Association for Public Policy Analysis & Management

For many unemployed workers in the U.S., self-employment is an attractive option for getting reemployed and achieving self-sufficiency, particularly in periods characterized by a tight labor market.  Other unemployed workers may be interested in self-employment simply because they have a passion for a particular business idea or because they want to be employed on their own terms.  Although self-employment is attractive for unemployed workers, they face significant obstacles in starting and operating their own business, including lack of business experience and limited access to credit.  These obstacles may be even more prevalent during recessions when demand is low and financing is scarce.  This paper examines the value of offering self-employment training services to unemployed workers through the public workforce system.  Our analyses focus on two experimental design self-employment training programs sponsored by the U.S. Department of Labor before and during the Great Recession: (1) Project GATE (Growing America Through Entrepreneurship), a demonstration program implemented in 2005 in Maine, Pennsylvania, and Wisconsin, which offered an array of self-employment training services to unemployed and other workers; and (2) GATE II, a grant program implemented in 2009 in North Carolina and Virginia, which provided similar services to unemployed workers.  Analyses of participant characteristics show that the two programs attracted a diverse population of unemployed individuals, with relatively high proportions of women, nonwhites, and individuals with more than a high school education.  Interestingly, few differences in characteristics between Project GATE and GATE II are detected, implying that the fact that the two programs were implemented at different stages in the business cycle did not affect the composition of program participants. Analyses of program impacts show that both programs led to positive effects on new business starts after program entry, leading to significant effects on self-employment and overall employment.  We also find that Project GATE had higher effects on overall employment than GATE II, and was the only program that led to positive effects on earnings.  These findings show that offering self-employment training to unemployed workers is a potentially effective reemployment strategy, even when the labor market as a whole is weak.