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BY-NC-ND 3.0 license Open Access Published by De Gruyter January 18, 2017

Work Integration Social Enterprises in Austria – Characteristics, Evolution and Perspectives

  • Maria Anastasiadis EMAIL logo
From the journal Nonprofit Policy Forum


At a time of rising unemployment and strained labor market policy budgets, Work Integration Social Enterprises (WISEs) are currently facing difficult circumstances in Austria. If, and how, WISEs can continue to create and deliver quality services for their users (while meeting public authority’s demands) is a topic of vigorous debate at the national level. In an endeavor to gain insight into the current situation, the focus of this paper is to explain the historical emergence of WISEs in the context of the Austrian welfare state. The analysis combines empirical data on key characteristics of ECO-WISEs – a major subgroup of WISEs with an ecological orientation – with an analysis of the institutionalization process of these WISEs, based on the outcome of a series of semi-structured interviews with key experts in the field. The discussion begins by describing their development in the 1980s, growth in the 1990s and concludes with the marketization and reorientation process experienced by these WISEs from 2000 onwards. The paper concludes with a discussion of the victories and challenges faced by these WISEs and highlights the important role that ECO-WISEs have assumed in recognizing and responding to societal needs, developing innovative services, and in meeting the requirements of policy makers.

1 Introduction

In their capacity as third sector organizations (TSOs), Work Integration Social Enterprises (WISEs) act in an economic field between the market, the state, the informal family and neighborhood economies. They are placed in an ideal position to foster participation and to create social innovation. They recognize needs, develop innovative services and communicate requirements to policy-makers. In turn, their organizational development is influenced by political and economic conditions. In this article, the focus is on a key tension Austrian WISEs face, namely, meeting public authorities’ requirements and users’ demand. Using results from an empirical research project on ecologically oriented WISEs (ECO-WISEs) [1] the article concentrates on the key question of how, and if, WISEs continue to be able to co-design public policies particularly in times of a changing welfare state.

To answer this question three-research stages were completed. This paper outlines these stages, beginning in Section 2 with an explanation the methodology employed to undertake a detailed empirical study on key characteristics and the institutionalization process of Austrian ECO-WISEs. Section 3 focuses on describing the general criterion of WISEs. This is followed by an historical review of the emergence of Austrian social enterprises and WISEs drawing on existing national and international theoretical literature available on the social enterprises in general and WISEs more specifically. Section 4 describes the historical development of Austrian ECO-WISEs. This serves to illustrate the dynamic evolution of ECO-WISEs’ against the backdrop of the changing welfare state. The paper concludes with a discussion of how the institutionalization process affects these WISEs, and considers the identifiable barriers and drivers influencing the development of ECO-WISEs specifically and WISEs in general.

2 Research Background and Methodological Design

This article is based on data collected from a multi-level research project, which focused on ECO-WISEs, [2] and sought to understand their contribution towards sustainable development. In addition to their social, economic and participatory dimensions, which are emblematic criteria of social enterprises (SEs) and which will be presented in more detail in Section 3, ECO-WISEs are defined by a focused ecological orientation. More specifically, our research focused on WISEs operating in ecological business areas such as the repairing or recycling of goods, waste management, organic food production etc. and/or selling services and/or producing goods in an ecologically sustainable way (Anastasiadis 2013a). To arrive at this definition and to analyze their evolution, characteristics and perspectives, both theoretical and empirical approaches have been applied.

In a first step, in 2008, a systematic literature analysis was undertaken in order to filter the main characteristics of WISEs in general and ECO-WISEs specifically. The focus was on articles in national and international journals as well as on ‘grey’ literature, such as research reports and various published working papers.

The subsequent stage of empirical work completed comprised of three phases. In order to gain a deeper insight, especially into the main characteristics of ECO-WISEs and their development process in Austria, a series of 15 semi-structured interviews were conducted with a pool of experts consisting of researchers, political decision-makers and practitioners in this field in 2008. More specifically, the interviewees included seven CEOs from ECO-WISEs, four researchers in the fields of social science, political science and environmental science, two experts from umbrella organizations and two representatives of public funding authorities. The interviews were audio recorded, transcribed and interpreted using a qualitative content analysis according to Mayring (2010) alongside the following categories: development and goals of ECO-WISEs; their fields of activity; their organizational format and specific regulations; their role in the context of sustainable development; perspectives on the future of ECO-WISEs. The main results on the development process of these WISEs are discussed in greater detail in Section 4 of this article.

After this initial qualitative explorative stage of research, an in-depth, Austria-wide survey of ECO-WISEs was completed in 2009. The purpose of this survey was to quantitatively map the landscape of ECO-WISEs in Austria. In order to achieve this goal, a database had to be generated. First, the contact data of 420 WISEs [3] was collected; most data came from the regional offices of the Labor Market Service (Arbeitsmarktservice or AMS, in short), which represented the main funding partners of these organizations (Anastasiadis and Mayr 2010). The organizations were then asked, by means of a small questionnaire, whether or not they defined themselves as ECO-WISEs according to the set of criteria developed through literature analysis and qualitative interviews. [4] Fifty percent of the 420 organizations responded, and among those 210 organizations, 151 turned out to be ECO-WISEs. A detailed questionnaire was then prepared with the aim to capture the social, participatory, economic and ecological performance of ECO-WISEs in Austria. The questions were divided into four sections:

  1. Organizational aspects: founding year; reasons for their existence; positioning in the triangle between the market, state and community; service delivery; cooperation structure; network activities; details concerning ownership.

