Breaking the Cycle: Pioneering social enterprises to combat long-term unemployment

06 Jul 2023 – Written by Jimena Madrigal

Summary

Existing mechanisms to combat unemployment, and especially long-term unemployment among vulnerable individuals, have proven inadequate in addressing changing structures of social risk and providing sustainable solutions.
Territoires zéro chômeur de longue durée (TZCLD) is an innovative initiative being pursued in France, which aims to eliminate long-term unemployment in specific territories by creating job opportunities through a unique social enterprise model.
This model matches the skills of long-term unemployed individuals with the needs of small municipalities, and draws upon the French tradition of solidarity and grassroots mobilisation to address the structural obstacles hindering effective combat of long-term unemployment.
By actively manipulating the labour supply and demand to better align with the evolving needs of the community, it is able to foster inclusive growth and social cohesion, ultimately leading to a more efficient allocation of labour resources.
The success of the TZCLD project in France has inspired other countries like Belgium and the Netherlands to adopt similar approaches, indicating the potential for widespread implementation.

Article Photo: Association TZCLD (2023).

Introduction

Western welfare states were conceived in the post-war era with the central objective of reducing the dependency of wage earners and their families on the fluctuations of the market; an innovative attempt to counteract the process of commodification of labour generated by the industrial revolution and the rise of capitalism. In view of these “industrial societies with stable family structures and a clear division of labour between men and women in couples” (Bonoli, 2007) they were generally successful in securing subsistence levels and social cohesion. However, structures of social risk have dramatically changed since the 1970s, and the inability of a family to secure income from the market is no longer the most pressing social risk to which wage earners are exposed. In recent decades, globalisation, technological advancements, and the overall transition to a post-industrial order has resulted in significant social shocks for advanced economies. These shocks have manifested in various forms, including the emergence of the working poor, long-term unemployment, rising poverty and inequality, job insecurity for young people, and vulnerability among women and single-parent households.

The forces of globalisation for one, have reshaped economic structures, relocating production and increasing competition. While this has indeed entailed numerous benefits, it has also resulted in significant social dislocations; notably the emergence of the working poor which constitute around 10% of all workers in the EU (Eurostat, 2023). These individuals are employed but still experience poverty due to low wages, precarious work arrangements, and inadequate social protections, challenging in turn the conventional understanding of employment as a pathway out of poverty. Moreover, technological advancements have further exacerbated the challenges faced by workers in advanced economies. Automation, digitalisation, and artificial intelligence have transformed industries, leading to the displacement of certain jobs and overall changes in the skill requirements of the labour market. Job insecurity has become a prevalent concern, particularly among young people who face uncertain career prospects and frequent job transitions. In April 2023, the youth unemployment rate was 13.8% in the EU (Eurostat, 2023). The paradigm also implies a higher risk for possessing low/obsolete skills.

Another relevant factor is the large-scale entry of women into the labour force shattering the standard division of labour within families, and the growing rate of single parenthood in OECD countries. This often entails financial and logistical challenges, including difficulties in accessing suitable employment, affordable childcare, and support networks. In fact, the OECD single-parent households have a poverty rate of 32.5%, three times higher than their two-parent counterparts (OECD, 2022). For women, the challenges are amplified by the fact that in post-war welfare systems, because of the dominant family structure, welfare programs were concentrated on the male breadwinner and women often did not directly benefit from them, unless they were widowed or in a situation where the breadwinner was no longer there.

Finally, post-industrial society is also characterised by the shift from manufacturing towards service employment. Because of the characteristics of the service industry, being labour intensive and resistant to standardisation/replication, it is generally unlikely to match the productivity increases typical of manufacturing. Productivity improvements are, in turn, key to sustaining economic growth and the slowdown thus increases acute problems for the welfare state, like impeding the growth of wages on which its revenues heavily depend.

Existing mechanisms to combat unemployment, and especially long-term unemployment among vulnerable individuals, have proven inadequate in addressing these changing structures of social risk. They often focus on short-term solutions and temporary measures rather than addressing the underlying structural issues in which the problem takes root. While these policies may provide immediate relief and support, they frequently fail to facilitate sustainable pathways to stable and meaningful employment. France allocates €40 billion annually to unemployment benefits (Gautier, 2023); however, despite this substantial investment, in 2021, a staggering 1.5 million individuals had been unemployed for over a year. The complex challenges faced by vulnerable individuals, such as limited access to education, discrimination, geographical barriers and lack of social networks highlight the need for a radical rethinking of how we approach the problem.

