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WORK INTEGRATION SOCIAL ENTERPRISES

IN THE UNITED KINGDOM

Mike AIKEN

Roger SPEAR

WP no. 05/01

This paper is part of a larger research project entitled "The Socio-Economic Performance of Social Enterprises in the Field of Integration by Work" (PERSE). The PERSE project involves researchers from eleven EU countries and is coordinated by Marthe NYSSENS (CERISIS, Catholic University of Louvain). It is financed by the European Commission (DG Research) in the framework of the Programme "Improving the Human Research Potential and the

Socio-Economic Base."

2 3 SOCIAL ENTERPRISE AND WORK INTEGRATION IN THE UNITED

KINGDOW

Mike Aiken and Roger Spear, CRU, Open University, UK

1. INTRODUCTION

1.1. Labour market context in the UK

The UK has a relatively low ILO unemployment rate by international standards. In April - June 2002, for example, it stood at 5.1 per cent, which was lower than Japan, the USA, Germany and France and below the EU average of 7.7 per cent. Seven EU countries, however, did have lower rates. When unemployment for under 25s is considered, the UK fares slightly worse, ranked ninth amongst EU states, with a rate of nearly 12 per cent over the same period. Amongst the unemployed, certain groups face much more disadvantage than others. Indeed, as is shown below groups such as women, particularly those with young children, people with disabilities, those with low qualifications and ethnic minorities face particular disadvantages. As well as low unemployment the UK also has one of the highest employment rates in Europe. This success with regard to unemployment/employment rates is substantially a result of policy measures introduced during the Thatcher period of government to deregulate the labour market, and reduce the power of trade unions. The result is a more "flexible" labour market, but one with less protection for workers. At the same time, as in the rest of Europe, there has been an increasing differentiation of employees in terms of skill levels and pay. In contrast, deregulation with different shorter apprenticeship paths has led to less protection of professions and occupations, and some concern that in general the skill level of employees has declined. This concern arises despite a government emphasis on skills development, and a broader definition of what is meant by "skill" so as to include the softer skills as in customer relations, and the requirements of many newer occupational groupings. This greater variation in both pay and terms and conditions of employment has led to concerns that at the bottom end of the skill spectrum, there is the risk of a relatively low- skilled "underclass" moving in and out of marginal, poorly paying jobs, with little employment protection, poor pensions, and limited employment benefits. As unemployment has fallen, there has also been a need to focus more on these socially excluded segments of society and their communities. In general the niche that social enterprise initiatives for work integration occupy is that of addressing the problems the most disadvantaged groups in society have in integrating into the labour market. At this point it is worth summarising some of the key data on the UK labour market with an indication of the trends. The employment rate was 74.8 per cent amongst people of working age in the period April - June 2002, representing 28.55 million persons. This has remained relatively stable, with the seasonally adjusted rate remaining within the band 74.5 to 75.0 per cent for the two years preceding this period (ONS Labour Market Trends, Sept 2002). The ILO unemployment rate was 5.1 per cent in the April - June 2002 period, representing

1.54 million persons, which was below the EU average in June. The UK rate represents only

a 0.1 per cent increase on the same period in the preceding year. The seasonally adjusted trend has been generally downward from 5.6 per cent two years earlier but with a slight rise 4 in 2002. The claimant count, often used within the UK as a headline measure of unemployment, was just under one million or 3.1 per cent in July 2002 (ONS Labour Market

Trends, Sept 2002).

Disadvantaged groups in the labour market

Despite an overall "healthy" low rate of unemployment, pockets of high unemployment remain and some of these may represent good opportunities for social enterprises.

Unemployment figures

Long term unemployment: Taken here to mean those ILO unemployed for over 12 months, it has

fluctuated widely over the last decade, falling from nearly 0.9 to under 0.5 million men between 1987

and 1991 but then rising up again to just over 0.9 million by 1993. It has affected significantly greater

numbers of men than women and tends to be a bigger problem for people in their late 50s and early

60s (Pullinger and Summerfield 1998: 16). From 1994 it has declined steadily in successive years

from a total then of 1.483 million (spring quarters) to 0.763 millions in 2002 but with the first slight

increase occurring in 2002 (ONS Labour Market Trends, Sept 2002: Table C1). Young workers: While the number of those persons ILO unemployed for between six and twelve months was unchanged for younger workers, between 18 and 24, in the period June 2001-June 2002, the ILO unemployment rate actually rose, which was represented by an increase from 16,000 to

395,000 persons (ONS Labour Market Trends, Sept 2002: 448).

