First, I want to acknowledge publicly that I believe government assistance programs provide an essential safety net for struggling families across the nation. Unfortunately, most government programs exclude the self-employed who, (just in case no one noticed), are also struggling to keep their heads above water thanks to the economic down turn.
Political Science professors and civics teachers across America will tell you that the practice of politics is about the allocation of resources to people and communities. But sometimes, the way government chooses to allocate resources can cause harm to individuals, families and businesses.Drew Millelsen, of KING 5 News in Seattle recently reported that the state of Washington is sending out hundreds of thousands of $1 checks to the state's neediest residents in order to increase state eligibility for federal aid.
Why? The state of Washington would be eligible for an additional $43 million in federal funding if the state's food stamp recipients receive just $1 dollar for energy bill assistance.
The cost of mailing the checks out is $250,000 and could increase food stamp allocations by $30 dollars per month for many recipients. Granted, this is good news for the thousands of families in our state who are struggling to keep their heads above water.
But, the announcement raises a number of questions: for instance, how are the state's neediest residents paying gas, electric, water and sewer bills?
And, what assistance, if any, are self-employed individuals and families receiving due to the economic impacts of the recession?
Who are the self-employed? 1099 employees and business owners.
When I conducted an Internet search for "self-employment assistance programs," it appears that those individuals who are already self-employed and struggling because of the economic down turn, have very few resources to assist them. For a detailed look at the severity of the recession, check out Paul Krugman's article, Who’ll Stop the Pain? posted on the New York Times.
No doubt about it, rising unemployment spared no state last month, and 2009 is shaping up as another miserable year for workers from coast to coast. But traditional unemployment statistics, as gloomy as they may be, do not take count the self-employed.
Many small business owners have exhausted their savings and lay awake at night wondering how they are going to put food on the table, pay bills, or make the mortgage payment. Today, sub contractors are calling contractors, begging to be paid for work that was completed last year, or even the year before.
That's the way it works. The big guys get into financial trouble and the little guys don't get paid. Not getting paid means you can't pay your bills on time. Not paying your bills on time results in a low credit score, which prevents small business owners from borrowing money to recover from the economic down turn.
Meanwhile, former employees have access to unemployment benefits, retraining services, classes and other forms of assistance not available to former employers.
Many of the businesses that are struggling to survive were successful two short years ago. Many of them employed anywhere from two to ten employees. They are, (or were), what politicians on the campaign trail call, "The backbone of America," the entreprenuers who provide the bulk of the jobs for American workers.
They are the men and women who are ineligible for most of the social assistance programs other Americans take for granted -- including unemployment benefits.
However, if someone is receiving unemployment benefits, AFDC or TANF assistance, they may be eligible for a range of state and federal financial assistance to help them get started in their own business.
In fact, the government will extend unemployment benefits while displaced workers start a business. If a worker needs training to update or develop skills, government will educate them. In many states, there are funds available to assist with a business start up. Do I resent the fact that government is helping people? No.
But I do question the fairness of Self Employment Assistance programs that exclude individuals who have been self-employed and have already demonstrated that they have a solid track record of providing jobs for the community.
Is it fair for government to provide benefits for new start up businesses that will be competing with established businesses that do not have access to similar programs?
Why would we want to "throw away" experienced business owners in order to train new ones? More importantly, how can established business owners compete with state-subsidized business owners? Especially when the state-subsidized business owners can underbid established businesses that do not receive any kind of aid?
Let's take a quick look at current federal and state programs that are available to displaced workers but not the self-employed.
The Federal Government
From the United States Department of Labor website: http://ows.doleta.gov/unemploy/self.asp
Self-Employment Assistance Purpose
Self-Employment Assistance offers dislocated workers the opportunity for early re-employment. The program is designed to encourage and enable unemployed workers to create their own jobs by starting their own small businesses.
Under these programs, States can pay a self-employed allowance, instead of regular unemployment insurance benefits, to help unemployed workers while they are establishing businesses and becoming self-employed. Participants receive weekly allowances while they are getting their businesses off the ground.
