Kulturbahnhof Wittichenau

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How can the social economy contribute to local development?

Tivoli, 5-6 December 2006

Report of workshop D - Stop the brain drain

Project leader: Helmut Arnold, IRIS eV [1]. Case study: Toby Johnson

Creating endogenous jobs in media for young people in Saxony

Contents

Summary

The case shows that endogenous growth based on the ‘new sources of jobs’ identified in the 1990s by the European Commission are as valid as ever in regenerating areas suffering from industrial decline.

The problem

Since the reunification of Germany in 1990, the previously existing industrial base has to a large extent been wiped out. Many firms have been bought out by competitors from western Germany or abroad, and closed. Other industrial sectors such as lignite mining have been closed because they are very polluting. The resulting lack of economic opportunity led to massive out-migration from eastern Germany, which peaked at 400,000 in 1999, though it has now fallen back to close to zero. In the five new Lander as a whole, 15 years after reunification unemployment still runs at around 17% (slightly higher for women, but only 10% for young people). In the coal-mining area in the east of the Land of Saxony, however, the situation is worse, and the threat of depopulation is exacerbated by the fact that it is above all the young women who can most easily find service and administrative work in neighbouring Bavaria. The area also has a sizeable ethnic minority in the form of the Sorbs, who speak a Slavic language and comprise 35% of the population of the Kamenz district, in which the project is located.

Economic development policy focuses on attracting companies from outside the region to open factories in high-tech sectors such as electronics and car making. This results in a very high cost-per-job figure.

The social economy in Germany is large, accounting for some 7% of employment, but fragmented. Indeed it is sometimes said that although some of progenitors of social economy thought – such as Friedrich Wilhelm Raiffeisen and Hermann Shultze-Delitsch – were German, today it is a practice that lacks a unifying theory. It includes on the one hand the six major welfare associations (Wohlfahrtsverbände) which taken together employ 1.3 million people, on the other hand some 8,000 co-operatives (Genossenschaften) employing some 500,000 people, and between them maybe 15,000 thousand social and self-managed enterprises belonging to a number of federations. The welfare associations work in close partnership with the state, while the co-operatives, which are mainly in agriculture, banking and housing, have traditionally preserved a strictly commercial self-help stance and played no role in work integration. However this rigidity is now being relaxed and with the transposition of the European Co-operative Statute in August 2006, the scope of co-operatives was extended to cover social and cultural objectives, a form that has been piloted under EQUAL.

A more serious barrier is German social legislation, which essentially creates a rigid distinction between market and subsidised enterprises, rather than providing an integration path through which unemployed people can progress from subsidised to self-sufficient employment. Thus, work integration ‘enterprises’ tend to rely on annually renewable wage subsidies, sometimes coupled with grants to cover administrative costs. (Several of the Länder, but not Saxony, also support a more market-friendly form of work integration enterprise called a Sozialer Betrieb, which is allowed to compete and receives a wage subsidy that tapers off over five years.)

A further insurmountable hindrance to self-sufficiency is that subsidised enterprises are when using some of the activation measures prohibited from competing in the open market. The grant they receive is seen as ineluctably leading to unfair competition, whereas the integration enterprises hold the contrary view, that the subsidy only compensates for the lower productivity and, far from distorting competition, merely establishes a level playing field on which fair competition can take place.

Good practice from EQUAL

Objectives

The Erschließung neuer Arbeitsplätze für junge Menschen in der Sozialwirtschaft (‘Creation of new jobs for young people in the social economy’) development partnership http://www.equal-sozialwirtschaft-sachsen.de struck out in a different direction. It aimed to take the existing stock of young people, many of who were well-trained, having gone through apprenticeships, and give them the means to create their own enterprises. As a necessary means, the partners converted a disused railway station in the village of Wittichenau (Kulow in Sorbish) into a meeting place that could be used by all sections of the community – the Kulturbahnhof (‘culture station’) [2].

Apart from acting as a crucible for ideas by offering a home for all the local associations, one of the facilities these premises house is a multi-media training centre, the Internationales Multimedia Zentrum (IMMZ). The project organised training in the form of ‘socio-economic training modules’. These comprise on-the-job training in vocational skills – events management, multimedia work and public relations along with a comprehensive range of basic skills and project work. Young people thus had an optimistic setting in which they could develop their own business ideas.

The result is that around 30 new jobs have been created. These cover such activities as running a local television station (Krabbat TV), designing websites, and taking video films of weddings and other celebrations.

Partnership

The lead organisation, IRIS (Institut für regionale Innovation und Sozialforschung eV) assembled a development partnership that included 12 operational partners. These included the umbrella body United Clubs for Kulow, various associations concerned with employment, culture, young people and women, a media training association, the church (Diakonisches Werk), the trade union vocational training centre and, as evaluator, the Technical University of Dresden. These gave it access to the target group (young people), to older members of the community with useful skills they could share, and to specialist skills in industries with growth potential. The partners also gained useful knowledge, particularly about the operation of social co-operatives (of which there are 7,000 in Italy but none in Germany) by virtue of their transnational partnership with Emporio Lavoro, a development partnership from Perugia in Umbria.

