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From Job Seekers to Job Creators

Self-Employment Assistance is empowering unemployed workers to start their own businesses, and the Labor Department is offering new guidance to help extend that opportunity to more Americans.

In his 2012 State of the Union Address, President Obama stated his goal to turn the nation’s unemployment system into a reemployment system.  One way we can do this is to leverage and foster the entrepreneurial spirit of the nation’s unemployed workers, helping those who have lost their job transition to creating jobs.  Included in the payroll tax cut and unemployment insurance legislation the President signed into law in February was a provision called Self-Employment Assistance, or SEA, that allows states to empower unemployed workers to start their own businesses.

The idea is simple:  Some laid-off workers have the skills, experience, and entrepreneurial ambition to launch a successful business, but they are locked into an inflexible system.  If they stop looking for traditional work full-time, they will lose their unemployment benefits.  Instead, SEA allows an entrepreneur with a viable business plan to receive those same unemployment benefits, as long as they are working full-time to get a new company off the ground.  

We know that this model works, because several states have already established successful programs over the past two decades.  In multiple studies, SEA has been shown to increase the success of entrepreneurs, and increased their earnings from self-employment.

Take Rakia Reynolds, who in 2007 found herself laid off from her job as a TV producer in Philadelphia.  She discovered that Pennsylvania would allow her to dedicate herself to the all-consuming process of starting a new business, while continuing to receive unemployment benefits for a limited time to support her family.  She founded the public relations firm Skai Blue Media, and in just a few years hired six employees and established her company as a PR leader in Philadelphia.

Or take Adam Lowry and Michael Richardson, two software developers in Portland, Oregon whose employer went out of business in 2009.  Self-employment assistance allowed them to pursue their entrepreneurial ambitions and launch Urban Airship, an innovative mobile advertising company that now employs 75 workers, and promises to keep on growing.

America is full of potential success stories like these.  As part of the White House-led Startup America initiative to accelerate the success of job-creating entrepreneurs across the country, the President first proposed to expand SEA last September in the American Jobs Act.  TIME called SEA “the most important (and overlooked) proposal” included in the American Jobs Act.  SEA was one of several work-based reforms passed into law in February as part of the first major overhaul of the unemployment insurance system in decades. 

Today, the Labor Department issued technical guidance to put the new law into practice, extending this opportunity to the long-term unemployed, connecting entrepreneurs with mentorship and business development resources through the Small Business Administration and local partners, and giving states the tools to get new SEA programs off the ground.  The goal of this guidance, and of the legislation that generated it, is to give thousands more entrepreneurs the opportunity that Lowry, Richardson, and Reynolds had—to realize their dreams of self-employment, creating profits for themselves and jobs for others in the process. 

Danielle Gray is Deputy Assistant to the President for Economic Policy. Tom Kalil is Deputy Director for Policy for the White House Office of Science and Technology Policy and Senior Advisor for Science, Technology and Innovation for the National Economic Council.