Ensuring Economic Opportunity for Disproportionately Impacted Communities in Los Angeles County, CA

Meghan Anand
Abstract

The rise of the Covid-19 pandemic has introduced a myriad of socioeconomic issues across the country. Within the county of Los Angeles, young individuals of color were hit the hardest. In collaboration with Supervisor Holly Mitchell's Research team, this paper examines potential economic solutions for assisting disproportionately impacted communities in Los Angeles County, California. While there are a plethora of ways to increase the future economic growth for minority populations, this paper will focus on both short-term and long-term policies: work supports, educational and skill training opportunities, and employee ownership models. Based on diverse academic journals and numerous case studies with similar examples from other regions, this paper analyzes the necessary economic recovery vehicles and employee training programs that have the potential to transition individuals back into the workforce while increasing wages and reducing future job insecurity. This paper is divided into three sections: introduction, findings, and conclusion.

Introduction

For centuries, the spread of diseases has proved to be one of the greatest threats to the progression of the human race. Most recently, the rise of the Coronavirus has devastated communities around the world. Within Los Angeles County, the most devastated demographic of individuals consisted of young females of color. According to a plethora of studies conducted in Los Angeles and the surrounding areas, this key statistic can be attributed to lack of educational opportunities. As a result, these individuals displayed a higher probability of filing for unemployment in comparison to the general population (Sedgwick, 2020).

According to the Los Angeles County Economic Development Corporation (LAEDC) for Applied Economics, the rate at which female individuals filed for unemployment during the pandemic was approximately 6.4 percentage points higher than that of their male counterparts. Also troubling is the fact that 44.3% of individuals in California who filed for unemployment were 34 years old or younger. In addition, 65.3% of unemployed California residents were people of color, while another 56.9% had not received the opportunity to pursue an education beyond high school (Sedgwick, 2020).

Perhaps one of the most significant aspects of the pandemic was its portrayal of the striking volatility of the labor market. Prior to the pandemic, a study from the Los Angeles County Department of Workforce Development, Aging and Community Services (WDACS) displayed that the majority of homeless service clients were consolidated among low-wage jobs in the industries of retail trade, food services, and administrative/support services. In response to the pandemic, many of these industries ultimately shut down their business locations, forcing a plethora of difficult layoffs (Sedgwick, 2020). As a result of a significant lack of training and supportive housing services, many of these individuals were unable to obtain a new job, thus preventing them from climbing out of the homeless population.

Despite these devastating and unfortunate statistics, the most hopeful aspect of the occupational sector was the stability of the frontline industries (where employees deal directly with the public) throughout the pandemic. According to a WDACS survey, while non-essential industries experienced a 23.4% decrease in job growth throughout the second quarter of 2020, the frontline industries only experienced a 5.9% decrease in job growth. This key observation should ultimately incentivize the county to train more workers for Frontline industry occupations in order to mitigate the array of prospective negative economic impacts going forward. In observing the prospects throughout the labor market that would provide a greater amount of stability and growth for individuals in vulnerable demographics, it is also important to pay close attention to a variety of middle skill jobs in Los Angeles that pay above the living wage. Given a greater amount of resources available for individuals to support them in obtaining higher levels of education, many of the disadvantaged members of our society may be able to successfully reenter the workforce. According to the Los Angeles Economic Development Corporation, it is estimated that between 2020 and 2024, over 500,000 jobs will be added within Los Angeles County. Moreover, specific high growth sectors (such as healthcare, transportation, and construction) are pivotal to providing displaced workers with a pathway to living-wage employment.

Given the current state of the county's economy, this paper initially focuses on overcoming the most significant obstacles in getting individuals back into the workforce. Then, this paper analyzes case studies from similar regions that have successfully implemented a myriad of training programs aimed at supporting vulnerable demographics as they attempt to climb up the socioeconomic ladder. In addition, this paper will examine the use of an employee ownership model as a sustainable economic recovery vehicle that may sustain the success and economic progression of our targeted population. Finally, this paper will conclude with proposals aimed at assisting Los Angeles County in their journey to ensure economic opportunities for disproportionately impacted communities.

Findings
Child Care

As displayed through Appendix 1, prior to the pandemic, Black, Latinx, and indigenous families struggled to afford and obtain adequate child care services. In fact, a typical median-income minority family with two young children would have to spend approximately 56 percent of its income on child care. Moreover, the combination of an inadequate supply paired with extremely high costs left parents with very few options: they could either spend money outside of their budget, find cheaper (and in many cases, lower quality) care, or simply reduce their labor force participation (Schumacher, 2021). New Analysis from the National Survey of Children's Health indicates that these issues were not created but merely exacerbated by the pandemic. Unfortunately, black and multiracial parents were nearly twice as likely than their white counterparts to experience a serious job disruption due to problems with child care. This has caused many parents to leave the workforce and become full-time caregivers, which substantially depleted their benefits and retirement savings.

