No community left behind

Jonathan Salgo explores the communities who can benefit the most from impact investment.

In Australia, disadvantage has a postcode, an age, and a colour.

While Australia remains one of the most prosperous countries in the world, there are communities in danger of being left behind. These communities could be pulled forward with the invisible heart and hand of impact investment.

Manufacturing communities: we used to build things

Josh Smith’s situation is confronting.

Josh is a young man with no work and few job prospects. Josh is from Burnie, in northwest Tasmania. He is 21 having left school before Year 10. Other than short-term work harvesting potatoes, he has barely worked.

It’s not that Josh hasn’t applied for jobs. He has sought work stacking shelves at Woolies and waiting tables in cafes. But he’s often competing with upwards of 200 applicants.

Unfortunately, Josh’s life is normal for many young people in Burnie. At 21%, Burnie’s youth unemployment rate is the highest in the country.

Visiting northwest Tasmania, you’d hardly know that Australia is in its 24th year of uninterrupted economic growth.

Saul Eslake, the well-known chief economist at Bank of America Merrill Lynch, grew up in this area. Eslake says that the area suffers from many of the same problems that are crippling Elizabeth in South Australia and the Latrobe Valley in Victoria, it has a “narrow economic base” and remains rooted to Australia’s old economy.

These communities are reliant on manufacturing and now find themselves unable to compete with the economies of scale and cheap labour from Asia.

To make matters worse, these places have some of the worst school retention rates in the country. According to Eslake “the only place it is worse is in remote Aboriginal communities”.

Indigenous communities: Mind the gap!

Saul Eslake is right; our first Australians have also been left behind.

Fred Buchanon is a young Indigenous man, who finished high school a few years ago at the Alexandria Park Community School in Sydney.

As an Indigenous man, according to the Prime Minister’s Annual Closing the Gap Report, Fred is going to face a much tougher life than the average Australian.

Fred’s employment prospects are lower than that of the average Australian in his position. The prospects for the entire Indigenous community have in fact gone backwards. The proportion of Indigenous people employed fell from 53.8 per cent in 2008 to 47.5 per cent in 2012-13. According to the ABS, Indigenous Australians are now four times more likely to be unemployed.

Fred’s life will also likely be shorter than that of the average Australian. Life expectancy for Indigenous men is 10.6 years less than for non-Indigenous men, and 9.5 years lower for Indigenous women. Over a seven-year period, this gap has only been reduced by 10 months for Indigenous men and by less than 6 weeks for Indigenous women.

The Report also showed no overall improvement in the goal of halving the gap in reading, writing and numeracy for Indigenous students, and gaps only slowly closing in infant mortality and poor health.

Inner city communities: On the streets

Then there’s the issue of youth homelessness in inner city areas, such as Kings Cross and Woolloomooloo in Sydney.

Tracey[i] is in her mid-teens and has spent time on and off the streets of Sydney. Her stepfather physically abused her and her mother is a heroin addict. At 14, she is addicted to drugs and trapped in a vicious cycle. She has done time in Yasmar Detention Centre. To support her cocaine habit she has stripped and considered selling herself for sex.

Tracey is one of many young Australians who have found themselves on the streets.

On Census night 2011, almost 56 out of every 10,000 people aged 12-18 and 88 out of every 10,000 Australians aged 19-24 were recorded as being homeless. These numbers are likely underestimated because of issues with reporting homelessness.

Impact investment: Capital’s helping hand

Impact investment offers a real opportunity to help improve the lives of people like Josh, Fred and Tracey.

Capital can play an important role in underserved and underinvested communities. It can help build wealth, create employment opportunities and assist with well being; providing a pathway out of poverty and disadvantage.

In a previous blog, we provided one example of how impact investment can help. We looked at how the social enterprise STREAT has trained hundreds of homeless young people in Melbourne for long-term careers in the hospitality industry. STREAT was funded through impact investment. Its aim was to achieve both a social and financial return.

In Indigenous communities we are starting to see some impact investment activity as well. Yarnteen is an Indigenous not for profit that seeks to increase opportunities for Indigenous Australians in the business sector and help the close the gap in unemployment.

Recently Yarnteen entered into a partnership with Social Ventures Australia and with funding from Allco it is assisting Indigenous social enterpises to prosper and grow. Through this partnership it has set up The Yarnteen Indigenous Social Enterprise Hub to help Indigenous social enterprises collaborate with each other and achieve scale through an accelerator program.

These are early signs of how impact investment can help some of Australia’s most disadvantaged and marginalised communities.

Impact investment, however, does not absolve governments of their responsibilities. Governments need to provide a decent social safety net for society. They need to tune their policy settings to encourage innovative ways of improving outcomes in these communities.

If governments are to improve outcomes and make the most out of impact investment they will need to encourage supply, demand and intermediation in this space through a range of measures.

This is important beyond Josh Smith because it can help prevent intergenerational poverty.

Josh’s daughter, Nikayla, is three. She lives with him in their housing commission house in Upper Burnie. Her prospects are not great. Her postcode should not determine her life outcomes.

[i] Name changed for privacy.

Learn more about impact investment from world leading impact investor John Simon, Founder of Total Impact Capital, at our upcoming breakfast being hosted by Qantas.