Is Social Entrepreneurship an employment generator?

Social Entrepreneurship /Fall 2011

Professor: Miguel Alves Martins Grader: Joo Cotter Salvado Student: Joana Rocha Cabral, n939

Is Social Entrepreneurship an employment generator? Nowadays, the world (in particular the western part) is facing growing rates of unemployment and uncertainty in the economic and financial markets. This call into question the whole global economic system which humanity has followed in the last decades and also leads to a search of new solutions, able to direct people to the road of more justice, opportunities and positive social impact. Social entrepreneurship fills the goals of creating a social and environmental change through the market and business knowledge, looking for the creation of social capital instead of financial profits, which can be reflected in for-profit (to achieve financial sustainability) or non-profit social enterprises and organizations. Providing a business model to these companies or organizations, social entrepreneurship enables them to become more sophisticated in maximizing economic and social values. In this small paper, the main objective is to approach the way by which social entrepreneurship can actually contribute to economic growth and development through the creation of jobs, especially to groups that are marginalized and where the unemployment is structural. It also looks forward to another view of social organization, where social economy may have an increasing relevant role, as social needs have also grown and as change in societys mindsets is also needed. In this particular field of job creation, social entrepreneurship contributes to increases in economic and social values as referred above. In economic terms, it reduces the burden on government on the improvement of socio-economic needs, filling its gaps as well stimulating employment in disadvantaged people and regions. This is reflected in job growth, not only in the perspective that social problems are increasing, and so, the demand for NGOs and products/services delivered by social enterprises are also growing, leading to more places for high skilled employees in such organizations; but also in the standpoint that these projects help disadvantaged people in communities to be autonomous either by helping them to find a job or training them to go ahead with their own business ideas. It also leads to economic gains in the way it aligns social benefits with market opportunities through program savings (in food, energy and product innovation) allowing the government to shift their role for social service delivery to a regulatory role (Baldwin, Andrea) and also through economic expansion, not only with social enterprises, NGOs and government supports but also by encouraging values of corporate social responsibility in the private sector. In social terms, the potential of benefits is big as the main purpose of social entrepreneurship is to create social value and impact. Social gains

are reflected in the way of social capital, as it increases through the building of networks, partnerships, trust relations and community economic development, engaging with groups of people who are less likely to participate in the society and economy. The program outcomes itself, which in this paper are focused on the job creation, have innumerous externalities not only in the person who gains a job but also in the indirect jobs who may be created, in the family who now has source of income leading to poverty reduction, in the societal values and outcomes improved, therefore highlighting the importance of investing in innovative programs with social impact. Even with notorious results, the measurement of social return on investment (SROI) is difficult to evaluate due to the complexities of assessing social phenomena. In the case of employment creation there are intangible benefits such as the dignity and satisfaction of working on a job as well the development of skills created by the employment, the externalities in the education of children and the creation of future businesses (which lead to more jobs) and indirect jobs. The role of social entrepreneurship in generating employment can be better evaluated by analyzing the role of social enterprises and NGOs, which are generally local community organizations. The fact that they are close to communities make them able to provide an active and targeted support at the local level, filling gaps in the services left by public sector agencies. Further, as they have a long-term presence and are focused on the needs and capabilities of the target groups, they accumulate knowledge on that people and offer a more intensive individual care. In the group of these social economy organizations, social enterprises, defined by OECD in 2009 as an innovative business model that meets both social and economic objectives contributing to labour market integration, social inclusion and economic development or by EMES as organisations with an explicit aim to benefit the community, initiated by a group of citizens and in which the material interest of capital investors is subject to limits are multiple-goal organisations, mixing social, economic and socio-political objectives as they are connected with benefiting the community, have an entrepreneurial nature and are often rooted in a sector traditionally involved in socio-political action (Defourny and Nyssens 2006). Social enterprises have, therefore, a key role in addressing disadvantage people and regions, improving employment outcomes and fostering social inclusion. A type of social enterprise that focuses on the promotion of social inclusion and employment are the WISEs (Work Integration Social Enterprises) which provide work integration activities such as skill training, provision of employment opportunities directly, or support in helping people to access the open labour market. The main objectives are helping disadvantaged people who are at risk of permanent exclusion of the labour market, not through profit maximization

but through the satisfaction of those social needs under the constraints of economic sustainability. By integrating marginalized people with productive activity, these social enterprises allow for the supply of goods and services to a wider set of consumers and users, a greater distribution of them to disadvantaged social groups and to a bigger support in the process of local development, with the comparative advantage of engaging directly with hard-to-reach people. These hard-to-reach people are groups of the society with low rates of employment, structural unemployment and in which labour market policies have difficulties or lack the required abilities to take action (for not being in direct contact with groups or due to negligence and lack of policies). Job seekers (or unseekers in many cases) with serious social problems (alcohol, drugs, homeless), immigrants, handicapped people, long-term jobseekers , disadvantage minorities, lowqualified, old people and women are the main social groups who suffer difficulties in entering in the labour market, especially in times of economic crisis as the ones lived nowadays. The isolated fact of being unemployed is already one of the major causes of social exclusion and so WISEs look forward to fight against this phenomenon and at the same time, spread the best route to fight against poverty (the creation of gainful employment). Although the first WISEs appeared in Europe in the 70s, they have been spread out to other developing parts of the world in the last two decades, rephrasing the importance of these WISEs to be adapted to local political and legal frameworks as well to the social, cultural and economic conditions of the target population. WISEs can be divided in three main focus of action: 1. The creation of immediate opportunities of job training and wage employment to people facing difficulties in finding a job; 2. The provision of capital, financing initiatives and providing consultancy (job coaching, soft skill training, counseling) 3. The compliance with local political and legal frameworks, policies and projects