This article will explore the structural obstacles hindering the effective combat of long-term unemployment and examine an innovative approach being pursued in France known as “Territoires zéro chômeur de longue durée” (territories with zero long-term unemployment). The initiative draws upon the French tradition of solidarity and grassroots mobilisation, offering a promising solution by matching the skills of the long-term unemployed with the needs of small municipalities and creating job opportunities through a special social enterprise model. By involving the long-term unemployed in the project’s development alongside local actors, including residents, companies, and elected officials, this experiment seeks to tackle long-term unemployment collaboratively and empower those who have been excluded from the labour market.

The Nature of the Challenge

Long-term unemployment in France refers to individuals who have been unemployed for over 12 months. It is usually expressed as a percentage of the total number of unemployed people in an economy. In France, the overall unemployment rate remained steady at 7.1% during the last quarter of 2022 and the first quarter of 2023 (Insee, 2023). Meanwhile, the long-term unemployment rate for 2022 stands at 27.5%, slightly surpassing the OECD average of 25.4% (OECD, 2022). For the European Union, the long-term unemployment rate in 2020 was estimated at 38.9%, with a minimum of 8.7% for Iceland, and a maximum of 66.5% for Greece (Cedefop, 2022). When comparing long-term unemployment rates across countries it is important to consider institutional arrangements, especially the duration and amount of unemployment benefits which can directly impact the duration of the spell.

Robust findings in labour economics indicate that the prospects of finding employment significantly decrease the longer a person is unemployed (Spinnewijn et al., 2021).

A 2023 study from the Federal Reserve Bank of Richmond, studies the effect of duration of unemployment on job finding prospects using Austrian social security data. They break down the impact of unemployment duration on employment probability into two: ‘Structural Probability’ which encompasses factors like loss of skills during unemployment and discrimination against the long-term unemployed, and ‘Heterogeneity’ which consider the possibility that the long-term unemployed represent a subset of the population that is worse or less energetic in job finding. Figure 1 shows the aggregate effect of the two. “The mixture probability peaks at 4.7% at 9.5 weeks of unemployment, declines to 0.9 percent at a year’s duration and declines further to 0.1 percent at two years’ duration” (Borovičková, 2023). After two years of unemployment, the structural probability is less than a quarter of what it was at the peak” (Borovičková, 2023).

Part of the rationale in the design of the Territoires zéro chômeur de longue durée project and of what is revealed in its early stages, is that most of the long-term unemployed face structural issues that go beyond labor-market frictions. Some individuals face barriers like lack of mobility due to the high expenses associated with car ownership and lacking public transportation. Others find that childcare or care for a loved one requires a time commitment incompatible with business hours. Many are hindered by possessing low or obsolete skills or face discrimination based on gender, and ethnicity. Moreover, the plunge into long-term unemployment is often preceded by a life accident, such as the death of a loved one or a divorce. This creates a vicious cycle which shatters self-confidence and limits the prospects for a rebound, with many falling into poverty. The growing awareness of these circumstances highlights the need to go beyond traditional mechanisms to fight unemployment, and allows for a more informed approach to policy-making in the future.

Beyond the economic strain it puts on individuals, an extensive body of literature across countries connects labour market exclusion to a variety of social ills (Paul & Moser, 2009; Pohlan, 2019) Unemployment can entail significant psychological and social costs that can even persist after the end of the unemployment spell and across generations (Clark & Lepinteur, 2019). “Compared to working individuals, especially the long-term unemployed often suffer from a greater risk of depression, suicide, alcohol abuse and stigmatisation that stresses self-esteem and personal relationships” (Ivanov et al., 2020). Even comprehensive social welfare benefits may not be sufficient to fully offset the negative consequences of job loss, as employment itself holds essential psychosocial functions related to social purpose, status, and identity (Jahoda, 1981; Ivanov et al., 2020).

Understanding variations in unemployment spells, their causes, and the extent to which they are mediated by different social security systems thus becomes a crucial concern for policy makers in addressing a myriad of social challenges and targeting overall market efficiency.

France’s “Territoires zéro chômeur de longue durée (TZCLD)”

Since 2017, France has been experimenting with an innovative way to combat long-term unemployment, looking to address the limitations of traditional approaches. The “Territoires zéro chômeur de longue durée (territories with zero long-term unemployment)” project diverges from the traditional top-down approach, as it is not merely an experiment imposed “for” the people, but rather a collaborative endeavour conducted “with” them and alongside key local stakeholders.

The underlying concept is simple: small municipalities of up to 10,000 individuals engage in a concerted effort to identify individuals in a condition of enduring labour market exclusion. A local employment committee CLE brings together volunteers and local stakeholders like businesses, residents, and elected officials who, through a process of coordination and consensus building, identify activities that can bring value to the local community and complement -not compete with- existing services. The long-term unemployed individuals’ skills are cross-referenced with these identified municipality needs.