  2. Goals consistent with sustainable development: definition of social, economic and ecological activities; priority of goals.

  3. Economic aspects: annual budget in the financial year 2007; financial structure or composition of funding; current and expected future budget development.

  4. Human resources aspects: human resource structure in the financial year 2007; share of transitional and permanent staff; additional attributes of the staff (age, level of qualification, etc.); current and expected future development of human resources; employee participation; wages and other reward opportunities.

  5. Future aspects: Current and future issues concerning the reaching of their goals (open question format).

This questionnaire was sent by email to the 151 ECO-WISEs identified in the database. Of these, 61 organizations (40 %) answered and took part in the detailed survey, which represents an average response rate according to Baruch and Holtom (2008). The data was then analyzed in a descriptive statistic manner using SPSS. Some core results of this stage of the study are presented in Sections 3 and 4 of this article in order to reflect if and how the theoretically specified criteria correspond with WISE practices in the surveyed segment.

To update the data, in 2015 the same 151 ECO-WISEs were surveyed using the same questionnaire in an online-format asking about their performance. In this trend-survey (Diekmann 2008) 33 ECO-WISEs (22 %) participated. The lower response rate might have been caused by a comparatively shorter survey period that took place during the summer months. After a descriptive analysis via SPSS, changes concerning their performance were examined between the two different samples on an aggregate level (mean value or percentage). Some of these changes are discussed in Section 3 of this article. [5]

However it should be noted that although the research results on ECO-WISEs are in line with results from other surveys on WISEs in general in Austria (BDV Austria 2008; Mathis, Heckl, and Senarclensde Grancy 2014; Eppel et al. 2014; Lechner et al. 2016), the findings are not generalizable beyond this limited subgroup of 151 ECO-WISEs.

3 WISEs – A Specific Type of Social Enterprises in Austria

As outlined in the introduction to this special issue, specific types of social enterprises emerged in the field of work integration in Europe during a first wave in the 1960s followed by a second wave in the 1980s. These WISEs were identified by the EMES Network´s researchers as aiming “to help poorly qualified unemployed people who are at risk of permanent exclusion from the labor market. These enterprises integrate them back into work and society in general through productive activity” (EMES 2004, p. 1). As SEs, they represent an economic project with a social mission and a participatory governance strategy. They are non-profit-maximizing organizations in terms of generating income and use of surpluses for covering costs and reinvestment in community benefits. They provide goods or services directly related to their explicit aim to benefit the community. They rely on a collective dynamic involving various types of stakeholders in their governing bodies. Furthermore, they place a high value on their autonomy and bear economic risks linked to their activity (Defourny and Nyssens 2008). This set of social, economic and participatory governance criteria is to be seen as an ideal-type model as the authors have emphasized. Comparative analyses of SEs in different countries indicate that different types exist which do not always synchronously meet the ideal-type criteria. Different national traditions are naturally bound to lead to different structures and cultures and criteria can, and should, be adapted to these country-specific variations (Defourny and Nyssens 2012). All this indicates that the development of SEs in general, and WISEs specifically, is always embedded in different socio-economic and welfare state environments. In this section, we explore what this embeddedness looks like in Austria.

3.1 Social Enterprise Models and Practice in the Austrian Welfare Regime

According to the results from an explorative literature analysis [6] four phases of welfare state development were identified in Austria from which the four social enterprise-related models have emerged (Anastasiadis and Lang 2016). Each have a close association to the Austrian Third Sector. As in many other European countries, the phenomenon of the Third Sector has a long history with roots back to the late nineteenth and early twentieth centuries when the welfare system had its starting point (Neumayr et al. 2007; Pennersdorfer, Schneider, and Badelt 2013; Anastasiadis 2006a). Austria was, together with Germany, one of the first nations to carry out social security reforms in the Bismarckian tradition. The welfare state in Austria came to be described as following a conservative welfare state model following the typology of Esping-Andersen (2007) (Tálos 2005; Borchert 1998; Anastasiadis 2006a). During the emergence of the welfare state, bottom-up self-help-organizations emerged, including interest-groups, cooperatives and non-profit orientated charitable societies. They played a decisive role in serving public needs, especially in the fields of education, housing, social and health care (Melinz 2004). Furthermore, they had an important political influence on the upcoming social security and welfare systems. They were closely interlinked with public bodies, preparing the ground for a corporatist system (Melinz 2004).

