A New Status Quo for Workers: Shaping A Good Jobs Recovery from COVID-19
The coronavirus pandemic wiped out 30 million jobs in the U.S. in the first four months, and put millions of small businesses in danger of closing. On the other side of the world in India, an estimated 120 million have lost their jobs. The pace of this economic collapse is so staggering that the Great Depression is the only comparison. And as in previous crises, the most vulnerable and underserved people and places — particularly lower-income workers and communities of color — find their financial and physical health at risk. Indeed, experts fear that the pandemic will reverse the progress out of poverty the world has achieved over the past 30 years.
With a crisis of this scale, the work of community-focused investors like Pacific Community Ventures (PCV) and Upaya Social Ventures has never been more crucial to the low-wealth communities we serve. PCV and Upaya both exist to create good quality jobs, with a special focus on marginalized communities, by investing in small and growing businesses. We provide funding, business advising and access to networks with a goal of building robust, financially sustainable businesses that create jobs and usher in economic prosperity to their communities.
Both our organizations are working towards the same outcome: resilience. At the six-month mark of the COVID-19 crisis, and as we in the U.S. mark Labor Day, we ask, “What does it mean to ‘recover’ when the pre-COVID economy was built on low-paying jobs, systemic racial and economic injustice, 40 years of flat wages, and decades of declining small business formation? When fewer people have living wages and employer-subsidized health insurance? When millions of people have jobs that provide little or no benefits, though they need them more than ever? What would it look like if Labor Day really honored the essential and frontline workers without whom we wouldn’t have food, home deliveries and restaurants, and who happen to be disproportionately Black and Brown?” The answers to these questions have resonance not only in the U.S., but in emerging markets around the world.
Building A Good Jobs Recovery: An Example from India
Over the past few months, Upaya has surveyed a small but diverse sample of jobholders in our India-based portfolio to understand how they have been affected by the pandemic and nationwide lockdown. The findings were illuminating – and perhaps surprising when compared to the public narrative: Three quarters of them had managed to keep their jobs and maintain their incomes. Upaya’s investee companies were doing everything possible to keep paying full or partial wages to their workers. The wages paid by our companies comprised nearly 80% of the total income for these households. Other jobs in these communities were scarce or had disappeared. Without these companies, then, the workers surveyed would most certainly not earn enough to meet their basic needs.
A good example of job preservation in Upaya’s portfolio is the company Tamul, headed by Arindam Dasgupta, based in the northeast state of Assam in India. Tamul manufactures environmentally friendly leaf plates and bowls and employs hundreds of local women and youth. The operation, however, ground to a halt amidst India’s sudden lockdown. Acting quickly, Dasgupta secured a stabilization loan from Upaya, ran a successful crowdfunding campaign, and was able to provide financial assistance to 1,884 families whose employment had been temporarily disrupted. Operations have now slowly resumed with new distancing protocols in place, and nearly 1,500 employees have returned to work.
There is a profound power in backing an entrepreneur with both the financial and moral support that can help them save 1,500 jobs. We’ve worked to take a similar approach to other businesses in our portfolio. Rather than feel overwhelmed by the scale of the crisis, the Upaya team is following a Three Wave strategy: the first wave focused on immediate relief, the second on job preservation and the third on new job creation. This third wave is especially important: We must work fast to create new jobs to replace the millions that COVID-19 has destroyed. To that end, we plan to accelerate new investment commitments and provide targeted support to a new generation of entrepreneurs who will help their communities return to a place of peace and prosperity once again.
This crisis has also shown us that it is not enough to create jobs with yesterday’s templates. That’s why Upaya is working more deliberately to ensure that new jobs include benefits — such as savings vehicles, health insurance and retirement accounts – along with sustained opportunities for advancement. We are also deploying more flexible capital to give our entrepreneurs the leeway to build more durable jobs.
Strategies to support the recovery of small businesses in the U.S.
Upaya’s work in India mirrors PCV’s efforts here in the U.S.: We’ve worked to support our clients by deferring current payments, keeping access to capital open, extending the time horizon of our loans, and advising on ways to pivot business models or reopen safely for their employees as well as their customers.