A special social enterprise known as Entreprise à but d’emploi (EBE) or job-creation company, hires these individuals recognised as chronically deprived of employment by the CLEs to perform the identified tasks. Contrary to the prevailing stereotype of the “lazy poor,” a significant majority of the eligible unemployed individuals willingly volunteer to work for these specially created companies (Grandguillaume & Planel, 2023). Remarkably, EBEs offer contracts to individuals that have been unemployed for, on average, 5 years. It is also worth highlighting that approximately 25% of the eligible individuals possess some form of disability. EBEs are regular companies that comply with labour laws and practice inclusive management.

The funding approach of the experiment revolves around redirecting passive expenditures associated with long-term unemployment. This entails reallocating public budgets that were originally allocated for these costs towards financing the creation of jobs within the territories. The EBEs effectively convert beneficiaries’ unemployment benefits into the minimum wage (“Présentation du Project”, Association TZCLD, 2023).

The TZCLD project, which is nationally executed through the collaborative effort of several organisations, including ATD Quart Monde, Secours Catholique, Emmaüs France, Le Pacte civique, and the Fédération des acteurs de la solidarité, assumes the crucial role of coordinating and facilitates services like financial assistance (through a dedicated fund ETCLD) for the wages of individuals employed by EBEs, signing agreements with the government, local authorities, and companies involved in the project’s implementation, offering necessary support and guidance to the territories, and conducting evaluations of the experimentation process (Association TZCLD, 2023).

The endeavour is certainly not charity. The services provided through the project are designed to address critical challenges faced by the municipalities. For instance, they work towards accelerating the transition to green practices, enhance food security through horticulture and market gardening initiatives, promote recycling, provide solutions for individuals with mobility impairments, and in some instances, ‘reshore’ industrial activities. As the social enterprise begins to generate revenues, these also serve to cover the costs associated with the initiative (Grandguillaume & Planel, 2023).

Finally, through its experimental nature, the project aims to gather insights and lessons, but also become a source of knowledge creation to inform policy-making and potentially establish a permanent framework for the right to employment. In May 2022 the TZCLD Observatory was launched as a meeting point between fieldworkers and academics. With the participation of close to 70 independent researchers, it is meant to promote evaluation and further research on the project and its social impact (“Rapport Activité 2022”, Association TZCLD, 2023).

It is within the landscape of contemporary pressures facing advanced economies and the resulting change in structures of social risk that the concept of Territories with Zero long-term unemployment emerges as truly innovative. In taking a proactive role in matching available labour with community needs, the initiative recognises the importance of market mechanisms while actively removing some of the agency over the supply and demand of labour from the market. It thus entails a nuanced and efficient way to target the structural constraints and social challenges that go beyond labour market frictions.

Overall, a key takeaway is that the “Territoires zéro chômeur de longue durée” is a project based on three convictions that make it humanly and economically possible to end long-term unemployment at a territorial level. These pioneers believe that:

No one is unemployable when employment is tailored to their abilities and skills.
There is no shortage of work when a wide range of useful tasks, diverse in nature, still need to be carried out, especially when profitability is not the sole determining factor in choosing activities.
There is no shortage of money when long-term unemployment costs society more than creating the necessary jobs to make employment a right.

The experimental approach carried out since 2016 is gradually confirming this (“Présentation du project,” Association TZCLD, 2023).

Successful Pioneers

Ten towns in France have been experimenting with this approach since 2017. As of April 2023, approximately 2,000 individuals who were facing long-term unemployment have found a job through the social enterprises. The experiment has also helped an additional 1,000 individuals find work in the conventional labour market (Grandguillaume & Panel, 2023).

The TZCLD project was envisioned in three stages. The first stage, spanning from 2016 to 2021 and involving 10 initial territories, confirmed the relevance of the initiative and helped identify its funding needs. Stage two, taking place from 2021 to 2026 envisions having at least 60 experimental territories, broadening the scope and implementing lessons learned from the first stage. The third and final stage from 2026 on, is focused on the sustainability of the framework, and hopes to have established the necessary conditions for any territory that wishes to undertake the initiative.

On 14 December 2020, a new law legally established the 10 initial territories and enabled the expansion of the experiment to at least 50 new ones. As of December 31, 2022, an additional 40 territories had been authorised and had emerging projects supported by TZCLD (“Présentation du project”, Association TZCLD, 2023).