After the second World War this corporatist system was institutionalized. With the rise of the Keynesian concept, the welfare state expanded at large. Although health and pension schemes were extended to cover all citizens during the twentieth century, consequently social security continues to remain a fragmented system, preserving status differences and relying on networks of relatives and friends in the provision of care services, as is typical of conservative welfare states in general (Tálos 1981; Obinger and Tálos 2006; Tálos 2005). During the era of an expanding welfare state, large Non-Profit-Organizations (NPOs), like Volkshilfe or Caritas and large cooperatives prevailed, acting as intermediaries between state and citizens in the welfare system (Lang and Novy 2014). Many TSOs gradually transformed into either purely commercial enterprises (e. g. Konsum, Raiffeisen) or were integrated into the mainly state-financed welfare sector as service providers (Melinz 2004; Anastasiadis 2006b). In this period, which can be characterized as a state-centered-corporatism, tendencies of “organizational isomorphism” (DiMaggio and Powell 1983) and standardization are observable.

In the late 1970s and early 1980s, this state-centered welfare system started to change. In line with the so-called “New Social Movement” the ecological, cultural, social and political awareness was raised among Austrian citizens, which led to the founding of a huge number of smaller organizations experimenting with alternative forms of socio-economical practices (Anastasiadis 2006b; Simsa, Schober, and Schober 2006; Neumayr et al. 2007). With a view to welfare provision, this community-led movement can be viewed as an expression of dissatisfaction with the mostly state-driven system. The new organizations associated with the self-help-culture of the traditional cooperative movement and began to take over more responsibility from the state with the aim to complement state provision, forcing the state to improve its own policies. Evers and Olk (1996) articulated this change with the notion of “welfare-pluralism”. A main feature of this strategy was a partnership-based cooperation between the state and the organizations; the state provided funding, but the organizations invented and delivered the services needed. This period was described as a highly innovative time, where political decision makers developed services and measures in cooperation with organizations. The experimental labor market policy can be viewed as an example of this innovation. It prepared the ground for the evolution of WISEs (Zauner 2006; Lechner et al. 2016).

In the middle of the 1990s, the welfare-market concept found its way into the Austrian context. Since then, there has been a clear tendency towards downsizing the welfare state (Meyer 2009; Anastasiadis 2006b). Since 2000, liberal social policy reforms have been undertaken, which aim to implement tighter controls and sanctions for beneficiaries in the social security system (Tálos 2005; Stelzer-Orthofer 2011). Moreover there is an observable trend towards privatization and outsourcing of public services under more restrictive conditions. To increase transparency and efficiency of subsidies to TSOs, performance-related contracts replaced lump-sum subsidies to a large extent (Melinz 2004; Dimmel 2012). Professionalism, competition, effectiveness, efficiency are the corresponding catchwords (Anastasiadis 2006a; Lehner 2011; Meyer 2007). As a consequence, traditional NPOs started adopting more market-based approaches (charging service fees, passing performance-based contracts etc.), thus moving in the direction of a more social enterprise-like approach (Neumayr et al. 2007). NPOs started to establish economic ventures to generate earned income, whether from government contracts or from the sale of goods and services (Mathis, Heckl, and Senarclensde Grancy 2014; Leichsenring 2001). Similarly, the remaining large cooperatives implemented professional management structures and focused on economic efficiency (Lang and Novy 2014), which reduced member and community influences in daily organizational life (Melinz 2004). Additionally entrepreneurial social businesses emerged in Austria at the beginning of the present decade. These tend to be small-sized businesses with a social mission founded mainly by young start-ups (Vandor et al. 2015). For this ‘new generation’ of organizations market income generation is seen as necessary and valuable and as more sustainable than public subsidies (Schneider and Maier 2013; Vandor et al. 2015). This indicates a different business-culture compared to SEs and WISEs, which emerged in the tradition of the welfare-pluralism. In summary, since the middle of the 1990s the conservative welfare state model has gradually changed into a more liberal one which clearly goes hand in hand with a marketization of the Third Sector and a higher level of responsibility for the organizations to solve growing societal problems through generating innovative services and finding alternative ways to finance them.

As these briefly sketched historical trajectories show, different types of social enterprise-related organizations have emerged within, and close to the Third Sector, over time (see Table 1).

Table 1:

Typology of social enterprise-related models in Austria.

Traditional SE modelsNew SE models
TypesCooperativesNPOsSocial enterprisesEntrepreneurial social businesses
ExamplesCommunity-led cooperatives with a focus on self-help activities and a strong member influenceLarge cooperativesa with a market orientation and reduced member and community influenceCollectively founded non-profit organizations with a self-help as well as a public benefit orientation in several action fields and forms (social, sports, culture, interest-groups, foundations etc.)Collectively founded non-profit-maximizing organization with a public benefit orientation in several action fields as well as forms of alternative self-help-economyRather individual-driven young start-ups with an explicit social mission

Source: Anastasiadis and Lang (2016).

Note: aIncluding public benefit (gemeinnützige) cooperatives, which only exist in the social housing sector.