In response to these concerning statistics, California continued to subsidize a variety of child care programs. However, as displayed through appendix 2, a combination of language barriers, complicated eligibility/enrollment processes, and inadequate advertisement has contributed to lower-than-expected enrollment rates. To start off, the majority of individuals initially enrolled in these programs consisted of Latinos. In this capacity, there was a severe lack of translators that were able to successfully communicate with families attempting to secure their access to this particular resource. Additionally, many Latino families feared any unnecessary interaction with a government entity due to their fragile immigration statuses, ultimately fearing that obtaining subsidized child care may impede their process to citizenship). Also, current rules for subsidized care force parents to resubmit their eligibility information in numerous situations (i.e., changes in income, a work/class schedule, or temporary change in address). Moreover, this would often result in frequent re-reporting by families each month. Given that families attempting to access these programs typically had variable work schedules and limited English proficiency, these burdensome reporting rules would often result in care disruption, undermine parents' employment, and in extreme cases may have also led to the premature loss of subsidized care (Schumacker, 2021).

With the above information in mind, it is vital for the county of Los Angeles to significantly increase funding for subsidized child care and development programs. Given the additional resources available from the American Rescue Plan, there is a substantial allocation of funds that are waiting to be allocated towards a public childcare program (American Rescue Plan, 2021). In addition, a portion of these investments may also be utilized towards the development of better and more efficient advertising campaigns (specifically, consisting of increased translators and intermediaries that may assist families in pursuing these programs).

Lastly, it is essential to address the arduous eligibility reporting rules that bar many families from accessing subsidized care. Perhaps the most beneficial implementation may include a 12-month window eligibility period. This would provide families with a wider time frame to report any changes to their work life, while also enabling children to benefit from stable and positive relationships with caregivers. Not only will this help parents maintain employment and increase earnings, but it will also enhance child development and aid in fostering a new generation of individuals ready to take on the workforce.

Work Advancement and Support Center Case Study

Between 2005 and 2007, the Work Advancement and Support Center (WASC) designed a program aimed at increasing the incomes of low-wage workers. Given the program's primary goal of stabilizing the employment and increasing the incomes of minority populations, an extensive examination of the WASC report will provide fruitful insights on what Los Angeles County can do to provide similar results. Essentially, the WASC program offered intensive employment retention and advancement services for participating workers. This included both career coaching and increased access to skills training. Through the utilization of one-stop career centers that were established through the Workforce Investment Act of 1998, this program uniquely provided all of its services through a single location (Miller, 2012).

In terms of the specific logistics of this program, it was run across three cities within the United States: Dayton, Ohio; Bridgeport, Connecticut; San Diego, California. In addition, it surveyed the general population of each city and targeted the specific population of individuals that were eligible based on their income and education levels. The program ultimately recruited low-wage workers, re-employed dislocated workers, and individuals who had recently lost their job or had become reemployed at a significantly lower wage rate. This population demographic primarily consisted of black, hispanic, and foreign born individuals. Once evaluated using a random assignment research design, each group of individuals was then sorted into either the WASC group or a control group. The WASC group would receive the associated benefits and services of the program, while the control group would only be able to seek out existing services within their community.

For up to two years, individuals in the WASC group were given simplified access to financial work support at the specified WASC location. These included but were not limited to food stamps, medical insurance, and subsidized child care. In addition, participants were also offered services such as career coaching, skills development, increased education about available work supports, and simplified procedures to apply for work supports (Miller, 2012). Under the career coaching model, welfare staff from each respective location carefully worked with participants in identifying both short and long term advancement goals. These goals were aimed at either moving up the ladder at their current occupation, or searching for better opportunities elsewhere. For individuals facing unstable employment, coaching was primarily centered around identifying and addressing their barriers to job retention. In terms of skills development, the staff at the one-stop centers referred participants to a myriad of training and education programs while also assisting them in securing funding to cover the costs (through WIA or other funds). Next, staff were also able to utilize a web-based tool known as the work advancement calculator. This essentially used the participants' household information to identify the benefits for which they were eligible for, while also calculating the likely effects that those benefits would have on the overall household income. Staff would then share this information with their respective participants, thus enhancing their education of the work supports available to them. Finally, the staff also assisted participants in accessing these programs by reducing the amount of documentation required while also extending the interval for recertification for each benefit (along with including nonstandard office hours to ensure that participants were able to make the most of the WASC program).

