Micro-Enterprise: An Exciting Idea for Job Creation

According a recent cover story in the New York Times Magazine, President Obama -- as he was preparing his State of the Union Address -- "was looking for bold ways to bring down unemployment."

NYT Magazine reported:

The ideas presented to him, though, seemed familiar and uninspired. "You know, guys," he said, according to someone in the room, "I've told you before, I want you to come to me with ideas that excite me." Nothing he was hearing excited him.

Well, I've heard something that should really get him excited.

As an entrepreneur, I know that small business is one of the keys to creating jobs and improving the economy. But I have been especially excited to hear about the results of a San Francisco-based group called Women's Initiative for Self-Employment. They're one of the nation's largest micro-enterprise training and funding organizations and have been providing a winning combination of training, mentoring and micro-loans for over 20 years to help low-income women start and grow their own businesses. They have found a low-cost solution, which provides increased income, economic stability and job creation for the participants and their communities. Their clients are all-low income women -- approximately 80 percent are women of color and many of the women are domestic violence survivors, single mothers and/or immigrants. They're people who are most at risk of living in poverty and becoming dependent on public assistance.

A report issued by the Senate Joint Economic Committee in May 2009 concluded that female-headed households, especially those headed by minority women, have been hit hardest by unemployment. In particular, long-term unemployment rates are growing rapidly for women over age 45 who have limited education. And many of these women have no safety net to fall back on.

There are stimulus programs that try to move the unemployed back into the work force, but many of these are providing short-term or low-paying jobs. I was in a meeting with someone from a New York City agency (which will remain nameless) bragging about the "very successful" workforce development program funded by federal stimulus money.

With $1.9 million, they created 30 jobs. That's over $60,000 per job. They estimated that many of them were short-term jobs that were gone within a year but, sadly, they weren't able to track what happened to those jobs one year later.

That seems to be the case all too often. One of the key pieces that I've seen has been missing from a lot of small business assistance and job creation programs is accountability and tracking. Because Women's Initiative has created a strong networking and mentoring group for graduates, they're able to maintain contact and track results of women who have gone through their program. The results are impressive. Here's what happens to graduates:

  • One year after training, 90 percent of WI graduates are employed or self-employed; more than one out of 10 provided jobs for others within the first year; and five years after training they provide an average of 2.5 jobs. In 2009, recent graduates created 2,244 jobs.
  • Their income goes up dramatically: Just one year after graduating, WI clients' average household income increases 60 percent, from $22,008 to $34,980.
  • Five years after graduating from the business training program, 70 percent of clients are still in business (better than the average success rate for most small businesses).
  • There's a 30:1 return on investment as women create businesses, pay taxes, employ others and come off of public assistance. That means for every one invested in the program, 30 go back into the community through clients paying taxes, hiring others and leaving the welfare system.

Women's Initiative is now providing training and micro-loans in more than 18 locations around the Bay Area. They are getting ready to launch in New York and Chicago and, hopefully, roll out their programs nationally. They estimate that in New York, instead of spending over $60,000 to create a short-term job for a low-income women, they can spend approximately $4,000 per woman to create long-term employment and stability. Their New York plans estimate that they can create over 2,000 new jobs annually, help launch almost 500 new businesses and create almost $90 million in economic growth -- all for just a few million dollars a year.

The stories are remarkable. Women who were supporting a family of five on less than $20,000 a year are now business owners -- supporting their family with significantly higher income, employing others, buying a house and helping their local economies. They are breaking the cycle of poverty as they build assets and create a secure future for their children.

As the President continues to look for ideas for job creation, let's take a look at some innovative solutions and find ways to support these with a combination of private and public dollars that go a long way toward having a positive, lasting effect on this economy.