An Employment Solution Both Parties Can Support – Christina Garcia

What do social policy researchers, Marco Rubio, Paul Ryan and President Obama have in common? They all support the earned income tax credit as one solution to reduce income disparity for hard-working Americans.

REDF believes a job is more than a paycheck and REDF’s Mathematica Jobs Study (MJS) shows us the power of employment. More than creating employment opportunities, to make work pay, we must improve policies, like the earned income tax credit.

REDF invests money and expertise in social enterprises, or mission-driven businesses focused on hiring and assisting people who are willing and able to work, but have the hardest time getting a job. Social enterprises offer on-the-job soft and hard skills development, providing employees with job placement services, counseling and life stability supports such as food security and financial education. In doing so, social enterprises enable people to realize their full potential and establish a path to employment.

Continuing our commitment to social impact, REDF commissioned the MJS, a first-of-its-kind report conducted by the internationally known research and evaluation firm Mathematica Policy Research to evaluate social enterprise’s success. Thank you to the seven REDF portfolio groups that were in the final MJS report, including 285 social enterprise employees.

The study shows social enterprises improve lives and society’s return on investment is more than double.

REDF social enterprises employ people that face multiple barriers to work and, on average, are less ready to work than others seeking employment services from the same organizations:

  • 25 percent had never had a job
  • 85 percent did not have stable housing in the year before starting the job
  • Only 23 percent of their monthly income came from work, with 71 percent coming from government benefits

Nearly one year after they started working at a social enterprise, the MJS found employees were more likely to still be employed and have greater economic self-sufficiency and life stability than before they were hired. One year later:

  • Social enterprise employees were more likely to have a job compared to those that were not hired and only received job readiness and search services
  • Monthly wage and salary income increased an average of 268 percent
  • Income from government benefits went down from 71 percent to 24 percent
  • Housing stability tripled

This report confirmed what we all expected. People are working hard in mission-driven businesses, becoming more self-sufficient, and participating in the economy – making work pay for society. Each dollar spent by the social enterprise:

  • Produced benefits worth $2.23 for society as a whole
  • Generated, on average, 97 cents in business revenue, reducing the burden on philanthropy & government to subsidize wages and pay for programs

So what’s the catch? Social policy researchers, President Obama, Paul Ryan and Marco Rubio agree –too many people are working hard, but work is hardly paying. While social enterprises produce positive benefits for society and government, for workers it’s not as clear. On average, the workers’ gains don’t exceed their losses, primarily from decreased government benefits and increased costs of improved self-sufficiency. Currently, workers only receive a positive return when they are earning a higher income. In order to do this, workers need stable employment, opportunities to increase their skills, and economic support while they are investing in their futures.  This is where the growing dialogue and interest in expanding the earned income tax credit becomes critical. Expanding EITC to single adults and smoothing out the “benefits cliff” can give hard working people the extra they need, as little as $500 in many cases, to keep them going as they enter the labor force.

REDF believes in making work pay. Building on the MJS results, REDF is joining the effort to find policy solutions that will provide workers with the right economic incentives to make self-sufficiency achievable. We have a moment of opportunity, a growing momentum of increasing minimum wages across the country, bipartisan interest in increasing economic equity, and evidence, like MJS, that shows its time for us to come together to make work pay for everyone.

You can find the highlights and the full MJS Final Report on our website.

This report is based upon work supported by the Social Innovation Fund, a program of the Corporation for National and Community Service. The Social Innovation Fund combines public and private resources to grow the impact of innovative, community-based solutions that have compelling evidence of improving the lives of people in low-income communities throughout the United States. REDF was a 2011 SIF grant awardee.