COALITION MEMBER FEATURE: Fueling the Rise of Businesses as Talent Incubators in California
By Maria Kim
At REDF, we are dedicated to investing in mission-driven businesses that create pathways to economic well-being for workers who would otherwise struggle to find stable employment.
We recognize that a more inclusive economy is essential to addressing persistent disparities rooted in centuries of biased policies and practices — in the workplace, education, health care, the criminal justice system, and more. Yet millions of people in America remain locked out of economic opportunity — their lived experiences with the justice system, unstable housing, violence, trauma, mental health and/or substance use impact job acquisition, retention, advancement, and skill building.
At the same time, employers across the country are facing an inadequate supply of skilled workers, holding back economic resurgence in the wake of the pandemic.
In California, leaders are working to bridge this critical disconnect through a groundbreaking new effort called CA RISE.
This year, California became the first state in the country to invest significantly in a new type of business called employment social enterprises (ESEs). These employers provide jobs, a paycheck, and the holistic support and training needed for individuals to fully participate and succeed in the workforce. The average employee of an ESE in California is male, BIPOC (Black, Indigenous, or person of color), 25 percent have never been employed, 70 percent have been convicted of a crime, and 80 percent have experienced housing instability.
To support these transformative businesses, the Governor and State Legislature created a new $25 million program called the California Regional Initiative for Social Enterprise (CA RISE), administered by the Office of the Small Business Advocate. A parallel initiative has also invested $10 million in ESEs through the State’s workforce program.
We know that stable employment and income are critical to breaking cycles of incarceration and housing instability — an imperative in California, where recidivism rates hover close to 50 percent, and there are a rising number of unsheltered people. ESEs are led by talented entrepreneurs committed to reinvesting business revenue into jobs, training, and support for the people they employ. They remove barriers that limit access to good jobs and provide trauma-informed supports to help individuals reach social and economic stability. A growing body of evidence demonstrates their positive impact on job retention, income growth, and housing stability.
However, ESEs frequently lack access to traditional financing and technical assistance that would allow them to employ a greater number of people, become more sustainable, and achieve even better results. For example, because many operate as nonprofits, ESEs are not recognized as small businesses by the U.S. Small Business Administration. The State of California Future of Work Commission recognized these challenges and proposed in their final recommendations, submitted in 2021, that the State extend financial and technical assistance to ESEs.
While the pandemic slowed the adoption of the Commission’s recommendations, California finally acted in 2023 — responding to the challenges facing ESEs with the creation of CA RISE, the first-ever program to invest dollars and technical assistance explicitly and specifically into ESEs.
CA RISE will support ESEs to create more jobs and deepen the supports and targeted, specialized employment and workforce training that they provide. The initiative also aims to create regional networks that connect ESEs and their employees with the broader economy.
REDF will work alongside state leaders and a fiscal agent (Lendistry) to take responsibility for the financial transactions and compliance, while identifying and selecting ESEs to receive grants of up to $500,000, and technical assistance (up to 30% of the funds can be utilized for that purpose) meant to fuel business sustainability and growth by supporting the entrepreneurs that lead ESEs and developing the practices, systems, and supports that lead to job retention and skill building for the individuals employed. To diversify the allocation of capital and technical assistance resources, ESEs led by leaders with lived experience and/or located in the Inland Empire and Central Valley will be given preference in selection. ESEs exist because they see this talent pool for the strengths they hold and contributions they can make, not the barriers they are striving to overcome.
CA RISE is an innovative policy solution that will provide the funding and infrastructure needed to further scale ESEs, help solve many of the urgent challenges facing our state, and expand opportunity for individuals, families, and communities. Additionally, CA RISE is a transformational innovative program model that federal policymakers should consider as they work on legislation in workforce development.
With at least 800 ESEs across the United States, this spark could light innovation across the country to invest in entrepreneurs that are achieving greater impact by creating jobs and opening up new opportunities for talented individuals and strengthening our economy and our communities.
Maria Kim is the President and CEO of REDF, an America Forward Coalition member.