Advancing CDFI Impact Through a Focus on Job Quality

For decades, Community Development Financial Institutions (CDFIs) that lend to small businesses have measured their impact in part by their support for job creation and retention. More recently, they have also become more intentional and focused on their role and impact in addressing racial disparities in business ownership and wealth. There is another way, however, that CDFIs can amplify their impact that touches upon both important mission outcomes - employment and racial equity. How? By incorporating a focus on job quality into their small business advising and investing.

Low levels of job quality are one of the reasons that so many in our country struggle to achieve economic mobility. We know how important good jobs are to our economy, society, communities, and individual and family well-being, yet less than half of American workers are in good jobs. Specifically, only 44 percent of working people in the US report having a "good job," including millions who struggle with low wages, lack adequate benefits, face discrimination and harassment, or contend with other challenges. Furthermore, the workers who bear the burdens of low-quality jobs are disproportionately concentrated in small businesses, and they're more likely to be people of color and women. We cannot drive the greatest impact on economic opportunity for Americans where low-quality jobs persist. If we are to improve the quality of jobs, and the economic mobility of workers of color and women workers, our focus should encompass jobs at small businesses, particularly those owned by entrepreneurs of color and women.

In our work at the Aspen Institute Economic Opportunities Program (EOP), we have highlighted business models that succeed by designing high-quality jobs. Simply put, good jobs are good business, and we have developed a framework alongside research and examples to help a variety of organizations engage in practical actions to improve job quality. We have provided tools to help businesses make the case for good jobs, challenging the false narrative that improving job quality for workers requires limiting business success. Rather, a focus on job quality can drive strong business performance and results, and it can help small businesses address the operational and workforce challenges they face today. EOP has long recognized the importance of business ownership as an economic opportunity and mobility strategy, particularly for women and entrepreneurs of color, and we are committed to the success of these small businesses. We believe that success can be stronger and more sustainable when it is shared with the workers in those businesses, rather than achieved at their expense.

Since 2022, supported by a four-year investment from the Gates Foundation, EOP has been partnering with 11 CDFIs that are helping their small business clients understand the importance of job quality to the success of their business, and to provide advice and incentives to help business owners make job quality improvements. We have called this demonstration program "Shared Success" because its focus is helping small business owners to make improvements that not only benefit their organizations, but also benefit workers and customers. This concept resonates with business owners in part because of the critical challenges they have faced in recent years with worker hiring and retention. A focus on job quality also supports the success of CDFIs as they work to increase economic opportunity and mobility, by extending the impact of their work beyond business owners to include workers.

CDFI small business lenders tailor their strategies and services to the geographic and demographic characteristics and needs of their target markets. As such, it's not a surprise that the approaches our CDFI partners have chosen vary. For example, California FarmLink, Microenterprise Services of Oregon, and the Black Business Investment Fund (BBIF) have developed specialized job curricula and resources for industry-based cohorts of small business owners. Northern Initiatives, Colorado Enterprise Fund, and Institute Capital have formed groups of business owners from a range of industries, led by members of their business advising teams, to do focused work on job quality. African Development Center and BBIF have retained consultants with expertise in human resources to support their business owners on labor law compliance. Justine PETERSEN is offering job quality content and incentives to recipients of its larger loans (those larger than $50,000) as part of its standard post-loan technical assistance. Coastal Enterprises, Inc. integrates a job quality lens into its underwriting practices and has built a workforce strategies team that can provide support to all of its loan and advising clients. And ICA Fund has written job quality objectives into its investment note and provides resources and support to help businesses meet those targets

As we have been providing grants to the CDFIs to support their job quality work, we have also focused on documenting their practices and working with our evaluation partners - the Financial Access Initiative at New York University and EA Consultants - to capture the experiences and outcomes of the cohort's small businesses and their workers. During the next year, as we partner with the CDFIs in the final year of the demonstration, we will be releasing a variety of publications and tools that share the results of our collective work, including content on the following:

• Tools for assessing the quality of jobs in small firms across diverse industries, and for integrating a focus on job quality into CDFIs' advising and/or investing practices.

• A narrative framework that informs the messages about job quality that resonate most deeply with small business owners.

• Practices and tools to help small business owners to engage and communicate with their workers about the quality of their jobs and the job quality improvements they would most value.

• Industry-specific curricula, content, and resources to help small businesses in sectors such as child care, construction, and farming to implement job quality practices.

• Resources that small business advisors and other stakeholders can use to help business owners comply with labor and employment laws.

• Survey findings that illuminate how many and what types of job quality improvements small business owners have chosen to make, their reasons for doing so, and the resources they need and challenges they face in making additional improvements.

• Findings about whether and what types of financial incentives motivate small business owners to improve job quality.

• Lessons about the organizational and leadership structures needed to successfully integrate and institutionalize a focus on job quality.

Although many of the resources will be built for and with CDFIs, we believe that they will also have value for other small business-serving organizations and practitioners - associations, chambers, Minority, Women's and Small Business Development Centers, economic development organizations, and others. You can learn more and watch for updates on the Shared Success demonstration here, and we welcome your comments and engagement in this work. Together we can build equitable and inclusive economic mobility strategies that work for workers, small businesses, and communities. Join us!

About the Authors

Joyce Klein

Joyce Kleinis the Senior Director of the Business Ownership Initiative, an initiative of the Aspen Institute Economic Opportunities Program.

Lauren Starks

Lauren Starks is the Director of Good Companies/Good Jobs, an initiative of the Aspen Institute Economic Opportunities Program.

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The Aspen Institute Economic Opportunities Programhosts a variety of discussions to advance strategies, policies, and ideas to help low- and moderate-income people thrive in a changing economy. To learn about upcoming events and webinars, join our mailing listand follow us on social media.

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