In examining the results of this program, this paper will focus on the WASC model from San Diego. This is primarily due to the fact that the results from the WASC program were unique to the specific region of implementation (i.e., the results of WASC in Bridgeport were primarily useful for the state of Connecticut rather than the country as a whole). Moreover, within San Diego, coaching seemed to have the most beneficial effect on participants. This was primarily because there was a severe shortage of funds for low-cost training within the community. Moreover, focusing on career coaching (specifically in regards to advancement at a current employer) and increasing access to work supports (especially in terms of child care funding and assistance with food stamp applications) provided the best results.

In concluding the analysis of the WASC program, it is important to note that a significant portion of the workers enrolled could have received work support in the absence of the program, however, simplifying access to them can actually increase the use of work supports among the population of workers with low participation rates. Moreover, the program ultimately succeeded in streamlining a more integrated workforce development. In this capacity, staff were able to effectively reduce the amount of paperwork and forms that participants needed to fill out in order to access work support. In San Diego specifically, WASC was able to increase the receipt of food stamps for individuals by roughly eight percent. The program in San Diego also had a large effect on the utilization of publicly funding healthcare and receipts of child care subsidies. As alluded to earlier, the program in San Diego also had the most significant effect in terms of encouragement and advancement assistant. However, given that applying for funds through WIA was especially burdensome for working individuals, they are unable to access funds for increased training. Taken together, the above implementations severely increased the earnings of WASC both during the duration of the program and for an additional four years after. This is not to say that individuals suddenly reverted back after four years, but rather, the Work Advancement and Support Center program discontinued their accurate tracking of participants' income and occupational status following the study.

Overall, the findings of the WASC program within San Diego suggest additional considerations of where to target services that may complement/duplicate ongoing efforts within the County of Los Angeles. For example, the program implementation suggests that providing convenient access to work supports may ultimately increase the participation of low-wage workers who otherwise might not even be aware of the benefits they are eligible to receive. However, evidence from the San Diego site also suggests that the specific work supports of food stamps and publicly provided health care coverage should not be the primary component of worker advancement services. This is primarily because individuals from the San Diego site began to reduce their work hours as they began receiving more benefits (Miller, 2012). These findings are also consistent with other research that suggests that increased benefit utilization may discourage work as these benefits would essentially reduce as earnings increase. However, at a minimum, this component of work support should definitely be coupled with job retention and advancement services in order to counteract the potential work disincentives.

Minnesota's Families Forward Program Case Study

In a similar vein to the WASC program, Minnesota's Families Forward program solely focused on training low income workers and providing increased family support to advance the socioeconomic status of participants and their families. Although the Families Forward Initiative has been implemented across numerous states within the United States, this paper focuses on its implementation within Minnesota as the emerging economic issues within that state closely mirror the current economic status of low income families within Los Angeles county. Moreover, the program within Minnesota was funded by the McKnight Foundation and also received the assistance of the Governor's Workforce Development Council (GWDC).

The program itself recruited individuals from current public programs that emphasized rapid job placement for unemployed people. Following the recruitment process, the participants served by Families Forward primarily included women of color with limited prior job training experience. When surveyed by the program in regards to the primary issues affecting their employment stability, the participants noted the most common problems to be a lack of reliable transportation, credit problems, and low levels of social support (Shelton, 2006).

Within Minnesota's Families Forward program, five specific services were offered to aid in the development of participants. To start off, one category of services was labeled 'assessments'. This particular section was designed to personalize the experience of each participant by providing the program staff with a deeper understanding of each participants' skills, interests, and experience to provide training/support that would be most helpful. Secondly, the program offered additional training such as coaching on workplace expectations, basic literacy and mathematical skills, computer skills, and job skills for specific industries. In addition, the inclusion of employment support in the form of job coaching/mentoring proved to be another beneficial service of the program. The inclusion of basic financial help in the form of tuition costs and small emergency grants (such as for car repairs, etc.) also provided the necessary cushion for individuals to progress throughout the duration of the program. There were also a variety of indirect financial training programs under this umbrella that assisted individuals in securing medical assistance and managing their money. Finally, the program included case management for personal and family support; this included child care assistance, transportation/housing services, and general encouragement. Appendix 3 portrays the participant's ratings of the extent to which the program's services altered certain aspects of their lives.