Implementation

The project worked outwards from the existing video workshop that was run on a voluntary basis. They contacted the Arbeitsamt (Employment Office) in Hoyerswerda and negotiated an innovative variation on the normal use of the ‘1-euro-job’ subsidy scheme, which allowed trainees to receive it for two years rather than one. It put together funding from various sources: from the municipality and the LEADER+ rural local development initiative for the premises; from the ABM (Arbeitsbeschaffungs-maßnahmen or job-creation measures) and EQUAL; rent from subletting part of the premises; and earned income. The project is now going to develop an interregional dialogue with neighbouring areas in Poland and the Czech Republic.

Success factors

Discussion of the case during the workshop at Tivoli revolved around the following factors of the project’s success:

  • it benefited from the passion and leadership of the local promoters
  • it stimulated endogenous growth, by identifying and exploiting the locality’s existing resources (skills, markets, premises)
  • It used an integrated range of tools, addressing the issues of premises, social networking and organisational counselling, as well as training for empowerment and in vocational and managerial skills
  • it stimulated entrepreneurship by bringing individuals together in an environment where they could develop business ideas
  • it influenced public programmes by talking to policy-makers (mainstreaming)
  • it used an appropriate mix of organisational types: broad networks to assemble opinions, ideas and skills and to build consensus, and more formal associations where structured dialogue, accountability and benchmarking are the issues.

Policy recommendations

  • A single labour market: Certain legal frameworks impose a horizontal bar across the labour market, dividing it between a ‘first’ labour market open to full and free competition, and a ‘second’ labour market that provides jobs for disadvantaged people that benefit from public subsidy. A complementary part of such legislation is often that subsidises social employers are prohibited from competing with conventional firms. Whilst the subsidies provided do play a very positive role in palliating exclusion, the system can in fact be counter-productive as it acts in some way as a barrier to full inclusion, as it prevents employees of social firms bettering themselves by launching competitive market activities. It can thus tend to perpetuate exclusion. The division is false and an easy ‘upgrade path’ should be provided between subsidised and non-subsidised work.
  • Endogenous growth: economic development policies that focus on attracting inward investment into high-technology activities are a very expensive way to create jobs (for example the cost of each job in the Infineon chip factory in Dresden is €1.5m). EQUAL shows that new markets can be created within deprived areas. Needs and skills exist that can be matched together, resulting in a raised quality of life along with a raised economic activity and prosperity and reduced exclusion. Some important factors in enabling this endogenous growth to take place are: (a) the existence of meeting places, where people can discuss and develop ideas; (b) the existence of childcare facilities that allow all job-seekers, including women, to become active.
  • Nurture an entrepreneurial culture: No innovation, no venture into the unknown, is possible without taking a risk, and it is therefore necessary to build a cultural climate where risk-taking is accepted. In doing this, useful tools are role models – preferably people who have succeeded in business and are also close to the target group, and therefore make credible messengers. Ambassadors and inspirational speakers can be effective motivators. However successful examples from far way can also bring inspiration, and this is one benefit of transnational partnership. Create news by involving well-known personalities. Take care to make messages concrete and understandable, and use widely-read media to spread them (for instance mainstream business advice websites).
  • Contain risk: running a successful business is all about the successful management of various risks, but some risks are to great as to be real deterrents to enterprise. Dependency should be discouraged, but mechanisms to limit risks such as the loss of one’s home if the business fails – loan guarantees and bankruptcy laws for example – can help to optimise the level of risk new entrepreneurs are expected to face. And more importantly these must be some upside risk – some reward for success. This reward does not necessarily have to be limitless material wealth, as social entrepreneurs are often motivated more to earn an honest living and be respected by their peers. Awards for success can provide the right sort of recognition.

Tap the right sources: In the feasibility study and market research phase, it can be illuminating to consult two sources: (a) people who have emigrated away from the area, who will tell you what it is that the areas lacks; and (b) the labour office, who will have a good idea of labour demand. Equally, local employers can be useful by seconding managers or by including social enterprises in their supply chains.

  • Create meeting places:' if the people of a locality are to be empowered to act to improve their own situation, they require a space in which they can meet to exchange and develop ideas. One model is the semi-formal and practice-oriented tavolo di concertazione through which local authorities in Italy consult the social partners and local community organisations. Networking does not come cost-free, and these tavoli are not only flexible but cheap to run.
  • Write inclusion into public procurement: public authorities should ensure that their procurement practice makes use of the scope to include social objectives such as the employment of disadvantaged people among the objectives of purchasing (that is to say they should be includes as selection criteria, not as award criteria).
  • Calculate cost-benefit: evaluation should be done, and its evidence then used to good effect. When preparing regional strategies, social benefits should be included when assessing the returns to social spending.

References

Kulturbahnhof Wittichenau: http://start.wittichenau.de/SitePages/Kultur/Einrichtungen/Kulturbahnhof.aspx

Sächsische Landesanstalt für privaten Rundfunk und neue Medien: http://www.slm-online.de

Krabat eV: http://www.krabatregion.de

LEADER+ project profile on KRABAT TV: http://www.oberlausitz.com/sites/leaderplus/downloads/LEADER_KRABAT_TV.pdf