The Emergence of Social Enterprise

Carlo Borzaga, Jacques Defourny

• Publisher: Routledge
• Year: 2001
• eBook ISBN: 9781134526710
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

What are the characteristics of social enterprises? What are the future prospects for social enterprises? What do social enterprises contribute? Analyzing social enterprises in fifteen different countries, The Emergence of Social Enterprise seeks to answer these important questions while investigating the remarkable growth in the 'third sector'. Us

Part I

Social enterprises in the
fifteen EU countries

1 Austria
Social enterprises and new childcare services

Kai Leichsenring

Introduction

The Austrian welfare mix, i.e. the division of tasks among various actors to provide social security and to sustain social cohesion, has been shaped mainly by the following historical traditions and developments: first, the important historical influence of the Catholic church and its social welfare paradigms and, in particular, the principle of subsidiarity; second, the importance of welfare organisations affiliated to the socialist (now social democratic) movement, which favoured consumer co-operatives rather than producer co-operatives; and third, the corporatist approach to state regulation (Sozialpartnerschaft).¹ Another important feature of the Austrian society after 1945 has been the far-reaching ‘pillarisation’, which has created a universe of (welfare) organisations affiliated to political parties or religious entities.

In addition, it has to be underlined that the Austrian system of social security is characterised by an extremely high share of benefits in cash, which make up to 73 per cent of the total social security expenditures, education excluded (Badelt and Österle 1998). Social services and other in-kind benefits to combat poverty and social exclusion are generally organised and funded by the regional governments within their specific Social Welfare Acts.

With respect to active labour-market policies and/or policies against social exclusion, Austria has been, since the 1970s, one of the OECD countries with the lowest rate of unemployment. This has been due, inter alia, to a largely nationalised industry, which was heavily subsidised during the economic crisis of the 1970s. However, the times when Austria had been labelled an ‘island of the blessed’ have receded, and problems connected to unemployment and social exclusion have increased in political importance during the past ten to fifteen years.

In the beginning of the 1980s, the Austrian government, and in particular the Ministry of Labour and Social Affairs, introduced – in addition to traditional training and mobility programmes – specific instruments to support reintegration of long-term unemployed persons into the ‘normal’ labour market. This so-called ‘experimental labour market policy’ included subsidies for projects in disadvantaged rural and alpine regions, the foundation of self-governed firms, and an action programme to create, initially, 8,000 jobs for long-term unemployed by means of subsidies for training, wage subsidies and projects promoted by local governments or non-profit organisations. This latter action programme, which was commonly called ‘Aktion 8,000’, has been the main instrument of the experimental labour-market policy, as it allowed public and non-profit organisations to create new and/or additional jobs in the areas of social welfare services, and cultural or environmental activities.² In 1996, Aktion 8,000 was renamed Public Integration Allowance (GEB, Gemeinnützige Eingliederungsbeihilfe), but its main characteristic remained unchanged. During a pre-defined period of time (usually one year), it provides up to two-thirds of labour costs, as an incentive to create jobs in non-profit organisations. Since 1984, about 50,000 long-term unemployed have benefited from this scheme. Aktion 8,000 (now GEB) assisted the traditional welfare associations, and in addition, the programme helped to create social-economic enterprises (Sozialökonomische Betriebe) in Austria.

This contribution will focus on initiatives that were introduced since the 1980s using the instruments of the experimental labour-market policies such as Aktion 8,000/GEB. These policies have been administered by the Ministry of Labour and Social Affairs and the Labour Market Administration (Arbeitsmarktverwaltung). The latter was partly privatised in 1994; it is now called the Labour Market or Employment Service (AMS, Arbeitsmarktservice).³ In the first section we will provide an overview of the newly emerging initiatives, projects and enterprises. We will focus especially on different types of work-integration projects. In the second section, the definition of social enterprises in Austria will be examined. The third section will then focus on one particular area of personal social services, namely childcare, in which social enterprises have helped to create new jobs, to promote new ways of delivering services and, at the same time, to fight social exclusion of disadvantaged groups.

1 Traditions of local co-operatives, socio-economic enterprises and social welfare associations

To analyse the emergence of social enterprises in Austria, it is necessary to distinguish different, sometimes overlapping, spheres and the development of intermediary organisations. Such bodies help to maintain the social fabric, to reintegrate special target groups into work and/or society, to cover areas in which merely market-oriented organisations are not active, and to offer complementary responses to statutory measures. Several types of initiatives can be considered as ‘social enterprises’ as defined for the purpose of this study. In this section, we will focus more specifically on those that can be described as work-integration enterprises.

Self-governed local employment initiatives

The first kinds of organisations can be defined as self-governed local employment initiatives. Self-governed producer co-operatives can be classified among these. Since the beginning of the 1980s, when structural unemployment started to increase, and governmental subsidies for such projects were provided, some local initiatives of this kind came into being. They were particularly influenced by OECD programmes with respect to rural development and local employment initiatives (BMSV 1984). For instance, several craft firms in structurally weak regions that were threatened with bankruptcy were transformed into cooperatives to secure jobs. This development was followed up by the foundation of two quasi-public consultancy organisations specialising in such initiatives, as well as in consulting services for other non-profit organisations. Initially, the emphasis of these initiatives was much more on autonomy and self-government than on employment as such (BMSV 1984).