Participants gained access to these respective services for two years throughout the duration of the program. Following its conclusion, the percentage of employed participants rose by approximately 15 percent. In addition, 53 percent of individuals were reemployed in a high growth industry, and approximately 70 percent of participants experienced a significant rise in their hourly wages. Moreover, the monthly earned income rose by nearly 14 percent, and the percentage of participants participating in employer-sponsored health benefits rose by roughly 12 percent (Shelton, 2006). Note that Appendix 4 displays the increases in hourly wages and monthly incomes for participants of this initiative. Although this program began in 2006, the short term gains provided by each service continued to progress over the following decade, as individuals were faced with greater job security and financial stability.

In concluding the discussion of Minnesota's Families Forward Initiative, it is important to note the kinds of services that produced the best results. By comparing each participants' response to surveys conducted before and after the program, evaluators were able to identify the services that were most greatly associated with increased family and financial stability. Ultimately, the utilization of assessments in personalizing each participants' experience proved to be the most effective. This is primarily because the assessments themselves enabled staff members to direct participants to training that better fit the needs of each individual in their respective industry. In addition, this personalization also aided participants with job placement following their training. Staff members would then provide consultation to each individual in order to determine the kinds of support they would need to maintain their job status (i.e., providing help with child care or transportation services).

Besides the significance of assessments in the Families Forward program, the two other areas that proved to be the most effective were soft skills training and the utilization of intermediary organizations. To start off, the term 'soft skills' primarily includes two distinct behaviors: interaction (i.e., friendliness, teamwork, etc.) and motivation (i.e., dependability, positive attitude, etc.). Training in those clusters of behaviors coupled with better communication significantly increased the attractiveness of participants from the perspective of employers. Also noteworthy is the fact that increased support services such as help with child care and transportation actually reduced the perceived need for soft skills. Furthermore, by reducing sources of stress, individuals experienced enhanced concentration and productivity, thus assisting them in becoming better employees. Finally, the intermediary organizations proved to be the most effective in meeting the needs of both employers and workers. The key features that made them so helpful were that they involved a partnership of organizations that contained great entrepreneurial leadership, allowing them to flexibly respond to the shifting labor market while also developing lasting relationships (Shelton, 2006).

Taken together, the key takeaways from both Minnesota's Families Forward Initiative and the WASC program indicate the importance of providing training opportunities to low wage workers along with other services to increase the accessibility of a myriad of programs. Under this construct, it is vitally important for the county to ensure that educational institutions are providing fair access to classes that may be helpful in equipping workers with the skills they need to succeed in their jobs. Moreover, educational departments within the county should increase the times at which courses are offered, while also providing asynchronous classes to enable individuals with variable work schedules to pursue their academic endeavors. Not only will this provide individuals with higher levels of education, but it will also enable them to climb up the economic ladder within specific job industries at a much faster rate.

Employee Ownership Models

The final aspect of research revolves around the implementation of employee ownership models to aid in the economic recovery of disproportionately impacted individuals within Los Angeles County. In selecting the best model to pursue as an economic recovery vehicle, it is vital to examine both Employee Stock Ownership Plans (ESOPs), along with Employee Ownership Trusts (EOTs).

At its most basic level, an ESOP essentially provides workers with a certain percent of interest (i.e., ownership) in a company. In utilizing an ESOP, a company's primary motive is to indirectly align their employees' interests with those of the company. This in turn would maximize the productivity and profitability of that specific company. While this particular stock option would ultimately provide employees with the opportunity to purchase shares at a fixed price for a set period of time and also provide cash bonuses for good employee performance, stock appreciation rights would prevent employees from obtaining the value of their shares until they leave the company (either through termination or retirement). In other words, an ESOP is set up in a similar manner to a trust fund. Companies essentially fund the 'trust' with cash to buy company shares, while each employee is granted access to a growing number of shares depending on their respective employment term. In the end, these shares are eventually 'cashed out' once an employee terminates their employment (Internal Revenue Service).

Through the above analysis of ESOPs, it is also important to recognize the risk associated with this type of retirement program. Since ESOPs concentrate the assets into one single security (i.e., the company stock), they are inherently quite risky. Additionally, each individual employee would ultimately be reliant upon the same company for both their paychecks and retirement accounts. However, despite the above risks, ESOPs are still much better than typical 401(k) plans.

In comparison to the Employee Stock Ownership plan, an Employee Ownership Trust is relatively simple to implement and is also associated with significantly lower legal fees. Under an EOT, shares are held by a trust rather than being based on the allocation of an individual stock ownership. As a result, employees are able to reap the economic benefits more frequently, especially considering that they would receive the profits associated with each share throughout the duration of their employment rather than simply after a retirement or termination. In addition, employers would also have the option to contribute to an employee's 401(k) plan on their behalf, thus aiding in the development of workers' retirement benefits (Employee Ownership Trust Law).

