Association for Public Policy Analysis & Management

For people who have lost their jobs and are eligible for Unemployment Insurance (UI) benefits, starting their own businesses is a potentially innovative alternative for reemployment. Entrepreneurial activities do not typically fulfill the UI program’s work search requirement. However, states that establish Self-Employment Assistance (SEA) programs have the option of supporting entrepreneurship by providing UI claimants who meet SEA eligibility requirements with a weekly self-employment allowance while they set up their businesses.

Although SEA programs vary by state, some features are uniform. For all SEA programs, the self-employment allowance is equal in amount and duration to the claimant’s regular UI benefits. All SEA programs allow participants to concentrate on self-employment activities rather than look for wage or salary employment, while receiving SEA services and benefits; however, the types of services can vary by state. Services, such as mentorship and entrepreneurship training, are often provided by partners of the UI agency, such as Small Business Development Centers. All SEA participants must work full time toward establishing their business and, in some states, they must meet benchmarks, such as creating a business plan, for SEA benefit receipt.

Although SEA programs appear to meet the needs of some unemployed workers interested in self-employment, few states have launched such programs. During 2015, only seven states had an operating SEA program, and participation in the programs has been low. According to data reported by states to the U.S. Department of Labor, 1,948 claimants enrolled in SEA programs nationwide from July 2013 through June 2014.

This congressionally mandated study, conducted by Mathematica Policy Research under contract to the U.S. Department of Labor, draws on both qualitative and quantitative data. Qualitative data were collected through interviews and reviews of program documents to provide insight into SEA program design and implementation in five states—New Hampshire, New York, Oregon, Rhode Island, and Vermont. In addition, we analyzed claims data from New York and Oregon to reveal insights into the characteristics and experiences of SEA participants, as well as UI recipients who did not participate in the SEA program.

Our analysis provides a rich understanding of program participants; participants’ outcomes, such as benefit amounts, benefit durations, and wage and salary earnings; and states’ implementation of their SEA programs. We also gained insights for other states that are interested in developing such a program. Key findings are that states struggled to collect data on self-employment outcomes, varied in their approaches to collect these types of data, and differed in their interpretation and measurement of outcomes. This variation in measurement has a strong influence on the ability to draw conclusions across the states from an analysis of data about participants’ outcomes.

The findings, which were shared with the U.S. Congress in addition to the U.S. Department of Labor, provided program administrators and legislators with policy-relevant information about the possibilities and limitations of SEA programs and—more broadly—about self-employment as a route to re-employment.