The models with the longest-standing tradition are those of the cooperatives – with two major streams, namely community-led cooperatives and large cooperatives – as well as those of non-profit organizations – including the broad spectrum of self-help as well as public benefit initiatives in several fields, reaching from traditional welfare organizations to locally-based self-help associations, and public benefit (gemeinnützige) foundations. Among ‘younger’ SE models, we find collective SEs such as WISEs (or other income generating non-profit-maximizing organizations) in several action fields and more individual-driven entrepreneurial social businesses in the form of young start-ups. Both rely on an earned income business model and can be understood as a “Social Business” (Vandor et al. 2015). The suggested differentiation between social enterprises and entrepreneurial social businesses intends to highlight the rather individual driven business-culture of the latter ones compared to the collectively founded social enterprises in times of the welfare-pluralism period as outlined above. Cooperatives and the collective type of SEs come close to the ideal type of a SE, as they display many of the EMES indicators for SE (Defourny and Nyssens 2012). However, this is not so clearly the case for the ‘youngest’ SE model – namely the more individualistic social entrepreneurship approach. Traditional NPOs cannot be considered either as prototypical SEs on a conceptual level, given their strong dependence on public funding and their non-profit-distribution constraint (although the latter does not necessarily prevent entrepreneurial NPOs from being considered as social enterprises according to the EMES indicators).

In conclusion, this typology represents a first delineation of the emergence of different types of social enterprises in Austria and their development since the nineteenth century. Although not yet empirically proven, it should therefore be viewed as a trigger for further discussions and research. Nevertheless, from this historical perspective, the role of the different social enterprises turns out to be twofold: they serve as ‘bottom-up’ innovators on one hand and as ‘top-down’ governed service providers on the other. The relationship between the government and the organizations can be characterized in line with Young (2000, p. 150), as “confrontational, complementary and collaborative”, with the focus varying throughout different welfare state periods.

3.2 Characteristics of WISEs in Austria

In Austria WISEs represent ‘newer’ social enterprises following the collective approach. They correspond to a high degree to the international understanding of social enterprises as they display the social, economic and governance-related dimensions of social enterprises such as are outlined in the EMES approach, and they pursue a specific social mission of work integration (BDV 2008).

They emerged in the 1980s in line with the experimental labor market policy strategy, in order to improve the inclusion of poorly qualified people or persons with special needs and other societal problems into society, by providing mainly temporary jobs with on-the-job training and social support (Mathis, Heckl, and Senarclensde Grancy 2014; BDV 2008; Lechner et al. 2016). These jobs are partly funded by public authorities, and especially by the Labor Market Service. The overall idea here is that, after approximately one year, the trained persons should gain ground in the mainstream labor market. The importance of this social goal becomes obvious when analyzing the human resource structure of the surveyed ECO-WISEs. [7] Exactly 3,081 workers were employed in 57 ECO-WISEs in the financial year (FY) 2007 and exactly 2,277 were employed in the 30 trend-surveyed organizations in the FY 2014. [8] The majority (64 % in 2007; 57 % in 2014) of the staff consisted of ‘transitional employees’, for whom the organization received public funding and who should ultimately be integrated into the mainstream labor market. The second largest group (20.5 % in 2007; 12 % in 2014) consisted of skilled social workers and manufacturers who were responsible for on-the-job training and the integration process. The data of both surveys indicate by trend a change in the ratio between the two groups of employees (3:1 in 2007 and 5:1 in 2014) (Anastasiadis 2016).

Furthermore, WISEs intend to strengthen the regional economy by providing specific services and goods that are needed (BDV 2008). As social enterprises they are non-profit-maximizing while having an explicit aim to benefit the community. Regarding the financial situation of ECO-WISEs in the FY 2007 and 2014 the results show that the average resource mix is almost divided up in thirds: sales to private customers represented 34.96 % (2007) and 32 % (2014) of ECO-WISE’s total income, sales to public customers amounted to 34.97 % (2007) and 37 % (2014) and funding from public authorities (subsidies) accounted for 29.38 % (2007) and 28 % (2014). Donations (0.4 % in 2007; 1 % in 2014) did not seem very important for ECO-WISEs in Austria. The importance of public authorities in this financial mix is beyond dispute, but the relatively high level of sales, be they to public or private customers, indicates that ECO-WISEs do face an economic risk.

Additionally, WISEs have a clear participatory nature internally and externally (BDV 2008). 64 % of the 2009 and 60 % of the 2015 surveyed ECO-WISEs were legally registered as associations, which is a typical legal form for democratic decision-making initiatives mostly established in a bottom-up tradition. About one-third (33 % in 2009; 27 % in 2015) were registered as public benefit limited liability companies (Ltd.) with social partners or local municipalities often holding a stake. [9] The remaining (3 % in 2009; 9 % in 2015) had the legal form of ‘religious bodies’ [10] and 3 % acted as a private firm in 2015. [11] Regarding liaising with the public sector, 38 % (2009) and 56 % (2015) of the questioned ECO-WISEs defined their style of collaboration as cooperative; 20 % (2009) and 31 % (2015) defined it as cooperative as well as confrontational, which corresponds approximately with a complementary style of relationship according to Young (2000). The remaining mentioned ‘other styles of collaboration’ which were not specified. None of them chose only ‘confrontational’ as an answer. Moreover, the reconstruction of the institutionalization process (discussed below in Section 4) will show that ECO-WISEs reside in a multiple stakeholder field, consisting of employees, board members, public funders, business partners, customers etc., which proves to be essential to their social and economic performance.

