainingProviderResults.gov—exposes the void at its core. Pallasch, who spearheaded its creation, explained his motivation:

"I was the one who launched that website because I knew coming from the state of Kentucky that the training programs in Kentucky were not performing... if the state of Kentucky didn't know whether the programs were good or bad and if the Department of Labor doesn't know whether the programs are good or bad how can we possibly expect the individual job Seeker to know"

Despite his push, the database remains inadequate, as detailed in the Harvard report:

"In its first release, the database lacked information on completions, employment rates, median earnings, and credentials for over 75 percent of programs."

Harvard's deeper probe uncovers an even grimmer reality: "for earnings metrics in particular, the share missing was over 95 percent." But let's be clear—this isn't mere "missing data." It's the systematic vanishing of human lives. The 95% whose results disappear aren't abstract figures; they're real people like Maria, James, and Destiny—silenced, erased, uncounted in a system that profits from their invisibility.

Pallasch also highlighted his role in issuing overdue guidance to enforce accountability:

"there was no sub regulatory guidance from the Department of Labor on how to administer sanctions uh until February of 2020 and it just so happened that I signed that sub-regulatory guidance so for more than five years the law was in place without the Department of Labor weighing in on exactly how the department would hold the states accountable"

The Poverty Pipeline: Exposed but Unchanged

Where scraps of data do emerge, they unveil the horrifying truth the system conceals, as revealed in the Harvard report:

"Training participants enrolled in the most common (medical assistant) and fourth-most common (nursing assistant) ETP programs make under $6,000 in a quarter, or $24,000 annually. We estimate that over 40 percent of WIOA training participants earn under $25,000 annually."

This isn't uplift—it's entrapment.

When 75% of outcome data is missing across 75,442 programs, that's no mere oversight; it's a fortress. A barrier to mute the exploited, keeping the system unchallenged.

4. Academic Laundering: How Universities and Think Tanks Legitimize Exploitation

The final piece of this architecture is perhaps the most insidious: prestigious universities and think tanks that transform moral outrage into academic debate, converting systemic failure into scholarly discourse that ultimately protects the very system it claims to critique.

The Georgetown Gambit: When Insiders Become Defenders

On May 11, 2023, before the House Education & Workforce Subcommittee, John Pallasch—former Assistant Secretary of Labor who once ran this very system—laid bare its moral bankruptcy:

Pallasch's Truth:

"If we look at the negotiated performance levels in New Jersey, their negotiated performance level for the adult program under WIOA is $5,400.00 a quarter. So that's $20,000.00 a year... That is just not enough."

But Pallasch's testimony went even deeper, exposing how states openly plan for failure:

"If you look at New York and New Jersey, their second quarter after exit—the number of people they say during the second quarter after they exit the program are going to have a job—is 61 percent for New York and 62 percent for New Jersey. So those states are telling us right off the bat 40 percent of the people who exit our program are going to be unemployed for six months. They're telling us that right off the bat."

Holzer's Laundering:

Watch how he transforms Pallasch's damning evidence into scholarly legitimacy:

"I respectfully disagree with my colleague Mr. Pallasch. I read those data completely differently than he does. You cannot just look at earnings levels. You have got to look at the improvements over time... If a person is starting at a very very low earnings level, and gets a 10 or 20 percent bump up, I would consider that a successful program."

In one academic pivot, $20,000 poverty wages become "success."

But here's what Holzer omitted: For youth, New Jersey's Department of Labor under WIOA defines success at around $9,500 annually)—40% below the federal poverty line. Holzer failed to mention that the system sets youth success at $9,600. That's not even subsistence—it's systemic sabotage.

Even by his own twisted logic of celebrating "10-20% bumps," he's defending a system that defines victory as trapping young people in poverty before they even begin.

But here's what makes Holzer's performance truly unbelievable—he's the ultimate insider:

• Former Chief Economist for the U.S. Department of Labor

• John LaFarge Jr. SJ Professor at Georgetown's McCourt School

• Founding director of Georgetown's Center on Poverty and Inequality

• Author of 12 books on disadvantaged workers and low-wage labor markets

• Advisor to multiple administrations on poverty policy

This man has spent decades inside the very system he now defends. He knows about the wasted dollar, the families trapped in poverty. And when Pallasch finally exposed the truth—80% failure rates, poverty wages as "success," states planning for 40% unemployment—Holzer stepped forward not to demand reform, but to dampen the evidence that might force it.

This isn't analysis—it's complicity.

The Senate Echo Chamber: One Year Later, Same Script

A year after Pallasch's House testimony exposed the truth, the Senate HELP Committee held its own hearing on June 12, 2024: "The Workforce Innovation and Opportunity Act: Supporting Efforts to Meet the Needs of Youth, Workers, and Employers." The title promised hope. The reality? The same academic laundering, just different faces.