The classification of these enterprises is, however, more complex as they vary geographically in legal terms and denominations, as well individually in the modes of work integration putted in the ground( transitional occupation, creation of permanent selffinanced jobs, professional integration with permanent subsidies and socialization through productive activity) ; the status of the workers in integration (formal work contracts, trainee or occupational status); the modes of professional training (on-the-job or structured); the characteristics of the target groups, and the types of resources mobilized, that can be monetary, with market resources (sale of goods and services, pure

private or quasi-public which are the ones that lead to collective externalities, e.g: childcare services represent the possibility to women to access the labour market,), nonmarket resources (public subsidies) or donations, and non-monetary resources, with volunteering and social capital (networks, partnerships and community relations). If classification criteria of WISEs are diverse, so they are their different dominations and legal frameworks, which vary by country and sectors of action. Social cooperatives (more focus on commercial and permanent jobs), associative structures (targeted to specific groups and providing temporary or permanent employment), community owned structures with activities in training and employment, transitional employment enterprises (which accomplish different levels of disadvantaged individuals and communities) and sheltered workshops for disabled people are some examples of Work Integration Social Enterprises denominations that foster social inclusion, job creation and economic growth. In the world 2.8% of worlds working age adult population is involved in social activities, varying a lot in terms of geography (0.2% in Malaysia while in Argentina is 7.6%), demographics (age, gender, education, current work status), motivation and the own social activities models that go from pure non-profit models to organizations with business models and philanthropy goals. As studied by GEM, entrepreneurship ventures around the world who contribute to employment growth are classified in four types: ventures with pure social entrepreneurial activity, which have no commercial activities; pure commercial entrepreneurial activity (without no particular social goals); overlapping social and commercial activity, an organization that is both commercial and social in its activity and a simultaneous social and commercial entrepreneurial activity, in which an individual runs a social organization and a commercial one, being therefore separated entities. A positive correlation between women (particularly in Africa, Caribbean and US), young age entrepreneurs and high levels of education (predominantly in locals with lower levels of economic development) with social entrepreneurship is observable, as well between entrepreneurial economies and social entrepreneurship, as they tend to offer a more favorable setting for undertaking socially innovative initiatives that depart from the traditional 3rd sector. The contribution of the civil sector to the economies is growing: in USA it already contributes to 7.2 % of GDP; in UK 6.4%, employing 5.5% of workforce in which 1.8% found social enterprises, and in Portugal it contributes to 6.5% of GDP employing more than 300,000 people. While social enterprises have to accomplish specific economic criteria such as continuous activity producing goods or selling services, autonomy, economic risk, minimum amount paid at work and also social dimensions as decision-making not based

in capital ownership, limited profit distribution and the involvement and benefit of the community, the whole social entrepreneurship does not necessarily has to carry out all these specifications, being sometimes mixed with state agencies (as in the case of some WISEs). The most important conclusion is that social entrepreneurship can actually contribute to economic development and to the reduction of social exclusion through the creation of jobs by increasing information, training, access and mobility, matching processes as well through the development of a sense of dignity and citizenship and by the avoidance of marginalization of disadvantaged or disabled people, showing that scarce resources can deliver large-scale social change.

Successful cases on job creation to disadvantaged people: Strive National (US, UK): Strive is an organization that provides training , support needed to gain living wage employment, independence and financial security with the mission of attacking the root causes of poverty. Their customer segments are harder-toemploy people from former incarcerated, disconnected youth and homeless to recovering addicts or unskilled and under-educated laborers. The way to re-engage this people in society is to provide them education, skills training and job placement and career development. The employment areas have been mainly in medical information techniques, office operations, green construction, supportive services and Strive has also started fatherhood programs with the purpose of approximating fathers to their children, recognizing fatherhood as a positive change agent. With activities in London, San Diego, Chicago and New York, Strive graduates 2981 people per year and has a 69% of job placement rate of their graduates in one year. Beverly Moodie (South Africa): In order to fight against widespread illiteracy and unemployment in South Africa (a big proportion of black community), Beverly Moody is training disadvantaged and unemployed people to start their own micro-enterprises. The process consists in first creating trust and self-confidence and then helping them to produce a product and put it in the market place. The objectives also pass through the importance of the people to figure out their own plans and of the matching-process which will make them more productive, self-employed, autonomous and less poor. Some of the fields in which small business ventures were created are fence making, candle manufacture, gardening and tour guide services.

The business of business is, increasingly, the creation of social value together with economic value (Austin, Gutirrez, Ogliastri & Reficco, 2006)

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