Over the past two weeks, the United States’ two major political parties convened to choose their candidate for President and unveil their respective agendas to confront the country’s economic and social challenges. Both candidates addressed the issue of rising income inequality and unemployment, yet neither gave significant attention to social enterprise as a solution. We believe they would be well-served to consider the important role that social entrepreneurs and social enterprises can play in helping them achieve their goals and measurably improve lives, and to support these initiatives by incentivizing investment, aligning appropriations and procurement policies, and investing in high-performing social enterprises.
In recent years, the nonprofit sector has been moving toward more entrepreneurial approaches to achieve greater levels of scale and self-sufficiency, while for-profit businesses have become increasingly focused on social and environmental concerns associated with their work. This convergence has resulted in the development and growth of innovative organizations that combine the mission of a nonprofit with the market-driven approach of businesses. The term “social enterprise” has come to reflect this new breed of organizational hybrids.
Because social enterprises are a relatively new phenomenon and the development of the sector is still in its early stages, the US government has yet to fully recognize and embrace their potential. The Obama Administration’s Office of Social Innovation and Civic Participation and Social Innovation Fund have undoubtedly represented a positive step toward unlocking social enterprise’s potential, but the funds backing these efforts have been modest so far and are in no way guaranteed to continue into the next Presidency.
Social enterprises across the country are advancing powerful solutions—that appeal to the right, left, and center—for improving educational outcomes and creating jobs and opportunities for Americans who face significant barriers to opportunity, including ex-offenders, opportunity youth, returning veterans, recent immigrants, people with disabilities, and the homeless.
Far too many US citizens cannot find their way from public assistance to productive work, and their disengagement takes an enormous toll on the economy. Over the past few decades, and with a growing prevalence in recent years, entrepreneurial nonprofits have been launching and growing businesses to create job opportunities for citizens on the margins of society—individuals that struggle to find employment in a competitive labor market.
Through these social enterprises, participants develop skills, self-confidence, and a track record that facilitates their eventual transition to mainstream work and long-term economic security. What’s more, revenue earned from the sale of goods and services produced by social enterprises are cycled back to cover the cost of support programs, which enables these organizations to be more self-sustaining and growth-oriented than other workforce development programs that operate on government or philanthropic support alone.
This approach deserves our next President’s attention, because it works. Research shows that employees of social enterprises experience a 268 percent increase in income, thereby significantly reducing their reliance on government benefits. And for every dollar spent by a social enterprise, society enjoys a $2.23 return on investment, according to an independent study by Mathematica Policy Research.
As members of the America Forward Coalition, we’ve seen the impact of social enterprise in action. For example, the social enterprise investees of REDF—the nation’s only venture philanthropy group focused solely on employment social enterprises—have generated more than $163 million in revenue and employed some 11,000 people over the past 25 years. These individuals remain employed over time at a 50 percent higher rate than those receiving job support services alone, and work their way into significantly more stable housing situations. For participants with prior criminal backgrounds, recidivism rates and costs decline significantly. Based on its success in California, REDF is now in the early stages of scaling its work nationally.
As another example, more than 80 percent of the high-school students employed by the social enterprise Genesys Works come from inner-city, low-income households and often require additional supports to realize their full potential. As a result, students who enter the Genesys Works’ program receive technical and professional skills training, and are placed at corporations like AT&T for 12-month, part-time, paid internships during their senior year. The program boasts a remarkable success rate: Ninety percent of Genesys Works’s student interns enroll in college, compared to 20 to 35 percent of their peers, and more than 80 percent of graduates persist in higher education after their freshman year.
We’ve seen through these organizations and thousands of others how gainful employment not only bolsters individuals’ earning potential, but also builds hope, a sense of belonging, higher expectations, and more opportunities for mobility. And when more people work, we can better harness all the talent the country has to offer to drive a thriving society.
As the federal government considers ways to alleviate strain on the public safety net by bringing more people into the fold of employment, social enterprise offers an effective, actionable policy solution. Policymakers can bolster the sector’s growth and impact by offering tax benefits for companies that hire people transitioning from social enterprises, or for firms or individuals who invest in social enterprises; aligning federal procurement preferences to include these types of organizations; giving nonprofits that operate social enterprises access to small business programs, such as loans, guarantees, and contracts under the Small Business Administration; and developing discretionary grant programs or providing preference for social enterprises in current programs, such as the Social Innovation Fund, to help implement and scale the highest-performance social enterprises. (See America Forward’s policy briefing book for more.)
The 45th President of the United States will have the opportunity to grow and scale a proven, evidence-based, and cost-effective model that builds on-ramps to first jobs and second chances for all Americans. Investing in social enterprise can not only help the next White House resident leave a social innovation legacy, but also make a transformative impact on the lives of the Americans who need it most.