Women"s employment: Employment rates by gender continue to differ widely with the narrowest differences found in the younger age ranges. Women"s employment rates are affected markedly by the age of their dependent children, rising from just over 50 per cent to 70 per cent when the youngest dependent child reaches school age (ONS Labour Market Trends, March 2002: Table 2). Lone parents: Lone parents are predominately women; figures from 1997 show 1.7 million women and only 0.2 million men in this category. While lone parents with dependent children make up only a small proportion of the total unemployed, both female and male lone parents tend to face higher unemployment rates than is the norm for their gender (Pullinger and Summerfield 1998: 1). Ethnic origin and unemployment: Differences in ILO unemployment due to ethnic origin were

significant with the rate in spring 2002 for White British (excluding Northern Ireland) standing at 5

per cent while the rate for all ethnic minority groups was just over double at 11 per cent (ONS Labour

Market Trends, Sept 2002: Table 1).

People with low qualifications: Educational qualifications have an important effect on the degree of people"s economic activity. ILO unemployment rates for those with higher education qualifications were only 3.4 per cent for men and 2.3 per cent for women in 2002, while for those with the lowest levels of qualifications these figures were 9.4 per cent and 4.8 per cent respectively (ONS Labour

Market Trends, June 2002: 300).

Disabled people: The ILO unemployment rate for disabled people was nearly double than that of the able bodied in spring 2002. There were about seven million disabled people of working age with roughly equal numbers of men and women. About half of the disabled were economically inactive and nearly a third of these wanted a job (ONS Labour Market Trends, Sept 2002). Other groups disadvantaged in the labour market: Many other groups face disadvantage in gaining, or sustaining, employment. People who are homeless or insecurely housed, those who have engaged in substance misuse or suffer from addictions and ex-offenders all face difficulties in the labour market. 5

Labour market policy

Much of the UK"s labour market strategy is based on improving the efficiency of its market operation through: improving information (employers and employees), improving skill levels through training, improving access and mobility (by making it easy for employers and employees to relocate), and improving the matching process - jobs with people (through public and private agencies). However with lower unemployment, concern for those suffering social exclusion has led to approaches that deal with a variety of interacting problems. This has resulted in an emphasis on more active labour market policies for these more disadvantaged groups. One of the most important trends in policy has been an increasing recognition that many government programmes have failed to make the necessary connections between training and employment. This has led to an emphasis on much tighter linkages between training and employment, both in the design of programmes, and through partnerships with employers of various types. These developments have opened the field for work integration initiatives, particularly for the more disadvantaged (and disabled), albeit on a relatively small scale.

1.2. Types of social enterprise studied in the PERSE project

The basis for studying UK social enterprise in this project was previous studies which had used the EMES criteria to identify the range of organisations that could be considered social enterprises. Various categories of social enterprises had been defined; however, further inspection revealed that these categories, in general, were derived from self-organising, self- defined groupings of organisations (for example, "social firms" are defined by a federation as having certain characteristics but these characteristics are not based on legal or firmly established criteria). Therefore it was found that the boundaries of each category were not clear-cut. Nonetheless, there was no other route to determining a population of social enterprise from which to select our sample; and this self-defining population had the advantage that at least it was recognised by many activists and decision-makers. Despite the blurred boundaries between these types (see below), an attempt was made to select from this population social enterprises that were diverse and yet as far as possible typical or sufficiently numerous not to be idiosyncratic. The other important major criterion was that they should be associated with work integration - in other words, only work integration social enterprises (WISEs) were selected. Thus for the sample for the PERSE project in the UK, six types of social enterprises were identified as having a substantial area of activity concerned with work integration. The sample was drawn from: - worker co-operatives (including social co-ops); - community businesses; - social firms; - intermediate labour market organisations (ILM 1); - quasi-state social enterprises; - voluntary organisations with employment initiatives.

1 Intermediate labour market organisations provide transitional employment for people whilst training them and

providing them with real work experience, often on government contracts for refurbishing housing or community environmental areas. 6

Diversity of organisational forms

One interesting finding was the wide range of types of organisations involved in work integration: WISEs included autonomous organisations largely concerned with work integration; holding structures with work integration as one arm; virtual organisations managing several projects; organisations dominated by service provision but with work integration as part of the supply chain... Determining the unit of analysis for such a study was not straightforward, but by encompassing this diversity the study has been greatly enriched.