These initiatives obtained rather good results in terms of employment, but a steady increase of their number and a dissemination of the values of self-governance could not be achieved. An evaluation of twenty-nine such co-operatives (crafts, tourism and culture, trade and services) which had been founded between 1981 and 1991 and supported by active labour-market policies demonstrated the following (Paulesich 1996):

• usually, the co-operatives had started as associations that held the largest part of limited liability companies, but they had evolved into conventional firms (with single owners), limited liability companies with external partners or even public limited companies;
• with respect to returns on investment, personnel costs and cash flow, all cooperatives showed positive results. Problems existed with respect to liquid assets;
• the original employment objective was achieved in twenty-two of the twenty-nine co-operatives and especially, in small industrial firms, where the labour force increased;
• interviews with the current management showed that the ‘co-operative idea’ that had initially guided the organisation had eroded. While nineteen firms had been founded on grounds of self-government, only nine mentioned this guiding principle at the time of the survey. This might be due to the fact that more than 50 per cent of the founding members had left.

The general climate of co-operation was reported to be satisfactory, and the instrument of self-government was characterised as an important mechanism to improve the quality of working conditions and, in particular, to facilitate the foundation of a new enterprise (Paulesich 1996).

Social-economic projects

A second category of organisations that has developed within the realm of experimental labour-market policies arose from socio-economic projects aimed at providing (temporary) employment and training for disadvantaged groups (homeless, young unemployed, women, people with disabilities). These projects have often been initiated by social workers, particularly in areas such as environmental activities, culture and social services. Even if the target groups are heavily disadvantaged on the general labour market, the main aim of these projects is to provide transitory assistance and to reintegrate their trainees or clients into the general labour market. Unemployed persons thus receive training to qualify or requalify for jobs through apprenticeships or other means leading to qualifications for trades and services.

However, many of these projects have become established enterprises – a fact which is reflected in their new identity as so-called Social Economic Enterprises (Sozialökonomische Beschäftigungsbetriebe). Although their commercial performance is somewhat reduced by the fact that most workers try to leave the enterprise after a limited period of time, the commercial aims of these firms are part of their basic philosophy. This is expressed, for instance, by their organisational and legal form as limited liability companies (GesmbH). These projects or firms are, on average, recouping about 37 per cent of their costs from their economic activities. About 48 per cent of the overall budget of about 400 millions Austrian Shillings (about 29 million Euro) is co-funded by the AMS, and the remaining 16 per cent is covered by provincial governments and – since 1995 – increasingly by the European Social Fund (AMS 1997).

In 1996, there were forty-five such enterprises offering 719 jobs to 1,606 temporarily employed persons. In addition, about 315 persons, the so-called ‘key staff ’, were employed. The number of projects remained stable in the past six years, while the numbers of key staff and temporary staff increased (by 25 per cent and 40 per cent respectively) between 1992 and 1996. As far as the gender and age structure of staff is concerned, it has to be noted that, interestingly enough, the number of women in these enterprises is relatively low (about 30 per cent). About one-third of the transitory staff are under twenty-five, and about 21 per cent are over forty (AMS 1997).

With respect to the performance of these social economic enterprises, two aspects have to be considered. In the first place, figures for the employment effects, in terms of transitory staff who left the enterprises during 1996, show that on average, about one-third of the workers were transferred to the general labour market; about 8 per cent went into further training; 27 per cent left the firms as pensioners, on family leave etc; and 31 per cent left the firms but remained unemployed. The overall average, however, tells only part of the story. In reality, there are huge differences between the individual firms and between provinces. For instance, the proportion of persons who re-entered the labour market during 1996 ranges from 23 per cent in the five social enterprises in Carinthia, to 56 per cent in the three enterprises in Burgenland. The proportion of persons who had left the enterprises but had remained unemployed during this period is between 18 and 40 per cent (AMS 1997).

Secondly, the economic performance must be taken into account. The selected enterprises generate between 8 and 82 per cent – on average about 34 per cent – of their total budget by their own economic activities. AMS subsidies represent on average 8 per cent, while other subsidies (mainly provided by regional or local authorities) amount to 27 per cent (AMS 1997). Subsidies are needed to cover investments, social and pedagogic support, and unforeseen

events. A study conducted in the early 1990s (Biffl et al. 1996) showed, for instance, that the more or less constant staff turnover calls for special organisational attention by key staff.

Much depends on the type of economic activity and on the type of persons joining (and leaving) the enterprise. For instance, BAN (in the province of Styria) is focusing on homeless persons and ex-prisoners. It provides thirty transitory and fifteen key-staff jobs in the area of environmental counselling (recycling) and clearance of refuse. This kind of work is also offered by the ARGE Nichtsesshaftenhilfe, in Vienna, while Chamäleon (also in the province of Styria) is active in general services (household, gardening etc.) and textiles (patchwork, tablecloth, rugs) and offers fifteen transitory jobs for long-term unemployed girls and women, people with disabilities and former drug addicts.

‘Sheltered workshops Ltd’

In Austria, a special legal status for enterprises with a social aim has been developed only for sheltered workshops. These workshops offer regular employment to persons with disabilities (according to defined eligibility criteria) and function as special forms of limited liability companies within the framework of the Disab...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Contributors
• Acknowledgements
• Introduction: From Third Sector to Social Enterprise
• Part I: Social Enterprises In the Fifteen EU Countries
• Part II: Social Enterprises: A Theoretical Perspective
• Conclusions: Social Enterprises In Europe: A Diversity of Initiatives and Prospects