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Editor's Note: As a person who was forced into entrepreneurship by losing his job, this Bloomberg point of view really caught my eye. And it gives impetus to my work with the foundation to find and finance more people just like I was in the late '80s........a hard worker with good ideas and no capital. [more]
TURN THE UNEMPLOYED INTO THE SELF-EMPLOYED
Cammie Allie and Ann Costlow are small-scale entrepreneurs who have battled back from unemployment to create successful businesses. Allie manages apartment buildings in Portland, Ore.; Costlow owns four crêperies in Maryland. To get started, each drew on business coaching and income support from an unusual state-funded jobless initiative. These self-employment assistance programs provide 26 weeks of income support, typically about $10,000. Participants try to start enterprises, rather than being required to look full-time for traditional jobs.
Founding a business isn’t for everyone. Hours are long, initial earnings puny, and the failure rate high even in boom times. A weak economy makes everything harder. For some displaced workers, however, self-employment may be their best hope. In Oregon, those opting for self-employment get business pointers and detailed reviews of their startup plans. Examiners look for clear ideas about pricing, supplies, customers, and competition. Only candidates judged to have at least a moderate chance of success can proceed.
Oregon recently surveyed 369 people who have participated in its program since 2000. Seventy percent had started a business; nearly half of those were hiring workers. The small survey’s responses might be skewed toward recipients who thrived. Even so, Oregon’s successful entrepreneurs each created an average of 2.63 jobs.
Self-employment aid closely matches the cost of regular unemployment benefits, which can run $400 a person per week. Britain, France, and Sweden have operated similar entrepreneurial assistance programs since the 1980s, with good results. In the U.S., though, only about a dozen states have followed suit, and most programs are tiny.
Bureaucracy is partly to blame. Current state and federal rules don’t allow unemployed workers to pursue self-employment aid right away; instead they must qualify for regular jobless benefits first, which takes weeks. States also worry that some startup dreams might fizzle quickly, wasting taxpayer money.
Making the entrepreneur’s path risk-free is impossible. Still, that shouldn’t stymie such aid. Three of the biggest states—California, Texas, and Florida—are home to 30 percent of America’s unemployed. These states don’t offer entrepreneurial assistance to the jobless; setting up such programs would be a big help.
Two other changes could help make entrepreneurship a likelier path back to work. First, states should tell the newly jobless about the self-employment option right away, rather than making them wait a month or two before becoming eligible. Second, minor income from a side business—capped at a reasonable level of, say, $750 a month—shouldn’t be automatically counted against jobless benefits. In some cases, this year’s hobby can be built into next year’s business. When 4.7 people are out of work for every job opening, unemployed Americans deserve better odds of becoming their own bosses. More...
