Self-Employment as a Reemployment Option: Demonstration Results and National Legislation

Author(s): Benus, Jacob M.; Wood, Michelle L.; and Grover, Neelima

Organizational Author(s): U.S. Department of Labor, Employment and Training Administration; and Unemployment Insurance Service

Funding Source: U.S. Department of Labor, Employment and Training Administration

Resource Availability: Publically available

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Summary

Presents findings from a comparative analysis of two experimental Unemployment Insurance (UI) self-employment demonstration projects in Washington and Massachusetts and the impacts on business formation, employment and earnings, and length of UI receipt.

Description

“The Department [of Labor, Employment and Training Administration] sponsored two experimental demonstration projects that tested the viability of self-employment as a reemployment option for unemployed workers. These projects, Unemployment Insurance (UI) Self-Employment Demonstration Projects, were designed to assist UI recipients interested in self-employment to ‘create their own jobs’ by starting a business venture” (p.v). “The projects…used experimental research methods, including a control group, so that they could provide evaluation results that tell us whether self-employment programs for unemployed workers can be effective and efficient as full-scale programs” (p.v). The Massachusetts demonstration compared 263 treatment individuals to 258 control individuals, while the comparative analysis of the Washington demonstration included follow-up surveys of 1204 participants 18-21 months following random assignment into the experimental or control conditions with supplemental data from the Participant Tracking System.

“This evaluation report provides results on the net impacts of each project on: business formation and survival rates; participants' employment and earnings from both self­ employment and wage and salary employment; participants' duration of unemployment and receipt of UI benefits; and job creation” (p.xi).

Each demonstration project contained two components: financial assistance and microenterprise development services. Financial assistance was provided as financial payments in the form of grants or loans to business as capital or periodic payments during the start-up period. Microenterprise development services provided training, business counseling, peer support, and technical assistance. “The employment security agency offered and paid the self-employment allowances, while the State economic development agency and local service providers were responsible for providing the business development services. The Washington demonstration tested financial assistance in the form of lump-sum payments, while Massachusetts tested biweekly payments equal to an individual’s regular UI benefits” (p.vi).

“The second part of this publication focuses on the…national legislation authorizing self-employment assistance (SEA) programs. This latter section includes both the legislation itself and also a Department of Labor program letter providing guidance to the States in developing their SEA programs” (p.xi).

(Abstractor: Author and Website Staff)

Major Findings & Recommendations

“Evaluation results from the UI Self-Employment Demonstration Projects in Washington state and Massachusetts…indicate that self-employment is a viable reemployment option for some unemployed workers” (p.viii). “…Both the Washington and Massachusetts demonstrations reduced the duration of unemployment and the receipt of unemployment benefits by promoting rapid reemployment. The Washington demonstrated reduced UI benefit receipt by 6.1 weeks. However, when controlling for lump-sum payments paid to the Washington participants, the amount of UI benefits were significantly greater than the UI benefits paid to control participants. The biweekly payments provided to Massachusetts demonstration participants reduced the UI benefit receipt by 1.9 weeks and resulted in a net savings of about $700 per participant in the first two years” (p.viii).

Both the Washington and Massachusetts demonstration results showed that “self-employment assistance directly increased job creation by doubling the number of business starts [and]…self-employment assistance significantly increased participants’ total employment” by two months (p.viii). Additionally, employment earnings for participants in the Massachusetts Demonstration showed that employment earnings were significantly higher than those in the control group. The authors conclude that “self-employment programs like Washington State’s SEED Demonstration and Massachusetts’ Enterprise Project represent viable policy tools for promoting the rapid reemployment of UI claimants” (p.ix).

“As a direct result of these demonstration projects, the Congress enacted legislation that allows States to establish self-employment assistance programs for unemployed workers as part of their unemployment insurance (UI) programs. This legislation and a Department of Labor directive providing guidance on this program are also included in this publication” (p.v).

(Abstractor: Author and Website Staff)

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Publicaton Date: 1994
Posted: 5/19/2017 4:09 PM
Posted In: Workforce System Strategies
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