Real U.S. Job Creators Coming From Unexpected Place

The ‘positive-impact’ sector must drive much of American job creation, says HIP Investor report

As the United States faces the challenge of creating more employment nationwide, new jobs are coming from an unexpected place — the “positive-impact” sector, says a recent report from HIP Investor Inc., a San Francisco-based wealth management firm that helps advisors create portfolios focused on sustainability.

Three out of 10 jobs in the U.S. economy focus on building a better world, and while the government has traditionally been the primary positive-impact job creator, that role is increasingly being taken over by private industry, according to HIP Investor authors R. Paul Herman, an RIA and CIO, and Tom Bowmer, a corporate financial analyst.

“In 2011, approximately 21 million of the 110 million jobs in the private industry positively affected society,” the authors write in “Who Are the Real Job Creators? Not Who You Think,” citing Bureau of Labor Statistics data. “This private industry contribution primarily came from the sub-sectors of health care, education and social assistance services, but it also includes positive-impact sectors like utility system construction, environmental waste remediation, and grant-making institutions.”

Positive-Impact Jobs Grew by 21% in Last 10 Years

According to HIP Investor’s analysis of annual jobs data released by the BLS between 2002 and 2011, jobs in the positive-impact sector of the U.S. economy have grown by 21%, at a rate of about 2% annually, while total private industry jobs subtracting the impact sector have fallen by -3.7%, or -0.4% annually.

But if the U.S. is to keep its recovery on track, it must create jobs at a faster rate, the authors assert.

“After four years, the U.S. economy has barely managed to make a dent in the jobs gap,” write Herman and Bowmer. “By contrast, at this point in the economic cycle, every other post-WWII recession had managed to return to its previous jobs peak. A new approach, which recognizes where the jobs are in the 21st century economy and how to design policies to stimulate further job creation, is needed.”

If private sector job growth continues at its long-term historical rate of 1.25%, the U.S. economy will not reach full employment until 2020, according to the HIP Investor authors’ analysis.

Challenges Ahead

"However, if that growth is accelerated, applying the impact sector’s annualized job growth rate (approximately 2%), then the U.S. could reach full employment by 2015," they write.

And they concede that the challenges are considerable.

For example, organizations in the impact sector may come up with compelling solutions to address society’s needs, but they often lack scale, the HIP authors concede. So even though impact-sector job growth is impressive, it still employs far fewer people than the business sector as a whole.

Their solution? Partnerships between more established businesses and the impact sector, which would fill the U.S. jobs gap with high-impact ventures.

“Solving human, social and environmental problems is much needed, and also compelling for employees.  More than nine of 10 new graduates want to work for a company that ‘does good’ in their daily operations,” write Herman and Bowmer.

Read more about the U.S. economy and sustainability at AdvisorOne.

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