New America's Taylor White revealed the formula. First, acknowledge the crisis:

"Currently over 12% of Americans between the ages of 16 and 24 are disconnected from both education and the labor market that's roughly 4.5 million young people... rates of disconnection are highest among Native American black and Latino youth."

Then, prescribe more of the poison that sustains the problem:

"Congress should establish a dedicated work experience fund that provides additional resources to programs that meet a set of quality criteria."

4.5 million youth abandoned by the very system she champions. Her prescription? Not confronting why WIOA is not connected to these young people. Not questioning why New Jersey's Department of Labor defines "success" for youth at $9,500 annually. Instead, she offers "quality criteria" and "dedicated funds"—the same failed medicine in a new bottle, while the patient continues to die.

Jobs for the Future's David Bradley perfected the art. After a decade of WIOA failure, he testified:

"Since WIOA was enacted in 2014 there's been a movement towards a skills-based employment ecosystem which has not been fully incorporated into WIOA."

His prescription for 75,442 programs with 95% missing earnings data and 40% earning poverty wages?

"There's room for improvement in the quality control mechanisms for training providers... encouraging a focus on job quality so that people go through the system end up in a good job."

Not shutting down failures. Not demanding accountability. Just "encouraging focus"—the expert testimony equivalent of thoughts and prayers for the poor.

Problem frame

"One problem is funding... programs were funded at just over $3 billion this is about the same amount that it's been funded since 2000 which is an inflation adjusted drop of about 50%"

Solution frame

"Another suggestion is to invest in evidence-based programs... sector strategies career Pathways apprenticeship re-entry programs"

The Call to Action

"JFF urges leaders in Congress to act create a Workforce system that works for all"

The Urgency Frame:

"Without focused Investments we could miss an opportunity to increase competitiveness and economic advancement for all"

How Think Tanks Launder Catastrophe: The Incentive problem

Cash the Checks: The Triple-Conflict Model

Jobs for the Future has perfected the art of being simultaneously judge, jury, and beneficiary of the workforce development system. Through a Department of Labor contract, JFF leads the federal Job Quality Academy, providing technical assistance to workforce boards across the country. At the same time, JFF's Research, Evaluation & Analytics team evaluates the effectiveness of workforce programs—the very programs they're helping to design and implement. The financial incentive to find problems not solutions becomes clear when examining JFF's revenue streams: the organization generates $23.5 million in program service fees, representing 25% of their total revenue, by selling solutions to the systems they evaluate.

JFF's Revenue Engine (FY2024):

• Total Revenue: $94.2 million

• Program Service Fees: $23.5 million (25% - selling services to systems they evaluate)

• Federal Grants: $13.5 million (14% - contracts to fix problems they document)

• Grants and Contributions: $54.3 million (58% - funding including workforce development stakeholders)

New America operates within a similar conflict web. The organization receives $1.1 million from Ascendium Education Group, a student loan servicer, to conduct workforce research that could influence policies affecting student debt. The Annie E. Casey Foundation, which focuses on "employment or entrepreneurship opportunities" and "postsecondary credentials that will position them for economic success," provides $1.23 million for workforce development research. Arnold Ventures, whose mission is to "maximize opportunity and minimize injustice" through "evidence-based policy solutions," contributes $1.49 million for education and workforce studies—the very areas where they advocate for policy reforms. Meanwhile, New America secures $1.3 million in federal grants for workforce contracts. This creates a perverse nonprofit-to-nonprofit funding web where organizations studying workforce development are funded by foundations that have direct programmatic stakes in workforce development outcomes.

The result is academic independence transformed into institutional capture, where New America's research on workforce development effectiveness is subsidized by foundations that are themselves major players in the workforce development ecosystem, creating a circular validation system where everyone profits from perpetuating the problems they claim to solve.

New America's Revenue Structure (2023):

• Total Revenue: $46.8 million

• Contributions and Grants: $41.4 million (88% - including workforce development funders)

• Federal Grants and Contracts: $1.3 million (3% - government workforce contracts)

Both organizations operate within the same fundamental conflict: they get paid to study failing workforce systems, then get paid again to fix those same systems (and do not), creating financial incentives to perpetuate problems rather than solve them.

The Bipartisan Theater: How Laundering Works Across Congress

The choreography across both hearings reveals the full production:

In the House (2023): Chairman Burgess Owens opens with concern about skills gaps. Pallasch drops truth bombs. Holzer immediately sanitizes them. Committee members nod thoughtfully.

In the Senate (2024): Chairman Bernie Sanders opens with emotion about prison recidivism and youth unemployment. Witnesses acknowledge the crisis, then immediately pivot to technical fixes: "sector partnerships," "career pathways," "evidence-based programs."

A full year passes between hearings. Nothing changes. The same failed system gets more academic defense.