This is a voluntary program for States and, to date, Delaware, Maine, Maryland, New Jersey, New York, Oregon and Pennsylvania have Self-Employment Assistance programs. The State Workforce Agency web sites for these states can be accessed at: http://www.workforcesecurity.doleta.gov/map.asp.
Generally, in order to receive these benefits, an individual must first be eligible to receive regular unemployment insurance under State law. Individuals who have been permanently laid off from their previous jobs and are identified (through a State's profiling system) as likely to exhaust regular unemployment benefits are eligible to participate in the program.
Individuals may be eligible even if they are engaged full-time in self-employment activities - including entrepreneurial training, business counseling, and technical assistance.
Self-employment allowances are the same weekly amounts as the worker's regular unemployment insurance benefits. Participants work full-time on starting their business instead of looking for wage and salary jobs.
Filing A Claim
You should contact the State Unemployment Insurance agency as soon as possible after becoming unemployed. At the time you file your claim you should ask whether a Self-Employment Assistance program operates in your State.
Click here for more Unemployment Fact Sheets
From Washington State:
RCW 50.20.250 (highlights are mine)
Finding — Self-employment assistance program — Rules. (Expires July 1, 2012.)
(1) The legislature finds that the establishment of a self-employment assistance program would assist unemployed individuals and create new businesses and job opportunities in Washington state. The department shall inform individuals identified as likely to exhaust regular unemployment benefits of the opportunity to enroll in commissioner-approved self-employment assistance programs.
(2) An unemployed individual is eligible to participate in a self-employment assistance program if it has been determined that he or she:
(a) Is otherwise eligible for regular benefits as defined in RCW 50.22.010;
(b) Has been identified as likely to exhaust regular unemployment benefits under a profiling system established by the commissioner as defined in P.L. 103-152; and (c) Is enrolled in a self-employment assistance program that is approved by the commissioner, and includes entrepreneurial training, business counseling, technical assistance, and requirements to engage in activities relating to the establishment of a business and becoming self-employed.
(3) Individuals participating in a self-employment assistance program approved by the commissioner are eligible to receive their regular unemployment benefits.
(a) The requirements of RCW 50.20.010 and 50.20.080 relating to availability for work, active search for work, and refusal to accept suitable work are not applicable to an individual in the self-employment assistance program for the first fifty-two weeks of the individual's participation in the program. However, enrollment in a self-employment assistance program does not entitle the enrollee to any benefit payments he or she would not be entitled to had he or she not enrolled in the program.
(b) An individual who meets the requirements of this section is considered to be "unemployed" under RCW 50.04.310 and 50.20.010.
(4) An individual who fails to participate in his or her approved self-employment assistance program as prescribed by the commissioner is disqualified from continuation in the program.
(5) An individual completing the program may not directly compete with his or her separating employer for a specific time period and in a specific geographic area. The time period may not, in any case, exceed one year. Both the time period and the geographic area must be reasonable, considering the following factors:
(a) Whether restraining the individual from performing services is necessary for the protection of the employer or the employer's goodwill;
(b) Whether the agreement harms the individual more than is reasonably necessary to secure the employer's business or goodwill; and
(c) Whether the loss of the employee's services and skills injures the public to a degree warranting nonenforcement of the agreement.
(6) The commissioner shall take all steps necessary in carrying out this section to assure collaborative involvement of interested parties in program development, and to ensure that the self-employment assistance programs meet all federal criteria for withdrawal from the unemployment fund. The commissioner may approve, as self-employment assistance programs, existing self-employment training programs available through community colleges, workforce investment boards, or other organizations and is not obligated by this section to expend any departmental funds for the operation of self-employment assistance programs, unless specific funding is provided to the department for that purpose through federal or state appropriations.
(7) The commissioner may adopt rules as necessary to implement this section.
Which raises a final question: will the recipients of the services above be the future employers of today's struggling small business owners?
If so, Ouch!
Link to RCWs: http://apps.leg.wa.gov/RCW/default.aspx?cite=50.20.250
cfed.org report http://www.cfed.org/publications/effectivePractice/TANF-Funded%20Microenterprise.pdf