A few years ago, en route to a hotel in the the Philippines, Mike Dershowitz noticed a father, mother and child sheltering in a doorway. The parents were asleep, but the little boy looked at him and started talking.
Dershowitz, who was in the country to check on his solar energy manufacturing business, was struck by how much the child reminded him of his own four-year-old son back home in Bryn Mawr.
“This was a tragedy,” Dershowitz recalls. “You have a kid on a street corner with the same amount of intelligence and brain power as my son, but because of where he is born, he’s not going to come close to what my son could achieve.”
That realization prompted Dershowitz to join the “impact sourcing” movement, which encourages First World companies to improve conditions in the cheaper-labor countries where they send out-sourced business. He started ReThink Staffing, a call-in center that pays employees a living wage, and that he says has made him a very comfortable man.
“You have to look at the economics of where people are living and help them have a good living within those conditions,” Dershowitz says.
Now, he’s turning his attention to a part of Philadelphia that has many of the same conditions as what he saw in the Philippines: Kensington. Dershowitz plans to open what he calls the “Philadelphia Fair Trade Call Center,” in a once-abandoned factory, employing neighborhood folks at a living wage of $12.20 an hour.
“My vision for Rethink Staffing is that we seek to reduce global poverty and economic insecurity by creating sustainable middle-class employment, eventually growing a new generation of capital owners from wage earners,” he says. “This vision is what drives me every day.”
That, and money. Because at heart, in spite of the rhetoric—or as he would say, in addition to it—Dershowitz is a businessman. He is not, he insists, a do-gooder. Like any businessman, he wants to make a healthy profit. And he says it’s the only way to ensure businesses also do social good. “I take a salary,” Dershowitz says. “I take a nice salary.”
Dershowitz, who grew up in Philadelphia and attended Friends Select and Cheltenham High School, spent seven years as a product designer and strategist at JPMorgan Chase before starting his first company in the Philippines, a solar energy software company in 2012. He says it once employed 65; now three work there as it makes it way out of bankruptcy. Three years ago, he launched ReThink Staffing, which he says now has several hundred employees.
Dershowitz says he pays his employees well above the going rate, and that better pay reduced turnover and absenteeism so significantly that ReThink was able to trim recruitment costs while retaining more clients, with better service. In the Philippines, Dershowitz’ employees are the voice on the other end of the line of a 1-800 call. They handle data entry and other routine computerized business processes. In Kensington, employees will simply answer phones.
Dershowitz says ReThink’s Filipino employees are also given free mandatory English classes, and training to move up in the company and make more money. And Dershowitz encourages his employees to start side-businesses for multiple streams of income, a plan he has for Philadelphia as well. “A lot of poor people are very entrepreneurial,” he says. “They have to be in order to survive.”
With ReThink, Dershowitz is part of the growing ranks of social impact businesses intent on both making a profit, and making a difference. In the United States, outsourcing has decimated neighborhoods like Kensington by taking jobs south or abroad; Dershowitz himself opened his solar company in the Philippines, where it was cheaper to do business. The gamble, now, is to see if he can help spur change by doing business in his hometown.
Time will tell if Dershowitz’s model will work here. Companies send call-center and data processing work to the Philippines because labor costs are lower. Why choose a higher-priced option here?
Dershowitz believes some potential clients need a domestic center and will like the optics of patronizing a hard-pressed neighborhood in Philadelphia. They might be willing to pay a premium as part of a vendor and minority contracting business social impact program.
He thinks his starting pay of $12.20 an hour, nearly $5 an hour above the $7.25 minimum wage, will attract workers. The $12.20 rate is also the minimum wage required in contracts with the city of Philadelphia.
Yes, Amazon is paying $15 an hour, “but you have to get to the warehouses,” he says. “You have to look at the economics of where people are living and help them have a good living within those conditions,” he says.
In Philadelphia, $12.20 an hour for a full-time worker hovers at the living wage amount needed to support one adult without children. It is not enough to support a family, or to save money for emergencies, education or a home. In Kensington, where rents are cheaper, the wage may go further. But will it go far enough?
“My vision for Rethink Staffing is that we seek to reduce global poverty and economic insecurity by creating sustainable middle-class employment, eventually growing a new generation of capital owners from wage earners,” Dershowitz says.
“In the developing world, our model is new” to the employees there, Dershowitz says. Most of his Filipino employees, he says, have moved into the middle class and support families on what they earn. “What we present to our clients is not new. They know we’re having a social impact. Here, it is a new product. I call it urban sourcing, not outsourcing.”
Still, only time will tell if he can make the margins work for his business. Dershowitz says he’ll initially charge clients $19.50 an hour, which he says is low for the industry. Typically, he and most others charge $22 to $24 an hour for a $12.20-an-hour U.S. employee. The $7.30 per-hour margin he’ll initially earn needs to fund health insurance, payroll taxes and insurances, recruitment, training, rent, equipment, utilities and, yes, profit.
Profit, though, is unlikely at $19.50 an hour. “We’ll probably do the first client as a loss-leader,” he says. If, that is, he gets a first client; nothing’s signed yet.
Unknown is whether he’ll find qualified talent willing to stay on the job; manufacturing employers in Northeast Philadelphia routinely complain about high turnover and the inability to hire workers who test clean for drugs. Dershowitz says he has turned to Philadelphia Works, the city’s employment arm, to help him recruit. He has also reached out to nonprofits who work with people on public assistance or returning from prison. In total, he plans to provide around 180 jobs through ReThink Staffing.
“Here in Philadelphia, it’s a new industry,” he says.
Dershowitz’s modest goal of breaking even wouldn’t be possible if it weren’t for Kensington, where the overhead is cheap.
“We structured the lease so that when he does well, we’ll do well,” says Jeff Kahn, a principal at B Corporation Shift Capital, which owns the former factory, MaKen Studios South. Shift bought it for a low price, so can afford to give Dershowitz a break. Kahn says Dershowitz’s mission parallels Shift’s of bringing jobs to a hard-pressed area based on lower real estate costs
“The world’s changing,” Kahn says. “I think there is a renewed interest in urban problems. Everybody has rushed into the cities and now we have to figure out how to make them work.”
For Dershowitz, it’s a big experiment. But he also has no doubt that it is what he should be doing.
“It has to be rich white guys like me from Bryn Mawr,” he says. “It has to be guys like me deciding to make a difference.”