Solving the Reemployment Puzzle: From Research to Policy

Ch 8 - The Self-Employment Experiments and the Self-Employment Assistance Program

289 8 The Self-Employment Experiments and the Self-Employment Assistance Program with Jon Messenger1 The U.S. Department of Labor sponsored two self-employment assistance (SEA) experiments in Massachusetts and Washington states during the late 1980s and early 1990s. This chapter examines these two experiments and the policy lessons learned from them. It discusses how the experiments led to the enactment of the federal SEA legislation. It also reviews the development and operations of the SEA programs that today operate in seven states. Since the enactment of federal legislation in December 1993, states have been able to incorporate SEA programs into their unemployment insurance (UI) systems. SEA programs permit an exception to the UI work-search rule requiring UI claimants to search for a job in wage and salary employment each week, although other eligibility requirements for collecting regular UI benefits are maintained. Under the SEA program , unemployed workers who are eligible for UI can start their own businesses instead of searching for wage and salary employment. While they are starting their small businesses, they can collect SEA benefits in lieu of UI benefits in the same amount and for the same duration as their regular UI benefits. They receive entrepreneurial counseling and training to help them establish successful microenterprises. The SEAexperiments began in 1987, at a time when microenterprise and microlending were not well known or well regarded as employment and economic development strategies. It was only in the 1990s that microenterprise development became more popular, and it was not until 2006 that Muhammad Yunus was recognized by the Nobel Committee for his pioneering efforts in this area. Yunus and the Grameen 290 Wandner Bank, which he started in Bangladesh, shared the Nobel Peace Prize because the committee believed that lasting peace requires the reduction in poverty that can be facilitated through microcredit programs. In the United States, microenterprise is an alternative employment strategy available to American workers. In addition to the availability of the SEA program, microenterprise training is provided through state WIA programs. microenterprise Creation and Self-Employment Assistance Most dislocated workers want to return to wage and salary employment . Self-employment, however, is a way to promote the reemployment of a small percentage of UI recipients. Establishment of individuals in self-employment is also an important subset of business start-ups. The growing recognition of both the contribution of microenterprises to the creation of employment opportunities and the relatively modest financial and managerial requirements of self-employment have generated interest in using self-employment as a tool for assisting unemployed workers to return to work. Unlike other services to assist the unemployed to obtain jobs, self-employment assistance is designed to promote direct job creation for unemployed workers—to empower the unemployed to create their own jobs by starting small business ventures . These microenterprises are typically sole proprietorships with one or at most a few employees, including the owner/operator. While the primary goal of self-employment assistance is direct job creation for the unemployed worker, the microenterprises started by these individuals may also generate additional jobs that can be filled by other dislocated workers. Thus, a self-employment assistance program for dislocated workers provides an opportunity to integrate labor market policy and economic development policy in a synergistic relationship , helping dislocated workers to return to work while simultaneously providing a modest boost to economic growth and job creation in their communities. In addition, an increasing number of dislocated workers are now coming from professional, technical, and managerial occupations—occupations that make them particularly well-suited for self-employment. In the Washington State demonstration, 37 percent of all participants came from professional, technical, and managerial occupations. In the Mas- The Self-Employment Experiments 291 sachusetts demonstration, 45 percent of participants came from these occupations. Encouraging self-employment is not a new workforce policy. It was a component of workforce development plans before SEA came on the scene. Indeed, self-employment programs were part of the Job Training Partnership Act (JTPA) programs. Entrepreneurial training was an authorized use of JTPA formula funds provided to the states for both disadvantaged and dislocated workers, and many states made use of that authority. Discretionary funding had also been provided for entrepreneurial training by the secretary of labor. For example, in 1986 8 of 90 dislocated worker projects funded from the JTPATitle III reserve account included an entrepreneurial training component (Wandner and Messenger 1992, p. 13). Similarly, today...