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The Daily Need

New bill would allow unemployment pay for entrepreneurs

Alexis Peterka (right) is a participant in Oregon's Self Employment Assistance Program. It allows her to collect unemployment benefits for six months while she works full-time on her own start-up company, Stayhound, a service that helps locate pet care providers.

Last week Need to Know reported on a small program in Oregon that allows unemployed workers to start their own businesses while receiving unemployment insurance, instead of looking for a new job. The Self-Employment Assistance Program, which has been in existence since 1993, has been very successful in Oregon – an estimated 77 percent of businesses started under the program are still running. But the program, which also operates in six other states in addition to Oregon, is very small in scope.

The law caps the number of participants at 5 percent of a state’s total unemployment beneficiaries, and in 2009, there were fewer than 2,500 SEA participants nationwide. In addition, SEA participants have to be identified as likely to exhaust their benefits and engaged full time in entrepreneurial activity while receiving benefits.

But some lawmakers think expanding SEA could be part of a solution to the nation’s unemployment crisis. Today, Sen. Ron Wyden (D-OR), Sen. Tom Carper (D-DE), and Sen. Bob Casey (D-PA) introduced the Startup Technical Assistance for Reemployment Training and Unemployment Prevention (STARTUP) Act (pdf) to expand self-employment assistance programs.

The bill would allow the long-term unemployed to take advantage of the program. Currently, SEA participants are not eligible to use the program during extended or emergency unemployment periods, which have been extended to 99 weeks in many states. Instead, SEA is only available for the first 26 weeks of unemployment. The STARTUP Act would allow an unemployment beneficiary to use 26 weeks of funds for self-employment assistance at any point during their eligibility. The bill would also incentivize every state to offer the program, providing technical assistance from the Labor Department and authorizing $35 million in state grants over the next three years to establish, implement, improve, and administer the programs.

Sen. Wyden, who was one of the architects of the original SEA legislation as a House Member in the early 1990s, said in a release that “being unemployed isn’t always a bad thing. For some of the nation’s most successful entrepreneurs, losing a job was an opportunity to start something new. But starting a new business takes time and focus which the current unemployment rules don’t provide.”

“By offering more workers access to this underutilized program, this bill will not only ensure that more Americans will find jobs but it will also help generate growth by fostering the next generation of startups that make our communities and economy stronger,” said Sen. Carper, who oversaw Delaware’s participation in the SEA program while governor.

But in a highly partisan Congress, the prospect for passing legislation related to the SEA program may not be easy. President Obama’s American Jobs Act also included language to expand SEA programs, but that bill stalled in the Senate last month. But the extension of emergency unemployment insurance benefits, which will expire at the end of this year if no action is taken by Congress, may be one possible vehicle for passage of this new bill, according to Tom Caiazza, a spokesperson for Sen. Wyden.

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