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First impact analysis of the Washington State Self-Employment and Enterprise Development (SEED) demonstration (Benus et al. 1994)

Citation

Benus, J., Johnson, T., & Wood, M. (1994). First impact analysis of the Washington State Self-Employment and Enterprise Development (SEED) demonstration. Unemployment Insurance Occasional Paper, 94(1), 1-172.

Highlights

  • The study examined the impact of Washington State’s Self-Employment and Enterprise Demonstration (SEED) on reemployment via self-employment for Unemployment Insurance (UI) claimants.
  • SEED was evaluated using a randomized controlled trial in which SEED applicants were randomly assigned to a treatment group, which could receive several types of business start-up training and support services, or a control group, which received UI benefits as usual. Outcomes of interest included measures of employment, self-employment, earnings, and UI benefit receipt.
  • The study found that applicants in the treatment group entered self-employment at significantly higher and faster rates than those in the control group did. SEED participants also earned significantly more from self-employment than nonparticipants did.
  • The quality of the causal evidence presented in this study is high because it was a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to SEED, and not other factors.

Intervention Examined

Washington State’s Self-Employment and Enterprise Demonstration

Features of the Intervention

SEED, a federally sponsored self-employment demonstration for unemployed workers in the United States, took place from September 1989 to March 1991. Six sites were selected purposively for the study; all UI claimants in these sites underwent a sequence of intake activities to screen out those with insufficient interest in or motivation for self-employment. The study excluded claimants filing interstate claims, those filing claims backdated more than 14 days, those who were employer-attached on standby or who were full-referral union members, and those younger than 18.
The study included a total of 1,507 approved applicants, 755 of whom were randomly assigned to the treatment group and 752 to the control group. SEED participants were offered three types of program services: (1) business start-up training and technical assistance, (2) a waiver of the UI work search requirements and documentation typically required to continue receiving UI benefits, and (3) financial assistance in the form of self-employment allowances equivalent to their UI benefits and payment in full of remaining benefits when they exited UI.
The researchers used data from a follow-up telephone survey administered to all study participants about 21 months after random assignment. The survey captured data on employment and earnings, unemployment, time spent looking for work, and SEED program experiences. The authors also used administrative data collected from several state agencies on SEED enrollment and activity, UI wages, and business activity. The authors estimated treatment effects using a multivariate regression framework.

Findings

Employment

  • The study found that, compared with those in the control group, treatment group members were 25 percentage points more likely than their control counterparts to ever be self-employed over the follow-up period. They also entered self-employment 6.4 months sooner and earned $142 per month more from self-employment than control group members. Treatment group members earned a total of $2,969 more from self-employment than control group members over the follow-up period. These differences were all statistically significant.

Earnings and wages

  • Treatment group members were about as likely as control group members to be employed in a wage or salary job in the first year after random assignment. However, they worked about 94 fewer hours and earned $1,038 less in wage and salary employment during that period. These differences were statistically significant.

Public benefits receipt

  • SEED reduced the length of the first UI spell by 6.1 weeks and reduced the amount of UI benefits received during that spell by an average of $1,431.

Considerations for Interpreting the Findings

Washington’s economy was consistently robust over the period of study. The authors noted that previous experience suggested that a lower unemployment rate makes people less interested in self-employment. About 20 percent of control group members reported receiving business training through alternate sources.

Causal Evidence Rating

The quality of the causal evidence presented in this study is high because it was a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to SEED, and not to other factors.

Reviewed by CLEAR

June 2015

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