4 Institutionalization Process of WISEs in Austria

Since the 1980s, WISEs have faced a dynamic evolution in Austria which went hand in hand with the dynamics in other sectors – the private market sector, the public sector and the informal community sector. In order to trace this evolution, the following institutionalization process of the segment of ECO-WISEs was reconstructed on the basis of the expert interviews conducted in 2008. During the content analysis of these in-depth interviews, three developmental phases of ECO-WISEs were identified, as illustrated in Table 2.

Table 2:

Phases of ECO-WISE development in Austria.

FactorDevelopment of ECO-WISEsGrowth of ECO-WISEsMarketization and reorientation of ECO-WISEs
Labor Market PolicyInnovation in active labor market policy led to the creation of the “second labor market”, which provides subsidized transitional employmentGrowth of unemployment led to a growth of re-integration measuresMarketization strategies lead to a stagnating development of ECO-WISEs
Funding DirectivesPreparation of the funding directives for WISEs (SÖB-Richtlinie)Joining the EU led to an increase in public funding for integration measures; regionalization of Labor Market ServiceDirective for public benefit limited employment projects or companies (GBP-Richtlinie) fosters new cooperation between ECO-WISEs and the private and public sectors, which leads to a reorientation

Source: Modified from Anastasiadis (2013a).

4.1 Development of ECO-WISEs in the 1980s

In exactly the same way as the emergence of WISEs, the emergence of ECO-WISEs went hand in hand with the creation of the experimental “active labor market policy” (ALMP, in short) in the 1980s (BDV 2008; Lechner et al. 2016). The 1980s WISE model expansion occurred as unemployment in Austria started to rise slightly at this time and ALMP grew in response. The three main pillars of this policy are a) job qualification, b) consulting service and c) integration through employment (Lechner et al. 2016). These three pillars, and the last one in particular, led to the creation of the so-called “second labor market”, which provided subsidized transitional employment, especially for the long-term unemployed. An interviewed expert described this period as “a self-acting and self-organized era when a lot of experiments were carried out”. Such experiments became necessary in light of growing unemployment. The Austrian state-centered welfare system was unable to tackle the new problems through classical transfer payments, such as early retirement, unemployment pay etc. The situation required sustainable measures to enhance the re-integration process of the unemployed. This was the source of a newly emerging partnership between policy makers and private social initiatives.

For example, “Aktion 8000”, a program that aimed to create 8,000 new jobs, framed the founding of several new social enterprises in various areas, e. g. mobile social services, alternative childcare initiatives, recycling projects, soft tourism projects, regional development projects, cultural activities etc. (Zauner 2006; Lechner et al. 2016). Each organization had objectives to create jobs in regional fields, to offer on-the-job training opportunities and to continuously increase the share of its income generated by the sale of goods and/or services in order to achieve a certain level of independence from public start-up financing. The “Aktion 8000” offered an opportunity for many regional initiatives to become important partners in social change, which is typical of the upcoming welfare-pluralism phase as emphasized by Evers and Olk (1996). Lechner et al. (2016) assert that the first WISEs were created as bottom-up initiatives in cooperation with the state to complement state welfare provision during this time. WISEs then had the chance to present their ideas directly to the Ministry of Social Affairs. The Ministry also created several expert-led work groups throughout various branches, including a work group for environment and employment which was the main contact point for all the ECO-WISEs that emerged during this period (Anastasiadis 2016).

In a nutshell, the conception and implementation of the experimental labor market policy can be characterized as a parallel process of bottom-up movements and top-down guidance (Lechner et al. 2016). The result was a respectful and innovative climate where a certain group of ECO-WISEs had their starting point. According to the results of the first survey on ECO-WISEs, which was conducted in 2009, 10 of 61 ECO-WISEs, were founded in this early period (Anastasiadis and Mayr 2010).

The legal organizational form of WISEs in general, and ECO-WISEs specifically, at that time was typically a not-for-profit association. In cooperation with the Labor Market Administration (Arbeitsmarktverwaltung or AMV, in short), which funded the activities, specific regulatory guidelines – the so-called “funding directive for WISEs” (SÖB-Richtlinie) – were prepared (Lechner et al. 2016; Anastasiadis 2016). The directive noted that a funding contract was only valid for a one-year period. The contract was to specify the number of people to be ‘transferred’ from the second to the mainstream labor market. Success was measured with regard to this benchmark after the one-year funding period (AMS 2013). The directive also indicated that the profits generated by the organization through its activities had to represent at least 20 % of its total annual revenue. The remaining 80 % were to be covered by Labor Market Administration funding (two thirds of the remaining 80 %) and the provincial government and local authorities (one third of the remaining 80 %) (AMS 2013). The directive further stated that if the organization made a profit that represented more than 20 % of its total revenue, the “excess” profit would be subtracted from the funding provided by the Labor Market Administration (AMS 2013). Moreover, as one interviewed expert indicated, the directive stipulated that ECO-WISEs were not allowed to act in fields where the market economy was operating in order to avoid direct business competition. Therefore they discovered non-marketable business fields, like the not yet profitable recycling and repairing branches, which became, among others, the traditional niches of ECO-WISEs. Another interviewed expert highlighted that both, the restriction on business field and the subtraction from the funding with an earned income more than 20 % – were hindrances for them to act more economically and become more autonomous from Labor Market Administration funding.