The Real Function of Academic Laundering

This isn't incompetence. It's a sophisticated mechanism that operates across time, across chambers of Congress, across institutions:

1. Transforms Moral Outrages into Technical Problems

2. Creates Infinite Deferral

3. Provides Bipartisan Cover

4. Protects the Profitable Status Quo

The Academic Accomplices: When Knowledge Becomes Betrayal

The most damning aspect isn't what these experts don't know—it's what they do know and choose to hide. Every witness at both hearings has decades of experience. They know:

• The 80% youth training failure rate Pallasch exposed in 2023

• The poverty wages defined as "success"

• The billions wasted annually

• The millions of lives destroyed

Yet they sit before Congress—House in 2023, Senate in 2024—and launder this catastrophe into calls for more funding and marginal reforms. They provide the intellectual infrastructure that allows politicians to claim they're addressing poverty while funding its perpetuation.

From Georgetown to Harvard, from New America to Jobs for the Future, our most prestigious institutions don't just study poverty—they manage it. They transform:

• Systemic abandonment into "service gaps"

• Profit from misery into "public-private partnerships"

They give congressional testimony—year after year, chamber after chamber—that provides cover for continued failure. They write reports that contractors cite to justify their approach. They create the vocabulary that makes a trillion-dollar betrayal sound like sensible policy.

And they do it all with footnotes, credentials, and decades of insider knowledge—the ultimate betrayal of intellectual integrity in service of a machine indifferent to human suffering.

The Self-Protecting Organism

These four components create a system that will fight reform:

The Reinforcing Loop:

• Money without accountability → Hidden by missing data

• Contractor cartels → Creates the economic incentives that organizes

• Data darkness → Ensures continued payment

• Academic validation → Legitimizes the entire operation

The Absorption Mechanism:

Every reform attempt strengthens the system. Pallasch revealed this:

"As we approach the 9th anniversary of the passage of WIOA, DOL is currently hosting webinars entitled 'Yes, WIOA Can' to explain what the State and Local Boards can do under the law."

Nine years later, they're still explaining what the law allows. Every clarification needs consultants. Every webinar needs contractors. Every failure needs more "technical assistance."

Reform attempts become revenue streams:

• Demand performance? "We need better data systems" (more contracts)

• Integrate services? "We need modernization" (more contracts)

• Measure outcomes? "We need technical assistance" (more contracts)

• Question the system? "It's complex" (more studies)

The Scale of Betrayal

By the Numbers:

• $25+ trillion spent since 1964 (~ More than World War I & II combined)

• $1+ trillion annually (~ U.S spending on Defense)

• 40 million still in poverty

• 75,000 programs that don't communicate

• 95% of outcome earnings data missing

• 5 million jobless youth nationwide

• 100,000 jobless youth in New Jersey

• 7,500 jobless youth in Newark

In Human Terms:

Four generations of Carters trapped in Newark's South Ward. Sofia wheezing in mold. Maria struggling to find job opportunities. Carla choosing between medicine and rent. Rosa rationing heart pills.

Multiplied by millions.

The Unforgivable Truth

Everyone knows.

Pallasch knew when he testified during congressional hearings on the reauthorization of the Workforce Innovation and Opportunity Act (WIOA), the core system he had previously overseen.

Georgetown University knew when they sent Dr. Harry Holzer to give testimony, transforming $20,000 in wages as success.

New America knew when Taylor White acknowledged 4.5 million youth are jobless and not-in-school, then called for more of the same programs that they can't access.

Jobs for the Future knew when David Bradley testified that WIOA has a 'performance accountability system with six main indicators of outcomes'—while omitting that 75% of programs report no data on those very outcomes.

Equus Workforce Solutions, Career Systems Development Corporation, Adams and Associates, and MINACT knew—they collect $1.4 billion annually.

Harvard knew when documenting 95% missing earnings data—and chose to publish academic papers rather than sound alarms about systematic fraud.

Senator Sanders knew. Chairman Owens knew. They held the hearings, heard the confessions, then kept the system running anyway.

They know because the system performs exactly as intended: Converting poverty into profit and praise without performance, desperation into dividends without delivery, hope into contracts without outcomes.

And now, you know too.

Exhibit: Documents and Testimony Cited

Southward of Newark, New Jersey

• Needs and Segmentation Analysis for the South Ward of Newark, New Jersey (NYU)

• Structure of Intergenerational poverty in the Southward of Newark, NJ

• Newark Local Workforce Board

Congressional Testimony

• House Education & Workforce Subcommittee Hearing: "Examining America's Workforce Challenges: Looking for Ways to Improve Skills Development" (May 11, 2023)

• Senate HELP Committee Hearing: "The Workforce Innovation and Opportunity Act: Supporting Efforts to Meet the Needs of Youth, Workers, and Employers" (June 12, 2024)

Government Documents

• U.S. Department of Labor: Notice of Availability of Funds and Funding Opportunity Announcement for Pathway Home 5

• State of New Jersey, Department of Labor and Workforce Development WIOA Annual Report Narrative 2022

Academic and Think Tank Research Reports

• Navigating Public Job Training (Harvard Project on Workforce)

• Jobs for the Future Policy Research

• New America Policy Research