Column: Big ideas needed for small enterprises
ASSETS Executive Director, Jessica King, wrote a column for LNP discussing poverty alleviation and the creation of the Great Social Enterprise Pitch. To view the column, in it’s original format, on LNP, click here.
I have failed at my job.
I am executive director of an economic development organization whose root mission is poverty alleviation. But in our city of 60,000 people, the poverty rate has increased 50 percent over the past decade.
To my credit, I’ve only been in my role for a few years and have spent most of that time developing new programs and shaking the trees for funding in response to government cuts.
Those in the nonprofit sector know we can’t do it all, especially with underfunded organizations and a historic “charity mindset” that works to alleviate symptoms rather than create empowered, intelligent, coordinated approaches to structural change.
Government isn’t solely to blame.
Lancaster city consists of a tax base in which 30 percent of the population lives below the poverty line. And 65 percent of the city budget is spent on the police and fire force and their rapidly escalating pension costs. Most of those public employees also live outside the city, which removes a middle-class demographic from a population that skews heavily toward poverty.
The city’s main way to increase revenue is through property taxes on a geographically constrained and nonprofit-heavy (i.e. tax-exempt) tax base. There is only so much it can do to proactively fight poverty.
To the point of individual responsibility (while this might sound like heresy in a conservative community like Lancaster), pulling oneself “up by the bootstraps” is virtually impossible if you don’t have boots.
The roots and depths of poverty are deep and depend on the individual (both those in poverty and those exploiting the poor), the community and political and economic structures.
In light of the challenges faced by the nonprofit sector and government, I believe the largest opportunity in the fight against poverty might be in the private sector. After all, it is the largest segment of our economy. In 2014, government represented 13 percent of the U.S. economy and nonprofits somewhere around 5 percent — leaving the vast majority of economic activity in the private sector.
While the federal government stagnates and nonprofits work to align our scarce resources, short-term hope lies in private-sector businesses that operate with multiple bottom lines; not maximizing profit at all costs, but also considering the sustainability and health of the community as a whole when making business decisions.
We need more companies that are innovating to fill gaps in the market. We need consumers who think about where their goods and services come from and how their spending decisions contribute to the problem or to the solution.
Most importantly, we need businesses that pay living wages and work to employ those in our community with barriers to employment or those who are working at minimum (or poverty) wages. After all, the surest path out of poverty is a good job.
Through our traditional work with underrepresented entrepreneurs, Assets helps people create their own jobs through self-employment. This includes training and innovative lending for those who can’t access traditional capital.
Last year, we launched with Lancaster County Community Foundation the Great Social Enterprise Pitch, an idea incubator and business planning competition to spur private-sector social enterprise growth. The hope is that these local social enterprises will create new economic opportunity.
In the past year, we have also been able to attract new government funding to make a low-cost loan of over $500,000 to a local social enterprise working to create “thriving-wage” (a step above living wage) jobs in Lancaster city. As that loan is repaid, it will be recycled to make more impact loans supporting job-creating social enterprises in areas where jobs are needed most.
The “social return on investment” of this kind of work is significant: For every dollar spent by a social enterprise, over $2.23 is returned to society in total benefits, primarily by reducing the cost of public assistance to those who were trapped in poverty and are now employed at family sustaining wages.
So while this type of lending might not have a huge financial return to Assets, the net value to the community is tremendous. We expect the capitalization of this loan pool will amplify the efforts of entrepreneurs to make a deeper financial and social impact in the local economy.
We can’t afford to fail in the fight against poverty. This means aggressively seeking new approaches, assessing impact and quickly adjusting course when needed.
We have to do this work differently if we want to see different results.
Jessica King is executive director of Assets Lancaster, a nonprofit that provides “microenterprise” support, teaching entrepreneurs how to start and grow early stage companies.