Social Enterprise and the unemployment crisis

Social Enterprise and the unemployment crisis

Published on the Guardian Social Enterprise Network

25. July 2012

I recently spoke to an audience at the RSA, aiming to debunk the rather comfortable myths about unemployment that many have accepted. Seemingly unemployment is not too serious, it’s cyclical and there are jobs out there for those that have the gumption to go and get them. I’m afraid those assumptions are plain wrong.

The numbers are far from manageable because official unemployment figures – 2.61 million out of work – hide the fact there are actually 6.5 million people who want to work in this country (ONS “economically inactive but want to work” data, May 2012

They’re not cyclical either. Even in 2005 at the height of our booming economy there were 4 million people unable to get work who wanted it.

And as for “there’s work out there if you want it”, official vacancies hover around half a million.  This means even without the people who want to change jobs there are 13 unemployed people for every one vacancy.

The numbers alone don’t tell the full story because behind them is a terrifying skills gap. As employers ask for increasingly higher skill levels and employment becomes more technical, we create a widening gap for the millions who don’t have even the basic skills. Around 10 million working age people don’t have a Level 2 qualification, which means they can only go for the most basic of jobs.

But those low and semi-skilled jobs are fast disappearing. Our modern business models look to remove labour at every turn or ships jobs abroad. Many businesses are also keen to set up on green fields well away from dense urban populations. This compounds the problem for those communities in deprived inner cities where a disproportionate number of the unemployed live. For the huge number of people who want to work but have care commitments to fulfil, distance to work is a critical factor. They simply cannot afford the extra time away from their dependents travelling to and from work.

These apparently inevitable economic processes create ever more desperate ghettoes of unemployment of people with low skills or complex commitments. So how do we reverse the trend and create low and semi-skilled local jobs? Enter social enterprise.

Social enterprises are perverse. They deliberately choose to locate in challenging areas and are three times more likely to be based in an area of multiple disadvantage and high unemployment than their private sector equivalent (SEUK 2011).  And relative to a similar sized private firm they employ more people.

So we have a desperate and growing need for jobs in deprived areas but the majority of business owners are not inclined to invest. There must then be a compelling case for supporting those people who do want to invest their time and sweat in such areas. Social entrepreneurs are the committed and determined business pioneers who are prepared to make the sacrifices needed to buck the trend. If government backed those individuals who take up the challenge because they are motivated by more than money, they would get a massive social dividend on their investment:  higher employment, increased social harmony, increased local income, reduced benefit dependency.

For government and local authorities investing in social enterprise should make sound policy, but what about the business community?

There is an equally compelling economic argument for businesses to invest in creating work in our most deprived areas. Just say they took an active part in creating a million new jobs. At the median wage that would be £26billion added to GDP. This is money that would typically be spent on products supplied by our largest firms. However, the benefits are far more strategic than a boost to local markets.

As the baby boomers start to retire there is going to be a massive labour shortage in this country and companies are going to be competing intensively across the skills matrix for people to work for them. Helping to create additional employment now for people who will otherwise languish at home is a very good investment in a future where there will be less working age people.

And again its not just numbers; in my experience unemployed people often hide remarkable skills and insights, which until they start to work are completely smothered. Seeing that potential gradually being released as a person builds in confidence has been one of the most rewarding experiences of my life.

As Harvard Business Professor Michael Porter says in his seminal paper “Creating Shared Value”, investing in local supply chains where businesses can form relationships and work together on problems can be a most productive way of creating innovation. If that local supply chain included social enterprises who were harnessing the ideas and creativity of a let-down generation we could produce some very interesting results.

There is a clear case for businesses to look over their shoulder at the depressed neighbourhoods on their doorstep and to engage with social enterprise to create work. They’d increase their markets, widen the pool of labour and discover some extraordinary insights.

Colin Crooks, serial social entrepreneur and Director of Tree Shepherd

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