How to Employ the Very Hard to Employ
The welfare reforms of the late 1990s led large numbers of former welfare recipients into the workforce, yet those with substantial problems-such as mental illness, previous incarcerations, and the homeless-had trouble getting and keeping jobs. Helping hard-to-employ people has long been a challenge for government social service agencies, with most government-provided programs for people who struggle with work, failing to have lasting and meaningful impacts. But according to a new study by Mathematica Policy Research, a much better alternative may be social enterprises-commercial entities using free market principles, created to help individuals who have trouble getting a job.
Social enterprises have a long history in the U.S. They differ from typical government programs in that they are a business, usually operated outside of government, with a concern for the bottom line. They are typically started by people who want to make a difference in society by helping others.
The study evaluated seven social enterprises supported by the private non-profit Roberts Enterprise Development Fund (REDF) and the federal government's Social Innovation Fund (SIF). REDF has a long history of addressing hard-to-solve joblessness through a social enterprise approach and SIF brings together public and private funding to test innovative community-based strategies.
The social enterprises that were studied included janitorial, street cleaning, temporary staffing, maintenance, retail, construction, and pest control businesses. Regardless of past problems with mental health issues, homelessness, and incarceration, the social enterprises provided hard-to-employ workers with a job and a support mechanism. Support services ranged from job preparation and skills training, to transportation and clothing help.
The evaluation found positive results: participants were engaged and largely satisfied with their experience. Prior to participating in the social enterprise, only 39% of participants had worked for six months continuously in the previous year. This increased to 67% in the year after the social enterprise job. There were also a number of other positive outcomes for participants, such as more housing stability and an increased share of income from earnings (rather than from government transfers). The evaluation was also able to examine the impact of one of the seven social enterprises by comparing the participants to a statistically matched non-participant group to detect whether the improvements in outcomes were due to the social enterprise job or to something else.
The impact on employment was impressive. The social enterprise group had an employment rate that was 19 percentage points higher than the comparison group (58% vs. 37%, respectively) at the one-year follow-up point. An impact of this magnitude, if it is real, is unheard of in social service program research. Even though the study's sample sizes were small, and the comparison group design leaves selection bias as a small concern, the results show a great deal of promise. They demonstrate that a social enterprise business can have a large positive impact on employment for workers who have trouble getting and keeping a job. The study should be replicated with a larger sample size and use a random assignment evaluation design in order to confirm these results.
To be fair, the results were not all positive, confirming that people with employment difficulties are hard to serve. Participants were no better off financially (the increase in earnings was offset by a decrease in government benefits), and the businesses operated at a small loss during the period of the study. But overall, the cost/benefit analysis found positive benefits to society as a whole, and to the taxpayer, demonstrating that social enterprises can be effective for participants and for society.
The lessons learned should be reviewed carefully, and improvements to the social enterprise model should be made where appropriate. Nonetheless, the benefits to participating workers, and to society at large, suggest that social enterprises may be a better alternative to government-sponsored programs for hard-to-employ people.