4.2 Growth of ECO-WISEs in the 1990s

In the 1990s, the growth of WISEs in general, and ECO-WISEs specifically, complemented the demands of the labor market policy. In this period, 30 out of the 61 responding ECO-WISEs were founded. Indeed, WISEs were seen as successful partners in the re-integration process of long-term jobseekers (Lechner et al. 2016). An interviewed expert from the ECO-WISE-scene characterized this period as “years when this sector has experienced a comparatively strong growth”. The demand for such initiatives grew as the number of unemployed persons increased. A long-term overview shows that the unemployment rate was very low in the beginning of the 1980s (1.9 % of the active population). [12] This period marked the beginning of a steady and constant rise of unemployment, which peaked in the mid-1990s (7 % in 1996). According to Sennett (2005) this development can be viewed as a result of the global economic market change, which is accompanied by industrial automation and technological improvement, the establishment of a worldwide workforce and the reduced durability of qualifications. Against this backdrop, more public money in this decade was spent on improving placement options.

Austria joined the European Union in 1995 and this provided new funding opportunities for WISEs in general, and ECO-WISEs specifically, which were mostly co-financed by the Austrian Labor Market Service and the European Social Fund (ESF) (BDV 2008). Another change was the restructuring of the Austrian labor market authority system, which gave rise to the regional offices of the centralized Labor Market Administration (AMV) becoming more autonomous. The Labor Market Administration was then renamed, and the entire system is now called the Labor Market Service (Arbeitsmarktservice, or AMS, in short). This restructuring and renaming can be seen as a response to meet the strategic goal of increasing the efficiency of public funding; internationally discussed under the term “new public management” and simultaneously improving regional development structures. The expectation was that experts in the regional offices of the Labor Market Services would know more about the needs within each region served and would therefore be able to create and formulate measurable benchmarks for private initiatives in order to react in a better and more timely manner. The former centralized ‘top-down-guidance’ approach thus gave way to a more regionalized-governance one (Zauner 2006).

4.3 Marketization and Reorientation of ECO-WISEs in the 2000s

With the end of the 1990s came tough times for ECO-WISEs. By comparison to the 1990s only 19 of the 61 responding ECO-WISEs were founded between 2000 and 2008. The growth in the 1990s and the declining numbers of newly founded ECO-WISEs in the 2000s is evident from a survey of Austian WISEs completed in 2008. According to the results, 24.5 % were founded in the 1980s, 42.16 % in the 1990s and only 7.8 % between 2000–2008 (BDV 2008). This stagnation can be viewed as a consequence of more restrictive conditions WISEs have to cope with in times when the welfare-market emerged in Austria. The interviewed experts said that, since 2000, funding from the Labor Market Services (AMS) had become continuously more restrictive and competitive, while pressure to re-integrate more people into the regular, “first labor market” had been growing. All this occurred within the context of a continuously fragile employment situation. The unemployment rate still ranged around 7 % in 2010, and it rose to 9.1 % in 2015 in the wake of the economic crisis (AMS 2016). An analysis of the annual reports of the Labor Market Service [13] has revealed that the overall expenses for the active labor market policy rose continuously from 2000 till 2014 in Austria, i. e. from € 600 million to € 1,200 million, but by comparison the numbers of supported persons has grown far more. Concerning work integration measures the expenses doubled from € 175 million to 319 million while the number of supported persons has quadrupled from 21.000 to 80.000. It is obvious that this cannot be handled without major cutbacks to the quality of the service. Evidence for this is found in the proportion between transitional employees and skilled workers in the surveyed 61 and 33 ECO-WISEs, which changed from 3:1 to 5:1 as already outlined in Sections 3.2 of this paper. This proportion often goes along with a reduction of the duration of the transitional period, which is not standardized in the funding guidelines. Another survey on WISEs in Austria completed in 2014 has revealed that the average duration of transitional workers have reduced from 241 days in 2005 to 116 days in 2012 (Eppel et al. 2014). This tendency is also observable in the data of ECO-WISEs. In 2008, most of the organizations (70 %) specified the transitional period duration of between 6 and 12 month; in 2015 large parts (72 %) specified it between 0 and 9 months.

Another indication for the ‘tougher times’ can be found at the roots of policy making. The aim of the restructuring of the labor market authority system in the 1990s was to give regional services more decision-making power, but, in reality, this regionalized-governance approach actually appeared to be a more centralized ‘top-down-guidance’ approach. As an interviewed expert stated, “the regional Labor Market Service centers are highly interested in regional initiatives to solve regional problems, and they are focused on gaining know-how and resources, but it seems that the regional service centers are currently not really and truly integrated in the decision-making process. The decision comes more or less, once again, directly from above. The goals are defined by the national government, by the Ministry, which is viewed as being “strongly politically influenced”.

