As the nation’s and California’s unemployment rate remains stubbornly high, one non-profit in the Bay Area continues to create jobs.
For twenty two years, Women’s Initiative, a Bay-Area non-profit organization currently led by CEO Julie Abrams, has been empowering low-income women throughout the Bay Area with training, funding and on-going support to start their own businesses and become financially self-sufficient. Graduates of the Women’s Initiative program are successfully running a wide range of businesses including food services, clothing and accessories, personal services and beauty, arts, business services, cleaning services and other services. In 2009, with the country at the height of its recession, the non-profit organization’s recent graduates reported that they created nearly 2,224 jobs for themselves and others in the Bay Area while the Bay Area was losing tens of thousands.
Here are some additional eye popping statistics – 20,000+ women empowered since inception, 3500 women to be empowered in 2010, five years after graduating from the program approximately 70% of the women are in business and have turned into employers, offering jobs paying an average wage of $16.80 which is twice the minimum wage in California. For every $1 invested by donors, the non-profit estimates that $30 dollars go back into the economy as empowered women pay taxes, hire others and exit the ranks of the unemployed claiming jobless benefits or the welfare system. The non-profit has achieved its success through its five regional offices and ten training locations in the Bay Area.
However, even though Women’s Initiative is possibly the nation’s largest microenterprise training and funding organization, its annual budget stands at a relatively modest $5M with a revolving loan fund of $550,000.
Why are these numbers not at $100M and $11M (20 times larger assuming significant support from the California state government) or $500M and $55M (50 times larger assuming significant federal support), especially given this non-profit’s exemplary performance in creating jobs?
A recent research study of the Women’s Initiative microenterprise job development model by Babson College (one of the country’s leading schools of entrepreneurship) professor’s Elaine Allen, Mary Godwyn and Nan Lagowitz estimated that - “With an average cost of $1,525 per woman served , a $1 million investment in Women’s Initiative’s programs would result in 132 new jobs being created within 12 months and a total of 480 new jobs in five years.” Read full study here.
These are serious numbers worth consideration by any policymaker, corporate entity focused on giving or granting or individual donors. Let’s analyze the impact of a $50M investment in Women’s Initiative programs to be replicated across major metropolitan areas in the United States. Using the data from the Babson College study, a $50M investment in Women’s Initiative programs would create 6,600 new jobs in the first twelve months and a total of 24,000 jobs in the first five years. The cost per job for 6,600 jobs created in the first twelve months would be $7,575. The cost per job for 24,000 jobs created in the first five years would be $2,083.
These numbers have to be put in context. Late last month, the Congressional Budget Office estimated the current price tag of the federal stimulus (American Recovery and Reinvestment Act of 2009) at $814 billion. In addition, the Council of Economic Advisors (CEA) estimated that as of the second quarter of 2010, the federal stimulus had saved and created between 2.5 and 3.6 million jobs. Assuming the high end of this job estimate, the cost per job saved or created by the federal stimulus is a whopping $226,000 in the first twelve months.
There could be many exogenous factors that could have contributed to the high cost per job created or saved by the federal stimulus. One interesting view was espoused by Andy Xie, former Asia-Pacific economist at Morgan Stanley. Mr. Xie, notes in a recent article that there is significant leakage in the federal stimulus due to the nature of the globalized economy. Past federal stimuli have resulted in increased US domestic demand, which in turn have stimulated domestic investment expansion, which then in turn have led to increased job growth. However, he notes that in today’s globalized economy, companies could just expand their investments in other countries with a cheaper cost of labor to meet stimulated US domestic demand. Put another way, a significant portion of the federal stimulus appears to have leaked to countries such as China to meet stimulated US domestic demand leading to anemic job growth and an unsustainable cycle of economic expansion.
So how does the US or state government ensure that the stimulus that it injects into its economy stays for the most part within its borders? One possible solution could lie in the success story of Women’s Initiative and its training and funding model focused on local economies and microenterprise development. In times of high unemployment, policymakers have frequently relegated the impact of nonprofits on the local economy as ancillary and chosen to focus their resources on firing up the for-profit sector at a national scale. The concept of microenterprise development as a source of job creation is recognized by most economists. Many agree that a significant portion of job creation, with some economists quoting figures as high as 70%, comes from microenterprises during an economic downturn. Maybe the targets and allocation for small business stimulus need to be reconsidered with microenterprise development organizations such as Women's Initiative being the primary beneficiary of such stimuli.
Looking into the Women’s Initiative war room, CEO Julie Abrams is not waiting around for policymakers to subscribe to her non-profit’s model to create jobs. She is currently embarking on an ambitious plan to “go national” using a growth model that she points out is “codified, scalable and replicable to allow for efficient and effective growth with systems in place for expansion”. The non-profit is currently seeking to raise $60M from government, corporate and individual donors to launch into 10 new markets. New metropolitan areas being targeted include Chicago, New York, Los Angeles, Denver, Minneapolis, Boston, Miami, Phoenix, Seattle, and Houston. All of these metropolitan areas have been chosen due to three factors (1) geographic diversity (2) dense urban markets with high poverty and robust economic activity and (3) business community and donor base potential.
Women’s Initiative’s operating model, could serve a much larger purpose than its current mission - it could offer a blueprint to stimulate the U.S. economy at a local and grassroots level with minimal leakage of funds to other parts of the globe.
Every effort to reduce unemployment undertaken by our policymakers and political leaders is critical to bringing about a lasting economic recovery in the United States. This author would like to challenge our local, state and federal leaders to take notice of this microenterprise funding and training organization and respond with both monetary and policy initiatives.
To learn more about Women’s Initiative, please visit www.womensinitiative.org. To learn more about the author, please visit www.marinfidelity.com or write to the author with comments at les.santiago@marinfidelity.com
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