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PARK June

Role of Social Enterprise to Boost Youth Employment

PARK June

Dec. 28, 2009

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Youth unemployment is a serious issue in Korea. Between 2004 and 2008, the employment rate of those aged 15-29 dropped from 45.1% to 41.6%, meaning only four out of 10 young people have jobs. The remaining 60% comprises not only students but graduates who are seeking jobs, have g iven up their job search or have no desire to work. The percentage of young people neither in employment nor in education or training tend s to be larger in the highly-educated group; 25% of college graduates in their 20s were classified as such in 2005, the highest among OECD member countries.

Why are highly educated people without jobs-One factor is while hiring at large companies remain s sluggish, a growing number of young highly-educated people hesitate to apply for jobs at small-and medium-sized enterprises (SME), which have chronic labor shortages. Around 80% of the workforces that SME manufacturers need are production workers, including machine operators and assemblers. The shunning of SMEs by higher-educated people is a natural outcome of Korea's excess focus on high education.

Youth employment should be addressed as a national issue. It is a social waste for young people to remain jobless after receiving an expensive high education instead of finding work at SMEs. If the situation continues, these young people may face a fate similar to Japan's so-called "lost generation," a group of young people aged 25-35 who failed to find permanent jobs and in the end, fell to poverty during the country's "lost decade" of the 1990s.

Social enterprise can be an alternative for young job seekers rejected by large companies in the face of fierce competition but unwilling to perform production work at SMEs.

Social enterprise refers to social organizations which jointly operate a business to solve social problems. Social enterprise is similar to a civic group in that it is dedicated to solving social problems rather than maximizing profits. The main interests of social enterprises are support for the disadvantaged such as the disabled and children and environmental protection. To achieve their objective, s ocial enterprises engage in profit-making activities, including manufactur ing and sales of products and services, reinvest ing the earnings in social purposes.

Juma Ventures, based in San Francisco, is an exemplary social enterprise that solve s social issues through business operation. The company was originally established as a non-profit organization for the development of young people in poverty. It started ice cream sales business by concluding a franchise contract with Ben & Jerry's, the ice cream maker, in 1994. Through profits earned by ice cream sales, it offers job training and employment for low-income youths, as well as scholarship for college entrance.

Social enterprises do not offer high wages. In the US, social enterprises' annual salary is 60-80% of the national average. Yet, social enterprises can be an alternative for young unemployed people because of the following three reasons.

First, although the main purpose of social enterprises is to employ disadvantage d people such as the disabled and homeless, they do not hire only these people. As a business organization, they also need workers in management, accounting and marketing. These occupations could attract youths who eschew jobs in manufacturing. Second ly, working in social enterprises facilitates younger people's school-to-work transition. While the starting salary is low compared to other companies, it is suitable to new college graduates since most of them do not have to support a family. They can later leverage their work experience in a social enterprise to capture better jobs. At least, working for social enterprises is better than staying jobless in terms of career development.

Third ly, but not in the least, social enterprise offers intangible compensation such as higher self-esteem and self-fulfillment. By working at social enterprises, they can solve social problems related to poverty and the disadvantaged. The sense of self-satisfaction and pride gained in helping make the world a better place to live can exceed monetary compensation. According to a social survey conducted by Statistics Korea in 2006, as much as 43.5% of young college graduates in their 20s said they prized intrinsic reward such as personal interest and self-achievement more than money compensation when choosing a job.

For example, Kang Seong-Tae, a graduate from one of the top universit ies and developer of an individual learning method, rejected a job offer from a promi n ent private-education firm to establish a social enterprise called Gongs h in. The enterprise provides free private tutoring and mentoring to teen-agers from low-income households to help remove barriers to social mobility stemming from expensive private education. It received the first prize in the start-up category at Social Venture Competition held by the Ministry of Labor in November 2009. "Great Wing," another social enterprise founded in 2005, assists the disabled and employs them at its bakery business. A manager at Great Wing, who formerly worked at a f oreign food company, says that her monthly salary has been halved but she is still satisfied due to exciting and challenging work at Great Wing.

Employment at social enterprises in Korea remains low compared to industrialized countries. The US has 415,000 jobs in social enterprises as of 2008, and in the UK, 55,000 companies provide 650,000 jobs as of 2005. In Korea, around 5,000 salaried people are employed in social enterprises as of June 2008.

It is therefore necessary for the government to address measures to expand jobs in social enterprises. Yet, simply increasing the number of social enterprises to display short-term results will not be effective. Social enterprises that cannot survive without government subsidy would not be a vehicle provid ing sufficient value-oriented compensation for the youth. Thus, the government should reform the current incentive system to promote competitive social enterprises which can bestow a vision to young people. Also, the government should ease regulations to encourage the establishment of non-profit foundations because they can serve as a basis for social enterprises. Last but not least, social enterprises should try to enhance public awareness of social enterprise through advertising and outreach activities.

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