Through the brief comparison of the above two employee ownership plans, it is clear that EOTs would actually prove to be more beneficial for low-income populations. Fundamentally, EOTs have proven to achieve much higher benefits for current and future generations of workers, while ESOPs primarily contain higher benefits for the retired populations (Michael, 2017). Given this conclusion, it would be beneficial to examine best practices to replicate from other jurisdictions in regards to an Employee Ownership Trust model.

Within the United States, the most recent EOT implementation was executed by Optimax Systems, Inc. Founded in 1991, Optimax is regarded as one of the largest manufacturers of prototype optics in the country. The company's high-quality precision optics are essential for a wide array of emerging technologies that are employed across different sectors. As a result, Optimax currently received an annual revenue of approximately $50 million. From the beginning, Optimax has always enjoyed a worker-centered approach. In fact, the company hires the majority of its employees immediately out of high school, teaches them how to make each precision lens, and then continues to support each individual at nearby community colleges and four-year engineering schools (Kahn, 2021).

In early 2020, Optimax began transitioning to the Employee Ownership Trust structure, with the primary goal of generating more good jobs for the region while developing their company. Optimax had previously shared 25 percent of their monthly profits, then equal to 1000$, with their employees, and their structure under an EOT continued this tradition. Each dollar the company receives in profit is divided with 25 cents going to employees, around 25 cents going towards taxes, and approximately 50 cents going back into the business to finance growth (Kahn, 2021).

After viewing the beneficial results that the EOT model had on both employee satisfaction and overall company profitability, Bicycle Technologies International (BTI) also transitioned to an EOT structure. Founded in 1993, BTI services bicycles and sells bicycle parts. Following a similar breakdown in distribution as Optimax, BTI has noticed a significant culture shift among employees since transitioning in February 2021. The company has found that employees have begun taking greater interests in customers and suppliers, given that the EOT model ultimately increases the paychecks of employees as the overall profits of the business increase. Moreover, the EOT structure provides employees with an incentive to improve the business, and each payment that the business delivers to the worker is also tax deductible.

A key takeaway from the above two examples is that EOT implementations essentially ensure the longevity of a given corporation. According to Optimax, the rise of EOTs appears to be an evolution of capitalism, in which the wealth generation can now be shared with the workers. If companies across the nation, including Los Angeles County, begin adapting to these models, it will strengthen communities by reducing the wealth that is currently going to the top one percent. Moreover, it would be extremely beneficial for the county of Los Angeles to encourage businesses to transition to an Employee Ownership Trust Model in which 15-20% of profits goes to employees, 25% goes to taxes, and roughly 55-60% goes back to the business for the employers and overall growth. In this construct, it is important to note that the range of 15-20% provides different businesses with more leeway. For example, small businesses may only be able to distribute 15% of their monthly profits with employees, while the upper portion of that range might be more sustainable for a larger corporation. Additionally, it is extremely important to have at least 55% of the profits going back into the business, not only to foster more growth and ensure the vitality of that specific business, but also to enable these businesses to pool more resources into areas that may benefit their employees (i.e., through increased transportation services or the inclusion of child care programs within the business itself). It may also be beneficial to include a provision for businesses to utilize a small portion of that 55-60 percent that must be used to directly benefit their employees. Besides the services discussed earlier, this portion may also be used to provide employer-based tuition reimbursement to low-wage workers that do not require them to pay the full amount out-of-pocket, since the skills they will be gaining through the educational programs will not only help the employees succeed, but it would also increase the profitability of the business as they continue to expand.

Conclusion

With the Covid 19 pandemic leaving drastic economic effects on minority populations within Los Angeles, the county should highly consider implementing the policy recommendations discussed in this paper. Although solely implementing certain programs such as increased access to work supports may initially hinder the motivation of individuals to return to work, the collective implementation of programs, including the adjustments of an EOT model, will ultimately encourage the targeted population to resume their occupations. With these policies, the economy of Los Angeles county will be able to accomplish both short term and long term success.

In the short term, the proposals listed throughout this paper, primarily involving child care and career coaching, will provide greater job stabilization for low income families within this region. In the long term, the proposals revolving around the implementation of an Employee Ownership Trust and increased training for new job skills will reduce future job insecurity while also shifting individuals into high growth industries (which in Los Angeles County, primarily refer to the sectors of healthcare and technology). Taken together, these policies will be extremely effective in ensuring economic opportunities for the disproportionately impacted communities of Los Angeles County.

References

Appendices

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