According to the interviewed experts, during the 1980s social innovations had a chance to truly flourish. Resources were made available, fostering motivation and ground-breaking ideas. However, since the mid-1990s, the labor market policy has defined its goals in accordance with the European Action Plan, and has thus adjusted its budget accordingly. The task of the regional service centers is to achieve those objectives measured with strict indicators. This leaves little room for creative innovation (Zauner 2006; Lechner et al. 2016) and, it indicates the return of a state-driven welfare provision (typical of the traditional Austrian welfare state structure and culture), which determines social enterprise development as a whole. Furthermore, it seems that a more neo-liberal approach, with less participation opportunities but more responsibility, arose when the welfare-market concept reached Austria. As a result, ECO-WISEs in particular have been confronted with new circumstances, be it in terms of contracting, competition or controlling. In essence, they have been reduced to the role of service provider.

Against this backdrop, ECO-WISEs have developed new strategies. To articulate demands to policy makers, in the middle of the 1990s WISEs in general began to form networks on regional and national level in Austria to concentrate their power. These networks – such as the Bundesdachverband für soziale Unternehmen, or BDV (renamed in 2016 as arbeitplus) – later became members of international ones like the European Network for Social Integration Enterprises (ENSIE) which aims to influence or co-design decision making processes on the international stage.

Another strategy is that ECO-WISEs have attempted to become more independent from the influence of the Labor Market Service. New deals with the local government, along with a new additional funding directive in Austria, gave them a chance to do so. The new funding directive, the so-called “funding directive for public benefit limited employment projects or companies” (GBP Richtlinie) fosters WISEs to broaden their resource mix so that at least one third of their expenses has to be made available by different public bodies in the form of subsidies, or service contracts, as well as from earnings through selling products and services in the private market (AMS 2014). In line with this new directive, projects have been created in partnerships with the local governments. Local municipalities are often involved when public benefit limited liability companies (Ltd.) are founded. This new organizational format has allowed WISEs in general, and ECO-WISEs specifically, to now act more economically and autonomously from the Labor Market Service than when under the funding directive for WISEs (SÖB Richtlinie). Furthermore, the local government has become a relevant partner, which is important for developing regional structures in general, as well as for preparing new alliances with regional business partners. These joint activities became more important in the middle of the 2010. Additionally, cooperation between re-use and recycling WISEs and environmental policy has recently been on the rise in line with new guidelines in waste management systems. This development clearly shows that ECO-WISEs are flexible at generating resources from different sources. Furthermore, it underlines their participatory nature which is evident in their cooperative and complementary style of liasing with the public sector.

On the other hand, this evolution has also meant that ECO-WISEs have had to face a greater economic risk, which has made following a more private sector business model necessary. Tendencies of organizational isomorphism are observable in the work culture, which changed from a grassroots-type business approach to a structured environment with hierarchies, defined roles and a focus on improving efficiency through business administration tools. Many ECO-WISEs also intend to change their image, as their services are often perceived as being of low quality, which is mainly due to their working with less skilled workers. As an interviewed expert noted: “Yes, we have social goals, but when we face customer demands, we are a serious and competitive service provider. We do not say that we come a little later or that our work is of lesser quality because we have this social goal, and please pay us regardless thereof, no – we would never appear like that”.

Another aspect of this evolution towards greater professionalism is, as some interviewed experts stated based on the necessity for ECO-WISEs to get out of business niches. Niches are important for developing services and a portfolio, but once developed and ready for a broader range of customers ECO-WISEs should face the challenge of private market competition, breaking away from niches. However, competition could also go along with cooperation and innovation; the questions today seem to be to what extent ECO-WISEs can be “social entrepreneurial” and how they can improve cooperation with the private sector and different policy areas in the public sector. These topics are sensitive issues that are being currently vigorously debated.

4.4 Challenges for Austrian ECO-WISEs

As previously outlined a sample of CEOs of ECO-WISEs were surveyed in 2009 to ascertain their views on current and future issues facing the sector. In this survey the CEOs highlighted the need for concrete ideas and concepts to combat poverty and social exclusion now and in the future. Concerns were expressed about the need for funding conditions to become more client-needs orientated and feasible. For example, funding restrictions and shorter transitional periods work against the increasing demand for work integration. The fact is that the economic crisis led to a reduction in employment opportunities in the labor market, which can lead to an increase in the exclusion of marginalized persons, who typically are at the end of the labor queue, like the elderly, the low qualified, long-term job seekers with multiple social and psychological problems. The perception is that shortening the transitional work periods and restricting funding undercut services and reduce flexibility at the exact moment their need is expanding. There are regional cooperation pilot projects existing with the aim to create flexible, long-term job options in a so-called “third” or “extended” labor market for highly disadvantaged target groups, as well as low-threshold projects that try to bring certain groups closer to the labor market like early school leavers (Paierl and Stoppacher 2009). However, these efforts still lack a genuine funding scheme with the Labor Market Service or other partners from the public sector. These initiatives are in most cases small projects of subsidiaries or of parent companies with an insecure financial structure depending on market-based activities and additional subsidies from the local municipalities.

