Government contracts must enable social economy organisations to provide decent employment conditions, says a new research paper, based on an international report produced by the Third Sector Research Centre for the OECD.

There has been much political interest in the role of the social economy, or third sector, in providing jobs and supporting vulnerable people into the workforce. But Governments must recognise the pivotal role that state contracts play in financing many of these organisations, and therefore affecting conditions and services.

The report echoes findings from TSRC’s national research on commissioning, such as the problems faced by organisations delivering services under the Work Programme. Research by the Centre on social enterprise  - which has been widely promoted in the UK as a way of integrating vulnerable individuals into the workforce - found that many struggled to provide secure employment conditions for staff due to lack of funding.

The research studied 655 social economy organisations (SEOs) across 8 countries, looking at their contribution to job creation, quality of employment, and role in working with vulnerable groups. The term ‘social economy’ is not widely used in the UK, but is broadly comparable with the third sector. Organisations included those working in sectors such as social assistance, education, work integration, culture and recreation.

Social economy organisations make an important contribution to employment. Many of the organisations in this study had increased the number of jobs they provided during a period of economic turbulence. However, a small proportion of organisations provided the majority of the jobs created.

Moreover many of the jobs created were precarious and low paid. Many SEOs, particularly those employing vulnerable people, operated in sectors where pay was low. Competition with private sector organisations was pushing them to reduce costs, and many were unable to bring in sufficient revenue to pay a living wage. Organisations in all countries found job security, career progression and adequate pay hard to deliver.

SEOs called for longer term contracts to help them to provide job security, and for governments to help meet the cost of the social value they created through (for example) employing vulnerable people.

Heather Buckingham from TSRC said ‘The commissioning environment is an area in which policy makers clearly have opportunities to shape the way services are provided and the nature of the jobs created, by building social clauses into commissioning models for example. However, there is a danger that these clauses favour social economy organisations, but leave them to deliver services on insufficiently funded contracts. A fairer and more sustainable way of supporting quality employment creation in both SEOs and mainstream enterprises is to embed social principles into the wider economy. Social clauses must be coupled with a commitment to meet the full cost of fulfilling contracts. And governments could help level the playing field through legislation requiring that all employees delivering government contracts are paid a living wage’.

More details see TSRC Briefing Paper: International insights into job creation in the social economy(pdf, 123KB), by Heather Buckingham and Simon Teasdale, TSRC, University of Birmingham. This paper is based on research conducted for the OECD. More details

For more information contact:

Naomi Landau, Knowledge Exchange Team / 020 7520 2421

For more information on OECD activities on social economy and social entrepreneurship contact Antonella Noya or Emma Clarence: /