Employers spend time and resources to recruit and train employees, making their employees a vital investment — so retaining employees is priceless. However, keeping all of your employees during an economic fallout is challenging. The unemployment rate abruptly rose to 14.7% in April 2020. At the same time, the pandemic has shown that many small business face real challenges in retaining their staff during unforeseen financial crises. The pandemic’s magnitude has caused many business owners from coast to coast to pivot rapidly, make swift transitions, and struggle to reopen safely for their customers and teams.
At the same time, high-quality jobs can create real short- and long-term cost savings for a small business’ bottom line. Not only that, quality jobs provide working people with greater financial security, enhance productivity, and support professional and personal success.
On the path to recovery, the federal government has a unique opportunity to rebuild a more resilient American workforce by enacting policies that promote employee ownership and improve workers’ job quality. It can also promote greater transparency and accountability among employers and leverage its buying power to create better jobs for millions of out-of-work Americans.
PCV’s expansive discussion paper – Meeting The Moment – examines how impact investing policy can be used to help private capital address inequality and support COVID-19 recovery efforts in the U.S.
Without proactive measures by the federal government, the financial crisis will result in long-term spending in unemployment and homeless benefits to those in need. To resolve this longstanding crisis, we provided three ideas that encourage support to employee-owned businesses, enhance businesses’ resiliency to economic fluctuations, and increase wealth-building opportunities for frontline workers.
1. Enhance Capacity of Revolving Loan Funds to Support Cooperative Small Business Models
The policy’s goal is to create and retain jobs while supporting employee-owned businesses and increase the capital available to small businesses.
Revolving Loan Funds (RLFs) for small business development in the U.S. are typically administered at the local level and funded in part by the federal government through the Department of Commerce’s Economic Development Administration (EDA). These pooled, self-replenishing funds offer a sustainable source of flexible and low-cost gap financing for small business development and expansion projects. Currently, the EDA does not have the flexibility to support worker-owned business models. The personal guarantee required to qualify for EDA-sourced financing excludes businesses owned collaboratively, rather than by one individual. At a federal level, Congressional action can allocate additional funding to the EDA while, simultaneously, EDA could adjust their guarantee standards to accommodate existing employee-owned businesses and encourage new employee-owned businesses to access RLFs.
2. Implement Federal Procurement Standards on Job Quality
This policy would drive more capital to businesses that provide good, quality jobs for workers. It will prioritize job quality at the federal level, incentivizing business owners to improve quality jobs in historically underinvested communities, enabling wealth-building opportunities.
Under the Federal Acquisition Regulation, federal procurement is governed by the rules and regulations. Although several clauses exist around the equal opportunity for businesses applying for public procurement contracts, the clauses lack specificity on the quality of jobs created by the contracting party. including mandatory reporting on job quality metrics as part of the federal procurement process, could incentivize businesses to prioritize job quality and drive capital towards businesses with minimum job quality standards. Working Metrics, a data-driven workforce analytics company, can address the challenges surrounding job quality.
3. Increase Support for Technical Assistance and Financing for Employee-Ownership Transitions
This policy will drive more capital to employee-owned businesses while championing employee-ownership at the federal level. In the foreseeable future, businesses will become more resilient to financial fluctuations while increasing wealth-building opportunities for frontline workers under an employee-owned structure.
With the establishment of employee-ownership centers in a few states, these centers deliver financial and technical assistance to businesses transitioning to broad-based ownership. In 2017, the Massachusetts Center for Employee Ownership helped small business owners set goals for transitioning to employee ownership, conduct a valuation and feasibility assessment, and connect with relevant service providers to assist in completing the transition. Amidst support from the federal government, awareness of employee ownership structure and access to capital can support employee ownership transitions. The government can finance new centers and support existing state and local centers for a more significant impact.