Should startup entrepreneurs be allowed to collect unemployment insurance while they work on their new businesses?
Many experts say yes. I recently reported on a new initiative from the U.S. Department of Labor, Self-Employment Assistance Programs (SEA) that allows people on unemployment to continue receiving their unemployment payments while they launch new businesses.
Most states allow recipients to collect unemployment benefits only if they can prove they are actively searching for a new job. SEA waives this requirement and enables recipients to get their benefits for up to 26 weeks—just like others on unemployment—as long as they can prove they are working on a “credible” business, which means having a viable business plan and getting training in entrepreneurship.
The Department of Labor can’t require each state to create a SEA program, but it has made $35 million in funding available for states to do so. It has also created guidelines that explain how state governments can institute the new program.
Only a few states—Oregon, Delaware, Maine, New York and New Jersey—have created SEA programs, though funding is available for all. In Oregon, which has been operating a SEA program since 1995, a survey of SEA participants found that nearly half of its program’s participants have created an average of 3.12 new jobs. SEA programs, says Senator Ron Wyden (D-OR), who has championed this cause, turn unemployment insurance into “job multipliers.”
In announcing the plan, Labor Secretary Hilda L. Solis said, “Self-Employment Assistance has proven to be a valuable tool in helping many unemployed Americans realize the dream of business ownership in Oregon and around the country. These grants will help improve and expand these state programs while strengthening the economy and creating new jobs as more start-ups launch and grow.”
While some might say that collecting unemployment while you start a business is opposed to the independent spirit of entrepreneurship, I disagree. For many startup entrepreneurs, the lack of capital is a crucial barrier to getting off the ground. Benefits to help deserving entrepreneurs start viable businesses pay off for more than just the entrepreneurs in question—they pay off for the whole community by creating jobs and stimulating economic growth.
There’s a lot of lip service to small businesses as job creators—now, here’s a program that can truly help them create jobs. If you agree, urge your state’s representatives to take action and adopt SEA.
The Department of Labor has asked SCORE to help provide technical assistance and training in participating states for those participating in SEA programs. Even if your state doesn’t offer SEA, visit the SCORE website to get matched with a mentor and get free business advice 24/7.