Boston Fed paper: Investors can play a key role in creating quality jobs Boston Fed paper: Investors can play a key role in creating quality jobs

New issue brief explores ways investors are sparking creation of better jobs New issue brief explores ways investors are sparking creation of better jobs

November 15, 2019

Workers have traditionally relied on businesses, government, or labor advocacy groups to create or preserve high-quality jobs. But according to a new paper from the Boston Fed, another player has been taking on a key, if underappreciated, role in quality job creation: investors.

The brief by Carmen Panacopoulos, “How Forward-Looking Investors Can Incentivize the Creation of Quality Jobs,” details how private and public entities are investing in quality jobs. It looks at places where this is happening, from Brunswick, Maine, to Oakland, Calif. It also dives into strategies for incentivizing quality jobs, such as specific loan requirements, offering reduced interest rates, and providing technical assistance.

Panacopoulos says most businesses want to be great places for their employees to work and thrive, but they sometimes lack the resources and expertise they need to make this happen. Investors are increasingly filling those voids. 

“I sincerely believe that this is an opportune time to get investors to think about this in a way that helps businesses grow and create the jobs of the future,” said Panacopoulos, a senior business strategy manager in the Boston Fed’s Regional & Community Outreach department.

According to the brief, a quality job has a number of characteristics, including:

  • livable wages, along with a stable and reliable pay schedule
  • health benefits, paid sick leave, and safe working conditions
  • employee voice in organizational operations
  • the opportunity to save for retirement
  • the chance to develop skills

Panacopoulos said investors are often perfectly positioned to promote quality jobs because they’re heavily involved when a business is having crucial conversations about its finances, strategy, and growth.

“These investors and banks work across business lines and often with small businesses, so it’s a natural conversation when you’re lending to a business to ask, ‘How is your business going?’ or ‘How many employees do you have?’,” Panacopoulos said.

She added investors are really going the extra mile to guarantee quality jobs once they get an understanding of a business. They’re establishing systems that give companies the ability to figure out what their employees need and how to find benefits that match those needs, Panacopoulos said. They’re also measuring and tracking the progress of quality jobs over time.

One of the quality jobs investors highlighted in Panagopoulos’s brief was Maine,-based Blue Highway Capital, a private growth fund. Blue Highway participates in the U.S. Department of Agriculture’s Rural Business Investment Program, which pools funding from local banks, farm credit banks, and impact foundations to provide equity investments for businesses in rural areas.

“When we were looking at setting up a fund, we were thinking about where I could make an impact, and we were looking for underserved markets,” said Karin Gregory, managing partner of Blue Highway Capital.

Gregory said plenty of investors are looking for opportunities in New York and Silicon Valley, but rural markets can get overlooked. This, despite the fact that nearly 46 million people in the U.S. live in rural areas and small businesses account for 63 percent of new jobs there.

Gregory noted only 16 percent of loans are loans from community banks to businesses. She said institutions are focusing on less risky loans, like mortgages, but they aren’t seeing the opportunities local companies offer.

Blue Highway Capital usually works with midsized businesses with at least $5 million in revenue that can demonstrate profitability, forecast 10 percent growth, and show a proven business model. Gregory said her company recently invested in a company in rural Vermont that has rapid growth potential, along with great managers and employees. She added she’s confident dozens of other companies share the same profile and offer the same favorable investment prospects.

Panacopoulos said investors in general are waking up to the opportunities available at companies committed to quality jobs.

“We’re seeing this happening across the country and it’s exciting,” she said.

Check out the full issue brief here.

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