September 2, 2010 | Read Time: 4 minutes
When politicians chat up families at Labor Day events this weekend, they know an economic fix will be on everyone’s mind. As a former member of Congress, I can tell you that this year’s Labor Day conversations will be no picnic.
Unemployment is high. The government is broke. Our politics are so polarized, they are paralyzed. The White House announced a “full-scale attack” to stimulate the lackluster economy and fight joblessness, but no one expects anything to get done before the elections.
As a result, this year’s Labor Day conversations should be realistic about government’s limited role in creating jobs that fortify our economy.
More government money channeled in the same ways will not solve our economic problems.
Ronald Reagan’s famous line suggested government wasn’t the solution, it was the problem. In the last two years we’ve seen a focus on government-led solutions. Without getting in the middle of this ideological debate, I’d suggest there are areas where philanthropy—and community foundations in particular—might be the most immediate, relevant, and responsive solution. Philanthropy is well positioned and financed to help create jobs.
With more than 700 community foundations, their potential impact is great. Giving to community foundations has skyrocketed from $183-million in 1981 to more than $4-billion in 2009. But it takes more than dollars to create the jobs that accelerate and secure economic recovery.
Our focus should be on small business. The National Federation of Independent Business reports that as many as 80 percent of new jobs each year come from small businesses. But small businesses are being choked by lack of access to credit and capital to keep or increase employment. Philanthropy can change that.
Philanthropy has a big job-making toolkit, with new tools added all the time. A few of these powerful tools include donor-advised funds; low-profit limited liability corporations, which are big-minded small businesses; and the National Fund for Workforce Solutions.
In a donor-advised fund, assets are given by donors who recommend how their money is allocated to charitable causes.
According to The Chronicle of Philanthropy’s annual survey, donor-advised funds had at least $16.9-billion in assets in 2009. Most community foundations accept such funds in the range of $5,000 to $25,000, making it possible for average Americans to become philanthropists.
Donor-advised funds can be applied by organizations like the Community Foundation for Greater Buffalo to create jobs.
The foundation works with donors throughout the grant-making process and is working with donors to help improve the economy in Buffalo through job-skills training and job-creation programs. Troubled youngsters are learning entrepreneurial skills as well as energy-efficient construction techniques, which represent the largest and most effective means to create good-paying jobs. The foundation’s efforts helped create more than 10 jobs and provided job training for more than 360 people — an important start in the right direction.
Another new tool in philanthropy’s job creation toolbox is the low-profit limited liability company, often called an L3C. Such companies operate like a business with community economic growth representing its bottom line. Instead of a grant to a nonprofit group, the funds can serve as an investment in job creation that for-profit businesses may be too afraid to make. If organized as an L3C, a foundation can then make contributions as part of its grant making. If profitable, the grant is repaid and recycled into a new business enterprise.
Recognized for their potential in stimulating the economy, L3C’s have now been approved in seven states and are being accepted by more community and business leaders as a creative job-creation solution. Robert Lang of Americans for Community Development expects a new L3C in North Carolina to help a furniture manufacturer create 100 new permanent jobs by supporting a facility rehabilitation.
The National Fund for Workforce Solutions is another way to generate jobs by putting to use the collective capital of many community organizations.
When a local paper-industry employer in South Wood County in Central Wisconsin was sold and the headquarters relocated, it resulted in a 40-percent spike in joblessness. Eleven local grant makers joined with area businesses and other organizations to help the local economy stay competitive and build a new, more highly skilled manufacturing work force.
About half of the 8 million jobs lost during the economic downturn were in construction and manufacturing, The Economist magazine reports. These workers must have access to new training for high-demand jobs, including education, health care, clean energy, and advanced manufacturing. It is critical to our economic recovery.
The Obama administration recently recognized the powerful potential of the work-force fund when it awarded the organization a two-year, $7.7-million Social Innovation Fund grant that will be matched by an additional $13-million provided by 24 communities. It will help at least 23,000 people gain the skills to meet the needs of more than 1,000 employers.
Philanthropy is working harder and more creatively than ever to put Americans back to work—and not a moment too soon. These innovative approaches not only build a community’s assets but also strengthen the entire community in the process.
It’s a recipe for long-term prosperity that will ease election-season conversations at Labor Day picnics for generations. And unlike our paralyzed politics, philanthropy is getting something done in community after community across America.