Building on the success of the French pioneers, Belgium is experimenting with around 20 territories; they aim to offer jobs to around 750 individuals who have been unemployed for over two years (Wallonie, 2022). In the Netherlands, the Groningen municipality together with an association of 300 local companies, is also testing a basic jobs programme that involves working directly with long-term unemployed individuals. Similarly, Austria is experimenting with a guaranteed job programme in a small town near Vienna (Grandguillaume & Panel, 2023). As new countries continue to join in, one could envision a not too distant future where developing countries will follow suit. This however, poses an additional challenge as they often lack public budgets and institutional frameworks that are essential for the implementation.

A 2023 paper from the IZA Institute of Labour Economics (Kasy & Lehner, 2023), evaluates the impact of the MAGMA guaranteed jobs program, launched in the municipality of Gramatneusiedl, Austria in 2020. Because of the methodology of the study, they are able to draw comparisons between individuals in this programme vs those that remain in the regular unemployment benefit system. The researchers found large positive effects of participation in the programme on economic well-being (employment, income, and economic security). They also found significant positive effects on a number of measures of well-being, including time structure, activity, social contacts and sense of collective purpose. In terms of territorial level effects, their headline finding is a large reduction in municipality level unemployment due to the programme (Kasy & Lehneer, 2023).

Beyond the impact in terms of employment outcomes, one of the main sources of added value that the project offers is in terms of its contribution to policymaker’s understanding of long-term unemployment as a phenomenon; its causes, its different manifestations and the challenges it entails. Finding a suitable job placement for the volunteer individuals requires engaging with them at a very personal level in order to identify their skills and expertise, and take due notice of their constraints and desires. The CLEs recognise that long-term unemployment manifests differently depending on the local job market reality, the person’s possibilities and their needs. They have collectively defined a thorough process to determine which individuals are indeed chronically deprived of employment, taking into consideration the nuances of what that can mean in different contexts (“Referential de l’équipe expérimentale”, Association TZCLD, 2020).

These field experiments together with the research that has stemmed from them help shed light on the realities of long-term unemployment. For instance, The white paper Paroles de Chômeurs ‘Words of the Unemployed’ was published in January 2022, following a five-month survey conducted by the collective, comprising 20 member organisations, including TZCLD (Paroles de Chômeurs, 2022). This initiative aimed to give a voice to jobseekers and shed light on the challenges exacerbated by the pandemic. The survey included 270 participants, and their responses brought attention to the shortcomings of the current support system for job seekers, unveiled the distorted perception of unemployment in public opinion, and showcased the aspirations and capabilities of unemployed individuals. The findings of this white paper were particularly relevant in the context of an upcoming election, as they provide valuable insights for candidates and policymakers seeking to address their needs (Association TZCLD, 2022).

Conclusion

The phenomenon of long-term unemployment poses a significant challenge in contemporary societies, with detrimental effects on individuals and communities. Traditional approaches to combat unemployment have proven inadequate in addressing the evolving structures of social risk and providing sustainable solutions. However, innovative initiatives like France’s “Territoires zéro chômeur de longue durée” offer a promising alternative.

The TZCLD project stands out for its collaborative and grassroots approach, engaging local stakeholders and the long-term unemployed themselves in the process of identifying valuable activities and creating job opportunities. By actively manipulating the labour supply and demand to better align with the evolving needs of the community, it is able to foster inclusive growth and social cohesion, ultimately leading to a more efficient allocation of labour resources. It is important to recognise that ending long-term unemployment goes beyond providing employment; it involves restoring dignity, social cohesion, and well-being for individuals and communities. By challenging the notion of unemployability and recognising the value of diverse tasks, the TZCLD project demonstrates that the cycles of exclusion can indeed be broken.

Moreover, the ongoing evaluation and research conducted by the TZCLD Observatory contribute to the accumulation of knowledge and the potential establishment of a permanent framework for the right to employment, ensuring that future initiatives can build upon the successes and lessons learned from these experiments. Indeed, the success of the TZCLD project in France has inspired other countries like Belgium and the Netherlands to adopt similar approaches, indicating the potential for widespread implementation.

In conclusion, social enterprises like EBEs, operating within the framework of initiatives such as the TZCLD project, offer a promising and effective path towards reintegrating the long-term unemployed into the labour market. By combining collaborative efforts, inclusive management practices, and redirected funding, these initiatives address the underlying structural issues and provide sustainable pathways to stable and meaningful employment. They serve as inspiring examples of how innovative approaches can break the cycle of long-term unemployment and foster social inclusion and economic well-being for all.

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Recommended citation:

Madrigal, J. (2023) Breaking the Cycle: Pioneering social enterprises to combat long-term unemployment, IDRN, 06 July. Available at: https://idrn.eu/breaking-the-cycle-pioneering-social-enterprises-to-combat-long-term-unemployment/ [Accessed: dd/mm/yyyy].