Production/service sectors of the WISE

The patterns of productive activities are shown in table 1. The major area of activity is in recycling, followed by IT (Information Technology), childcare and transport. This classification masks considerable differences; thus for example in recycling some WISEs are contracting with local authorities, while others are trading directly with the public. Nonetheless there are also similarities in that many of these sectors involve the public sector in some capacity, either as suppliers or markets. In addition, a common feature is that many products or services are value-based, such as recycling and wholefoods. In this context there may be first entrant advantage, where activist organisations move early into service provision (such as in ecological services). As early service providers, they establish good relations with consumers (and good knowledge about the sector), and are more easily able to subsequently mainstream the service provision (e.g. HCT moved from community transport to regular bus transport; ECT moved from voluntary recycling services to municipal authority contracted services).

Table 1 - Production/service sector

WISE Production/service sector

1. Recycle IT Recycling (computers)

2. Springboard Recycling

3. Bolton WISE Recycling (white goods)

4. Create Recycling

5. Necta Construction

6. Childcare Works Childcare

7. FRC Furniture supply/Recycling

8. ECT Transport/Recycling

9. HCT Transport

10. Daily Bread Organic/Wholefood

11. Magpie Recycling

12. G/Fingers (ShawT) Horticulture

13. GWork ENprove Landscape/IT

14. Factory Childcare/IT

15. Remploy IT/Electronics

Some social enterprises (ILMs especially) are scaling up their work integration capabilities, as well as diversifying within the field to provide a bigger portfolio of services to meet participants" work integration needs (e.g. placements). In some cases this kind of development has arisen from responsiveness to participants" needs (an example is HCT moving into mainstream transport to provide jobs for its successful trainees); in other cases it 7 is market-led (e.g. ECT is moving from recycling to adjacent markets such as street rubbish collection). Several social enterprises regard the European WEE directive on end-of-life disposal of electronic equipment as important for future markets. Types of WISEs and work integration services provided In the UK there is a huge diversity of WISEs: on the one hand there are large intermediate labour market organisations (ILMs) which take in up to two intakes of recruits per year and so have large numbers of participants (e.g. Enprove Groundwork); on the other hand there are some WISEs which have, in addition to their disadvantaged workers, substantial numbers of core staff engaged in production activities or other services (Springboard), and smaller WISEs (such as Magpie or Daily Bread) with relatively few participants, although they offer long term jobs. The range of work integration services in the WISE varied according to the type of contract offered to participants: transitional vs. permanent; and according to the type of training provided: formal vs. informal training. Thus ILMs specialised in transitional employment and formal training whilst worker co- operatives only provided permanent jobs with informal training. Others had a training programme, and employed some of the successful trainees permanently. In addition some social enterprise had, and were continuing to develop, more comprehensive employment services such as placement services

2. THE WISE AS A MULTI-STAKEHOLDER STRUCTURE

The majority of the WISEs studied are multi-stakeholder organisations, the only exceptions being the two worker co-operatives which have single stakeholders (workers) and the para- statal organisation, Remploy (which is 100 per cent owned by the state but where the board comprises diverse professionals and business people).

2.1. Legal form as an indicator of the stakeholder diversity

In the UK, the legal form is not a good indicator of stakeholder diversity. As shown in table

2, almost all social enterprises in the UK are registered as companies limited by guarantee

(CLG) or as Industrial & Provident Societies (I&PS); these legal structures are only used for social economy organisations. The choice between these two legal structures may in many cases be made on the basis of cost (CLG is cheaper) or values (I&PS is traditionally more associated with the social economy and through its registrar offers more protection for social enterprise values). The only WISE studied that does not use these legal structures is the para-statal, Remploy, which uses the "company limited by shares" legal structure. 8 Table 2 - Legal and organisational form as an indicator of the stakeholder diversity

