Human Development and well-being during the Great Recession. The non-profit sector as a capability-enhancing workplace

Salustri, Andrea; Viganò, Federica (2014). 'Human Development and well-being during the Great Recession. The non-profit sector as a capability-enhancing workplace' Paper presented at the annual conference of the HDCA, 2-5 September 2014, Athens, Greece.

The current financial crisis poses severe challenges to the economic system. Specifically, the increasing unemployment and the contraction of firms' labour demand induce a higher social vulnerability, leading to capability deprivation of individuals (Sen 1999), new sources of poverty, and social exclusion. As a consequence, labor productivity is reduced and, due to the fiscal pressure, labor costs increase. Then, the effect of the malfunctioning of the economic system has a direct impact on the well-being of individuals (the loss of human and social capital implies a degeneration of economic activities and investments) and on the public governments balance sheet (public debt increases, growth decreases, total factors productivity is also reduced).

The analysis shed a light on a perverse adjustment mechanism that might run the economic system into a vicious circle: enterprises during crises tend to reduce labor costs by firing people, reducing wages or outsourcing services and products that cannot be sustained internally; people –employees – run the risk of an economic marginalization and tend to move towards household production. In this scenario comes out a positive transformation: the non-profit sector can exert a crucial role, as it can offer employees a capability developing workplace context, where they can experience a reduction of their vulnerability by finding an alternative source of employment.

Assuming that equity, social justice and sustainability should be integrated in the assessments of economic welfare and individual well-being, we propose a model aimed at regulating the interaction between the formal economy and the informal sector (NPOs, third sector, cooperatives). The main innovation regards the existence of n non-profit activities that can lower the monetary costs of labor and capital by paying a share of wages and dividends in real terms. Consumption expenditure decreases proportionally to the share of goods and services that are not bought on the market. In a long term vision the 'intangibles' (specifically, capabilities opportunities), which constitute the basis of the human development and of the economic growth, should be embedded in a paradigm based on equality, sustainability and well-being. In this perspective there is room for the public sector to assign a value to the economic activities that foster social capital, contribute to reduce inequality and increase individual and collective well-being.

An in-depth analysis of the Italian economic system based on this framework stresses the importance of citizens and firms' participation at political, economic and social level in finding an equitable, sustainable and durable way out of the crisis. Our findings evidence the importance to restate the assessment measure of poverty: not only income and expenditures figures, but specifically contextual factors and capability development opportunity count for building equitable and sustainable life conditions. Our paper tackles the two topics of 'Social inequality, poverty, social exclusion' and 'Welfare production, social organizations, social services' by presenting a viable data based analysis (Italian Istat Data Warehouse) aimed at elaborating a way out of the crisis through the crucial role played by the non-profit sector. Specifically, we discuss how Italy might face the crisis by: i) developing a long term vision accounting for  the human and social capital stocks; ii) fostering SMEs and citizens' participation, respectively, in the economic system and in the labor market; iii) empowering the third sector and non-profit activities in interpreting their role of fundamental engines of the human development processes. Hopefully, an enlarged enquiry at European level could provide a comparable perspective of the issues at stake.

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