The Full Employment Folly

What is America to do when companies are demanding skilled help but the labor market is topped out at full employment? Well, here’s a start: Don’t fall for it.

Our nation is actually underemploying millions of people who want to work and could keep the economy humming. “Full employment” – no matter what the economic definition of that term – does not exist when you consider all these Americans who have been squeezed out of the hiring discussion.

You might say they have been forgotten. They are our neighbors and our friends. Many are moving beyond struggles like periods of jail time and homelessness, poor education, violence in their home, drug abuse and mental health problems.

The sheer size of this target audience should demand attention – on societal grounds, yes, as a country that helps its own, but also on basic economic grounds. The labor force would get a major jolt.

A new study by the American Enterprise Institute finds that nearly 10 million adults and young people are not working but could if given a chance through a business model called “social enterprises.” These are businesses that provide their employees not just jobs but services to help them in life; in turn, the businesses thrive and drive their bottom line while serving a social mission.

This social enterprise investment pays off for society – research shows a return of more than $2 in benefits for every $1 spent. These mission-driven businesses have tremendous potential, and the jobs and training they provide employees are financed by private-sector profit. As people go to work, that means less reliance on taxpayer-supported social services.

And there is an impact beyond the dollars in the lives transformed. With work, people find pride, belonging and social mobility.

Overall, the underemployed are those whose stories get buried in the rosy labor reports each month. People of all races and colors are impacted, but unfortunately people of color face the double jeopardy of institutions and communities that have historically reinforced job barriers. Zoning and lending practices kept many from living in safer neighborhoods with better schools, and “blind testing” still finds businesses offer fewer job interviews, promotions and pay increases to people of color.

Meanwhile in places like Appalachia, the Midwest and the South, changes in the way we farm and develop energy – mostly due to technology, environmental initiatives and changing international standards – led to a lot of white men and women, as well as people of color, losing their jobs. Too many now can’t afford a home in a secure neighborhood, adequate food, decent schools or good health care.

Many middle-aged people have been caught in the crevasse of our economy. Workforce retraining too often does not work for them. If you talk to your neighbors, and not economists, then full employment is not here.

So how do we get more people working?

First, and most critically: Entrepreneurial employers play the most significant role. Right now, in many communities, a flourishing set of small- to medium-sized local businesses with strong roots in the community are providing jobs to people who are overcoming a wide array of obstacles. These employers create a positive culture and environment that encourages and rewards skill building and hard work.

Some of these – the social enterprises – explicitly focus on providing jobs, training and services to people who are overcoming hard times so they can move on and move up. They include businesses like FareStart in Seattle, which provides culinary training and jobs for people with barriers to employment through their restaurants, including three new eateries that will be on Amazon’s corporate campus. Others are successful mainstream companies, like Dave’s Killer Bread in Portland, that make a point of hiring, training and promoting people whose backgrounds might put off other employers.

We need to invest more in the starting up and growth of these enterprises so they grow individually and spread as an economic force. They are becoming an even more relevant part of our society because they not only offer a path into the workforce that actually leads to full employment, but are growing and no longer just serving a few on the margins.

Second, we need more investors to focus positively on companies that invest more in their workforce, particularly the front-line staff. Gardner Denver Holdings, which makes gas compressors and vacuum systems, awarded company shares of $100 million to about 6,000 employees including hourly workers and customer service staff. Pete Stavros of the private equity firm KKR, which controls Gardner Denver, noted that “treating employees like owners and business partners — that’s how you can create value and make this more than just a feel-good story.”

Lastly, we need political and philanthropic leaders to create an environment that encourages businesses to employ people who have faced hard times, and encourage people to work as much as they can.

Real full employment will not only allow many more people to contribute their talents and fuel a cycle of economic growth as they gain more purchasing power; it will save taxpayers money as fewer people revolve through the criminal justice system, the streets and shelters, and the hospital emergency rooms.

If we really want to help the forgotten American, let’s remember the answer that is already working.

Carla Javits is president and CEO of REDF (Roberts Enterprise Development Fund), a venture philanthropy that creates jobs by investing in employment-focused social enterprises nationwide.  

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