WISE Abbreviation CLG or I&PS Charity or owned

by charity Co-op / community business/ social firm / ILM

1. Recycle IT RIT Yes No Social firm

2. Springboard SB Yes Charity Social firm

3. Bolton WISE BW Yes Charity ILM

4. Create CR Yes No ILM

5. Necta NE Yes No ILM

6. Childcare Works CW Yes Charity ILM

7. Furniture

Resource Centre FRC Yes Charity Community business

8. Ealing

Community

Transport ECT Yes Charity Community business

9. Hackney

Community

Transport HCT Yes Charity Community business

10. Daily Bread DB Yes No Co-operative

11. Magpie MP Yes No Co-operative

12. GreenFingers GF Yes Charity No

13. GroundWork

ENprove EN Yes Charity No

14. Factory FA Yes Charity No

15. Remploy RE Ltd Co No No

The six forms of social enterprise studied were based on publicly recognised types. As already underlined, on closer examination, these types were found to overlap considerably; thus ILMs were distinctive in terms of the form of work integration (transitional), but organisationally they had community business or voluntary organisation structures; similarly social firms were distinctive in targeting difficult to employ people (especially people with learning disabilities), but they also had community business or voluntary organisation structures. Even reducing the types down to four did not eliminate conceptual ambiguities about the different types of social enterprises; consideration of these ambiguities led to a new way of conceptualising the sector but the original classification is still used for convenience and for ease of communication outside this project. This is discussed further below and illustrated particularly in table 4. In general terms tendencies towards multi-stakeholder governance may be differentiated by type of WISE (see table 3); for example, community businesses tend to have a range of community stakeholders on their boards. However, in other cases, the type of WISEs is not a good indicator of the type of stakeholder governance; this is for example the case of voluntary organisations, which can be either community-based with multi-stakeholder (MS) structures, or single-stakeholder (SS) organisations, served and governed by members of a specific segment of society (e.g. young people) - it has been a strong part of the voluntary sector tradition to specialise in serving specific segments of society. 9 Table 3 - Types of social enterprise and stakeholder governance

Type of social enterprise Stakeholder governance

ILM2 MS/SS (as community business or voluntary

organisation)

Co-op SS

Community business MS (different community stakeholders)

Social firm

3 MS (as community business or voluntary

organisation partnership) Voluntary organisation SS/MS (depending on parent organisation) Private para-statal SS (single public stakeholder, with commercial model of board) The different types are not easy to unravel; empirical investigation was needed to determine whether each type of social enterprise was a multi-stakeholder organisation. As a matter of fact, the ownership structure may apparently suggest single stakeholders (as in the case of ECT and HCT, which were owned by community transport organisations), but board representation may actually be more diverse than might have appeared at first glance. For example, due to co-options, HCT had a board 70 per cent controlled by third sector community transport representatives, with the remaining 30 per cent being co-opted. New formulation of social enterprise structure (UK) While most social enterprises operate a "one person, one vote" system for electing their management boards, the basis for the recruitment of the board representatives differs considerably. This is linked to the extent of membership (those that own and control the social enterprise) which varies from being numerous/widely held to minimal/narrowly held. By "widely held", we mean a large number of members (with votes), in contrast to "narrowly held" - with few members (at the limit all the members are on the board). The extent of membership is not linked to whether the social enterprise is a single- or multiple-stakeholder organisation (this is based on diversity in the membership base), but it does seem to influence the governance system - see table 4 below. Boards may be democratically elected from a membership base - these are referred to as elected (this is more likely to take place in a widely held member structure); or they may be appointed (though nominations will usually be ratified at Annual General Meetings [AGMs]) - these are referred to as appointed, typically through a process of self-replication by the existing board (this is more likely to take place in a narrowly held member structure). Table 4 shows the distribution of the various forms of WISEs on the basis of the type of governance.

2 ILM organisations were found to be similar either to community business or voluntary organisations; we

decided that what distinguishes these for our purposes is that a) on governance, community businesses have a

broader form of democratic governance - where a wide range of community members elect a board and b) on

structure, community businesses supply some services to the community within a holding structure, while many

voluntary organisations have a more closely held membership electing the board, or the board is in effect self-

appointing (where charitable trust form applies).

3 Similarly social firms were found to be similar either to community business or voluntary organisations. In

addition most social firms serve participants with learning disabilities; so we did not study social firms that were

just for people with disabilities; instead we focused on those organisations for disadvantaged or for a mix of

disadvantage/disability groups. 10 Table 4 - Types of governance and form of social enterprises

Governance Form of the social enterprise

Elected Co-ops, community business, member-based

voluntary organisations (some ILMs and social firms)

Appointed Voluntary organisations (some ILMs and

social firms) The formulation in table 4 is still subject to debate and we need to further research the consequences of these forms of governance for social enterprises.

2.2. Existence of a single or several stakeholders

In the sample studied, two thirds of social enterprises had multi-stakeholder structures. As far as the composition of governing boards is concerned (see table 5), the dominant categories are permanent staff at 37 per cent (but this is distorted by worker co-ops - see below), followed by representatives from the third sector, private sector and lastly from the government or local state. Participants in schemes are notable by their absence from boards, though this is slightly misleading since in the worker co-ops they were represented but as workers rather than as trainees/probationers.

Table 5 - Board composition and influence

Members of the board Overall % Strong influence*

Users / private customers 2% 4%

Volunteers 7% 4%

Permanent staff 37% 12%

Participants in schemes 0% 0%

Representatives of the private business sector 14% 27% Representatives from governmental agencies 11% 23%

Representatives from the third sector 17% 19%

Other 13% 12%

* Key staff were asked the extent to which differing groups were seen to exert strong influence over decisions and discussions on the board. As far as the board composition is concerned, it is interesting to examine a subset of the data,quotesdbs_dbs30.pdfusesText_36

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