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The Future of Job Creation in America

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Next week, President Obama is sure to note in his speech to Congress and the Republican presidential candidates that US job growth continues to be anemic in the face of an ever-deepening recession. Although we know that small and medium-sized businesses are responsible for most job growth (1), our capital markets are not driving investment where it needs to go to jump-start new jobs at the levels required to pull us out of the sluggish economy.

However, champions for job creation can look to many bright spots in the US that are not widely known, but have the potential to become an important part of America's economic strategy and growth engine. New forms of business are emerging in communities throughout the US focused on job creation and economic growth. Some highly successful companies are effectively deploying policies that increase jobs for, and are significantly beneficial to low-wage workers, offering decent wages and benefits, and the chance for upward mobility.

Examples abound. The Evergreen Cooperatives in Cleveland operate a 'green' laundry, and other 'green' businesses that employ people living in some of the city's most impoverished neighborhoods through a partnership with local 'anchor' institutions. Integrated Packaging Corporation and Homecare of Rochester, two of the businesses highlighted in 'the Pioneer Employers Program' of Hitachi Foundation, "have achieved strategic advantage by offering better than average wages or employee stock options, and exceptional training for their workers... by creating genuine opportunities for employees to move up the economic ladder, they secured a sustainable competitive advantage through increased productivity, revenues from new market segments and improved quality of product or service."

In addition to providing opportunity to the broader workforce, some of these efforts also target people with particularly high rates of unemployment, who face barriers to entering the workforce that result from low levels of education, histories of incarceration or homelessness, or disability.

Bayaud Enterprises in Denver operates a document scanning business that employs people with disabilities, people who have been homeless, and others with barriers to work. Workforce, Incorporated in Indianapolis employs ex-offenders in Recycleforce, a waste recycling company. REDF -- a venture philanthropy in San Francisco -- invests in six companies that deliver fresh-cut produce, staffing services, street cleaning, maintenance, recycling, and property management services while employing young people and adults who have been homeless or incarcerated, involved with gangs, or deal with mental health, addiction, and other issues.

We now know that many people whom we assume will remain unemployed actually want to and can work when given the opportunity, training and oversight to do so. Most Americans want to see this happen.

Historically, unemployment rates for these populations -- approaching fifty percent or more in some cases -- are a long-term drag on the US economy, reducing tax revenues in low-income communities where public investments are needed most, and resulting in ongoing costs that are increasingly unaffordable -- for welfare, unemployment insurance, and disability payments, prisons, and safety net services.

Social impact businesses offer the possibility of making jobs play a much more significant role as not only safety net, but springboard, creating a much larger working population in our country that is significantly more self-sufficient.

The broader economic sector of businesses that are focused on job creation for low-wage workers is not well-known, and developed capital markets are not yet in place to help take them to the scale required.

What's needed now is expanded access to capital and more widespread replication of the best practices of a three-pronged business creation strategy:

  1. Mainstream private sector companies that implement outstanding human resource practices for low-wage workers -- developing significant numbers of jobs, offering decent wages and benefits, and cultivating talent and career pathways..
  2. Businesses that are owned cooperatively, through employee stock ownership, or by community development corporations. These companies build the assets of low-wage workers while also creating jobs with decent wages and benefits (see the Evergreen Cooperatives Field Study at www.capitalinstitute.org)
  3. Nonprofit-owned businesses (often termed "social enterprises") that provide both long-term and short-term 'transitional' employment to people with psychiatric, physical and developmental disabilities, people with histories of homelessness and incarceration, young people disconnected from school and work, and people who receive welfare (see AbilityOne, and REDF).

Together, these businesses employ hundreds of thousands of Americans, with the potential to grow to employ millions more. Innovations in capital deployment are helping them start and expand. More needs to be done to leverage these business strategies so that they influence the broader economy, and achieve the scale required to tip the balance toward significant job growth.

Jeffrey Hollender & Carla Javits
Carla Javits is the President of REDF, a venture philanthropy that helps to create and grow 'double bottom line' enterprises that earn income while employing people with high barriers. She also oversees REDF's efforts to build the field by broadly sharing the results of its extensive, multi-year effort to measure the outcomes that demonstrate the effectiveness of social enterprise in helping people with histories of incarceration, homelessness, addiction, mental illness, and/or limited education to successfully retain employment.

Jeffrey Hollender is co-founder and former CEO of Seventh Generation, which he built into a leading brand known for its authenticity, transparency, and progressive business practices. For more than 25 years, he has helped millions of Americans make green and ethical product choices, beginning with his bestselling book, How to Make the World a Better Place, a Beginner's Guide. He went on to author five additional books, including The Responsibility Revolution and Planet Home. He is a board member of Greenpeace US and Verite and also co-founder of the American Sustainable Business Council. Please visit www.jeffreyhollender.com to learn more and visit Jeffrey's blog. He can also be found on Twitter (@jeffhollender) and on Facebook.

(1) "High-growth start-ups are the best generators of new jobs (the Kauffman Foundation, an American outfit devoted to entrepreneurship, calculates that between 1980 and 2005 nearly all net job creation in America took place in firms that were less than five years old). They are also the firms most likely to raise productivity, a basis for economic growth. They create jobs that did not previously exist and solve problems that people assumed were part of the natural order of things." (The Economist, February 24, 2011)