The economic crisis led to a general decline of purchasing power, which also impacted ECO-WISEs. According to the CEOs, ECO-WISEs are experiencing lower demands for goods and services. Therefore, market-based activities are an important, but insecure source of income. Furthermore, the social orientation of ECO-WISEs has set clear limits for raising their income from market-based activities. The kind and amount of services and products ECO-WISEs deliver depends to a large extent on the capacities of transitional employees. Due to a lack of qualifications and social competence, while also bringing a wider range of social problems (drug addictions, debt, lack of socialization, homelessness etc.), these employees are not to be mistaken as “fully-fit”. Moreover, these persons are there to be trained and supported, which also requires resources. These circumstances make it hard for ECO-WISEs to compete with private businesses and to raise their income. Therefore it may be misleading to think that they are able to provide quality services with sustainable effects by only raising their income through market-based activities. CEOs define work integration as a public duty, wherefore the whole society should show responsibility. ECO-WISEs can create and deliver demand-oriented services, but for that they need sufficient support.

5 Concluding Reflections on Drivers and Barriers

In conclusion, ECO-WISEs in Austria have become increasingly institutionalized into a partnership-like relationship with the public authorities. Concurrently, the culture of this partnership has intensified at a time when there are rising tendencies of social exclusion due to an increasing national unemployment rate. As argued below, these two trends serve as opportunities and drivers for the growth of these WISEs but also create barriers to their development.

The partnership-like structure is based on the corporatist tradition of the Austrian welfare state practice as previously outlined in this article. The literature review and interviews highlight that the nature of the partnership has changed over time. In the state of welfare provision, the state places a high value on social enterprises as inventors and providers of social services. Public resources are made available for experimental piloting projects, but when proven as sustainable and successful, these initiatives are often incorporated in the state-driven welfare provision model, with a strong regulation and controlling mechanism. This also happened in the early years of charitable societies when many turned into large NPOs, fulfilling public authorities’ demands in line with regulated funding (Melinz 2004). Such ‘isomorphic’ tendencies (DiMaggio and Powell 1983) can also be reconstructed in the institutionalization process of ECO-WISEs. In the wake of the “New Social Movement” period, they were launched by groups of citizens, which were affected by the increasing unemployment rate and environmental problems. Triggered by public authorities’ initial programs, such as “Aktion 8000”, they invented solutions to combat upcoming social exclusion tendencies. There were spaces for social innovation and participation, as the interviewed experts asserted. Both, the rising social problems as well as the partnership with public authorities can be identified as drivers for the evolution of WISEs in general, and ECO-WISEs specifically, in times of the “welfare-pluralism” (Evers and Olk 1996). But once developed, a regulatory regime was established, limiting innovations and controlling practical implementation. Since the 1990s, with its increasing unemployment rate, ECO-WISEs have been incorporated into the state-driven welfare provision system via a ‘top-down guided’ closely controlled contract-based relationship. The restructuring of the public labor market authority system and its regionalization in the 1990s, in line with the “new public management” strategy did not change this noticeably, as noted by interviewed experts. Rather, it was expanded to the European policy sphere. This was accompanied by drawbacks and opportunities. On the one hand, the availability of funding by the ESF led to a remarkable growth of WISEs (BDV 2008; Lechner et al 2016) including ECO-WISEs, with the opportunity to react especially to regional demands of work integration. On the other hand, national policy strategies have since been matched to European guidelines; the budgets have been adjusted accordingly, which narrows the spaces for demand oriented action (Zauner 2006; Lechner et al 2016). The two faces of European policy – fostering regional and benchmarking national development at the same time – can be identified as drivers of and barriers to the development of ECO-WISEs. At the beginning of the 2000s the Austrian welfare-pluralism shifted gradually to a welfare-market system. Increasing societal needs led to an “activating social policy strategy” in general (Stelzer-Orthofer 2011). Since then ECO-WISEs have been confronted with more neo-liberal-like circumstances, focusing on strict contracting and rigid controlling. At the same time, the economic crisis has led to an increasing demand on work integration measures.

The empirical analyses based on a survey of ECO-WISEs at two points in time indicate that the mean number of workers per ECO-WISE is increasing and the ratio of beneficiary to social work staff is also increasing. This suggests that ECO-WISEs have increased their level of service provision and partnership under expanded ALMP approaches.

Both trends – the neo-liberal-turn and the increasing demand on work integration – can be viewed as barriers to the evolution of ECO-WISEs. On the one hand more people are in need of support, on the other hand, public expenses have not risen in the same proportion, as the contrasting juxtaposition between costs of delivering the measures and numbers of supported persons shows. As a consequence, more and more people are expected to be integrated in the mainstream labor market in an ever shorter time period. This is aggravating the conflict between meeting users and public authorities’ demands. Additionally, ECO-WISEs are forced to raise their income from market-based activities. As the impact on the financial structure indicates, two thirds of this is derived from sales to private and public customers. Indeed, this is leading to a more professional economic accentuation and, in turn, this determines the social orientation of the WISE. To manage this situation new forms of partnerships are emerging. The “funding directive for public benefit limited employment projects or companies” opens spaces for collaboration with local government and business partners as well as with other policy areas like the environmental policy. This indicates a clear demand for a joint responsibility in times of constantly rising unemployment rates and strained labor market policy budgets. Additionally such partnerships can increase the opportunities for WISEs to participate in local decision-making processes and to co-design innovative, client-needs oriented programmes with feasible financial conditions.


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Published Online: 2017-1-18
Published in Print: 2016-12-1

© 2016 Anastasiadis, published by De Gruyter

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