Since March 1st, PCV has seen a 2,900% increase in daily traffic to our website. We’ve received over 600 loan requests, and our team is fielding hundreds of phone calls from potential clients. While we’ve seen many businesses struggling to survive, we’ve also seen entrepreneurs like Lila Owens, who started a cupcake business out of her kitchen three years ago. Lila used our advising service to get ready to utilize lending capital from us, and added a second location last year in Oakland, CA. While the beginning of the COVID-19 crisis forced her to shut down, she hung onto her workers, worked hard to pivot her business online (using a coach PCV provided), and added a delivery service. When the racial injustice protests began in downtown Oakland, she was able to use that delivery service to meet the growing demand that came her way from loyal customers who wanted to further support a Black-owned business like hers. She has been committed to a good jobs agenda with PCV since she became a borrower, and has increased both the number of jobs she’s offering and their quality, growing from nine employees in 2018 to 29 employees by July 2020. (To help catalyze more investment in entrepreneurs like Owens, we’ve written an open letter to foundations, impact investors and banks asking for their increased support.)
While this crisis has created enormous challenges, it also represents a unique opportunity to change a system where working people deemed “essential” are earning poverty-level wages and live without paid leave or health benefits for themselves or their families. We have to focus on long-term resilience, starting with the workers who are absolutely integral to a functioning society. PCV’s Good Jobs, Good Business model offers the blueprint for rebuilding our economy through dignified jobs and local businesses that create healthy, vibrant communities. And Upaya’s work shows that the geographical context doesn’t matter: A lot of Americans are in the same boat as many folks in emerging countries, with little to no savings and too few tools to navigate the economic crisis. What works in one context works in all.
How Do We Guarantee Good Jobs?
After conducting in-depth research and interviews with leading experts in labor issues, impact investing and the small business sector, among other related fields, PCV identified five core components of a good job. Given that the specific elements of a quality job vary by industry, business size, job function and employee demographics, PCV synthesized a flexible definition. A good job, according to the study, provides at least three of the following five key elements:
- A living wage
- Basic health benefits
- Career-building opportunities
- Wealth-building opportunities (like retirement benefits)
- A fair and engaging workplace (i.e.: one that offers flexible and predictable schedules, solicits employees’ ideas, and helps them understand how their work contributes to the business)
Upaya has a similar mission – to create dignified jobs – and this is a standard to which we hold all our investee companies. By independently and periodically collecting feedback directly from jobholders, we ensure that the following standards are met:
- We support companies whose jobs are available mainly to extremely poor, marginalized communities
- Given the sheer scale of extreme poverty in India, we only invest in businesses that have the potential to create jobs in large numbers (a minimum of 1,000 jobs in seven years)
- All jobs must meet local minimum wage standards and should provide workers a significant increase in incomes (at least 50%) compared to the available alternatives
- The job should enable the jobholder to work in a safe, clean and healthy environment, and should also transparently lay out terms of compensation and day-to-day responsibilities
- Jobholders should have access to the formal financial system (bank accounts) and other benefits such as savings, insurance and retirement plans
The Blueprint To A Good Jobs Recovery
The opportunity to build back in a better way provides a new opportunity for the field of impact investing to step up its game. It also provides an opportunity for business leaders to put their stakeholders and the environment first, and for governments to improve social safety nets, and better regulate capital markets, to reduce their countries’ vulnerability to constant boom and bust cycles.
PCV has been working hard over this past year to help small businesses prioritize employee health and well-being in ways that also boost their bottom lines, using our unique Good Jobs, Good Business model. Pacific Community Ventures’ 2019 Good Jobs Report details how our model empowers small business owners, working people and community-focused investors across the country through a good jobs agenda. That agenda is the blueprint for economic recovery. In 2019 we worked with 770 businesses. Among those companies, 68% grew their revenues, and their median job growth was 11% — surpassing national and state rates which clocked in around 1.2%. Their average wages were $22/hour (full-time); 52% of their full-time workers were eligible for health benefits; 33% were eligible for retirement benefits; and 65% have paid time off.
Upaya is also tracking its key impact indicators closely: With the 17,000+ jobs our investees have created, households have been able to increase their incomes by 94% on average. Over 90% of these employees are happy with their jobs, and 87% report that their income is now more stable than before. More than half of our respondents have been able to significantly improve the quality of their day-to-day lives and pursue their longer-term goals.
These results are promising, and it’s just the start. As we rapidly respond to support small businesses through this crisis, we remain hopeful that we can re-establish the pre-COVID momentum and positive trajectory we had collectively built. We view this as a necessary foundation upon which we can push for even higher standards. What we are witnessing in our portfolios is a sign that more entrepreneurs and workers are starting to prioritize good jobs – a durability that’s needed now more than ever. When we build back from this pandemic and recession, we want all small business owners to have the financial and moral support they need to create the kinds of jobs that uplift their communities to a better tomorrow.
Main Photo: Lila Owens, Owner of the Cupcakin’ Bake Shop. Photo courtesy of the authors.