A social investment that pays dividends

What drives us to care for the disadvantaged among us? Usually it’s a belief that this is right or just, or perhaps we’ve witnessed, read or heard about someone in need, and it’s tugged at our heart strings.

It’s good that we have these motives: kindness and justice are foundation stones of a civilised society.

But they’re not the only reasons why we should provide for the disadvantaged. Increasingly, experience and research is demonstrating that it’s also good economics, that if we invest more in those who are currently struggling with debilitating problems we can help them overcome those problems and become more functioning and contributing members of society. Or we can reduce what society has to spend to meet their needs. Let’s consider a few examples.

A few years back the South Australian Housing Trust conducted a pilot scheme in which ten homeless, mentally-ill adults were provided with housing and casework support for one year. This cost $220,000, four times what probably would have been spent on temporary accommodation and support over this period, but it saved $1.16 million in hospital costs, because the rate at which these folks attended hospital dropped from a little under ten days a month to half a day a month. Thus, in the case of those ten people alone for just one year, providing stable housing and support saved society about a million dollars.

Then there’s the well-known Perry Preschool Project in the US, where struggling preschoolers in a poor black community in the 1960s were given extra educational help. Longitudinal research then tracked them (and a control group) until they turned 40, and it was found that for every dollar spent on the project, the state saved $17 through higher employment and home-ownership levels, reduced crime and other positive outcomes.

The Business Council of Australia and Dusseldorp Skills Forum commissioned Access Economics to examine the economic impact of better education provision for kids who currently leave school early and don’t have a successful transition to further education and employment, as well as for older workers needing retraining. The study predicted an impact “surprisingly large for relatively small increase in outlays”, resulting in a “GDP some 1.1% higher in 2040”.

Britain’s New Economics Foundation studied four social enterprises providing jobs for people with mental health and learning difficulties, the long-term unemployed and the socially isolated - jobs in a range of socially and environmentally useful projects. The study found that public money invested in the enterprises began to produce net savings for society after only three years, and this didn’t even include benefits relating to health, the environment, crime reduction, social connection, personal empowerment and general wellbeing.

The town of Trieste in northern Italy has a series of social firms employing 300 people with mental illnesses in hotels, restaurants, a radio station, T-shirt and book printing, a building and repair service, as well as doing all the street cleaning and office cleaning for the municipality. Five hundred social firms in Germany employ 16,500 people, 50 per cent of whom are disabled. These disabled employees are all economically productive, whereas they would otherwise be financially dependent on the state.

Many other studies demonstrate the savings to society from investment in those currently disadvantaged, whether they be wards of state, drug or alcohol abusers, the mentally ill, people experiencing domestic violence or neglect, kids involved in crime, demoralised public housing communities, or those affected by any number of other adverse circumstances.

The story is the same: if you can give people hope, show them they are valued, develop their skills, thoroughly address debilitating issues, connect them up to others, and enable them to be useful, they are likely to become net contributors to society from then on.

People may respond by saying: that’s all very well, but we can’t afford to spend more on programs for the disadvantaged, because we have to reduce government spending, or spend more on roads, or defence, or whatever the priority may be. But as the case of the ten homeless people illustrates so dramatically, we often don’t have the option of not spending on the disadvantaged.

Rather it’s a choice between spending well (on longer term solutions) and spending badly (on band aid solutions). In that instance the project led to savings in healthcare costs, but in other cases it might be savings in welfare payments or crisis assistance or police, court or prison costs - or most likely a combination of several of these. (It costs about $60,000 to imprison somebody for one year, and that doesn’t include the cost of building the prison, currently running at $160,000 to $430,000 per prisoner.) Or spending on the long term solution might mean that the government gets tax payments from those who have been able to start working. The choice really seems to be a no-brainer.

Anyone who watched the program The Oasis: Australia’s Homeless Youth recently will appreciate that, even when people’s lives appear wretched and hopeless, things can shift when those around them believe in the possibility of positive change and invest time and effort in working with them.

Everyone has the potential to develop themselves, to solve problems, to acquire skills and knowledge, and to contribute to others. But for the disadvantaged to realise this potential, and for society to benefit from it, we must first make the necessary investment.