New York is helping the long-term unemployed become entrepreneurs through a business training course. Through the Self-Employment Assistance Program, participants receive state benefits while spending 13 weeks learning how to launch a business. The scheme has trained some 9,500 people.
Results & Impact
At least 9,500 people have participated in the scheme across New York state. In 2012, more than 580 people took part, leading to the establishment of more than 360 businesses.
New York State Department of Labour, local job training and business preparation organizations
Applicants for unemployment insurance are assessed on a 100-point scale to determine their chances of finding a job before their benefits run out. Individuals at risk of running out benefit payments are made aware of their eligibility for the Self-Employment Assistance Program. While recipients of benefit payments are normally required to search for jobs, this requirement is waived for participants who instead work full-time on establishing a new business. Participants are required to attend 20 hours of businesses training and have two one-on-one sessions with a mentor. The training provides an overview of how to set up and develop a business, including how to write a business plan, secure financing and fulfil tax requirements. The state identifies suitable training providers, and participants choose the one that is most suitable to them based on types of classes and workshops. Participants submit forms at specified time periods to notify the state of their progress.
Cost & Value
Running since 1995
Self-employment assistance schemes in the US have been limited by federal restrictions on the number of people eligible to take part. The same federal regulations that enabled many states to launch their pilots also stipulated that a maximum of 5% of Unemployment Insurance claimants could participate at any given point, including in New York. The long-term viability of the start-ups is also questionable: Ormsby Street's Business Survival Calculator estimated that just four in ten start-ups survive beyond five years.
Many states have trialled similar self-employment assistance programs, including Washington, Massachusetts, Maine, Minnesota, Pennsylvania, Delaware, Oregon, Vermont, Rhode Island, Mississippi, Delaware and New Hampshire. The Massachusetts Enterprise Project increased the rate of self-employment by more than 5% between 1990 and 1993. Those who took part in a scheme operated across Maine, Minnesota and Pennsylvania between 2003 and 2005 were 7.5% more likely to find work. Between 2012 and 2014 the Federal Government made $35 million available to states to pursue Self-Employment Assistance Program schemes.
The state of New York has given at least 9,500 long-term unemployed people the chance to start their own business by paying them unemployment insurance while they pursue business training.
The Self-Employment Assistance Program (SEAP) has been operating for more than 20 years, and is designed specifically for people deemed likely to use up their full quota of benefit payments. The state government sees self-employment as a viable alternative, as one in ten Americans work for themselves. Participants undertake a minimum of 20 hours of training and have two meetings with a business counsellor over a period of at least 13 weeks.
New York’s SEAP scheme is one of the longest running self-employment assistance program in the nation, although similar initiatives have been implemented for short periods across the US, many with high success rates. The Massachusetts Enterprise Project operated between 1990 and 1993 and increased self-employment in the state by 5%. It had a financial impact of up to $13,000, made up of both the participants’ increased income and the reduction in unemployment insurance claims. A similar trial project that operated across Maine, Minnesota and Pennsylvania showed participants were 7.5% more likely to find work.
Success stories include WL Concepts and Productions, a firm that has provided signs for Walt Disney, Tommy Hilfiger, Timberland and JFK. International Tees and More was also launched as a result of SEAP, and now offers promotional products for businesses with connections to over 3,000 suppliers.
Applicants are assessed on the basis of their unemployment score. This is calculated automatically when someone registers for unemployment insurance in New York State, and is designed to identify individuals likely to exhaust their benefit allowance. The calculation is based on the amount of time the individual was working for their previous employer, where in New York State they live, previous unemployment insurance claims and the type of work they had been doing. Other requirements include a clear business plan, a willingness to locate the business in New York State and a commitment to be actively involved in the business on a full-time basis. Applicants are required to have have at least 13 weeks of unemployment insurance remaining, as SEAP does not extend benefits beyond the time it takes to complete the necessary training.
One of the advantages of the SEAP approach is its limited demands on state resources. The New York course provides a structure for entrepreneurs to pursue and complete training, but if there are any costs associated with the course, participants must pay themselves. However, the majority of the service providers listed on SEAP are free to participants. SEAP enrolees can choose from a mixture of workshops, seminars or even online classes, depending what they deem is best for them and their budget. For example, the Small Business Development Centre provides classes in the basics of starting a business, selling to the government and social media strategies, as well as free consultations with pro-bono attorneys.
Prior to starting their training, a plan must be submitted detailing the name of the service provider the participant will be using and the training they will be using to make up the 20-hour commitment. Training providers not pre-approved via the state website require special approval. The training itself must also be general, rather than specific to the product or service the entrepreneur plans to sell.
Participants must report on their progress as the scheme progresses. Once they have completed all 20 hours of training and held meetings with a business counsellor, they must submit an Individual Services Verification Form, signed by their counsellor, which certifies they have completed all training.
Although the New York initiative and previous self-employment assistance schemes have proved successful, all have been limited by federal restrictions on the number of people claiming unemployment insurance eligible to take part. The same federal regulations that enabled many states to launch their pilots also stipulated that a maximum of 5% of unemployment insurance claimants could participate at any given point, including in the case of New York.
In 2012, more than 580 people participated in SEAP, resulting in over 360 new businesses. Roughly 9,500 people have taken part in the scheme in New York State.
(Picture credit: Flickr/U.S Embassy London)