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UNITED STATES DEPARTMENT OF LABOR

Self-employment as a reemployment option: Demonstration results and national legislation (Benus et al. 1994)

Review Guidelines

Causal Evidence Guidelines

Citation

Benus, J., Johnson, T., Wood, M, & Grover, N. (1994). Self-employment as a reemployment option: Demonstration results and national legislation. Unemployment Insurance Occasional Paper, 94(3), 1-61.

Highlights

  • The study estimated the impacts of Washington State’s Self-Employment and Enterprise Demonstration (SEED) and the Massachusetts Enterprise Project. Both programs sought to determine how feasible self-employment was as a reemployment option for Unemployment Insurance (UI) recipients. This profile focused only on the program design and outcomes of the Enterprise Project.
  • The Enterprise Project was evaluated using a randomized controlled trial in which program applicants were randomly assigned to either a treatment group, which could receive Enterprise Project 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 and wage employment at higher rates than those in the control group. They also had higher earnings, on average, and reduced UI benefit duration and amount received.
  • The quality of the causal evidence presented in this study is high. This means we are confident that the estimated effects are attributable to the Enterprise Project, and not to other factors.

Intervention Examined

The Enterprise Project Demonstration

Features of the Intervention

Authorized by the Omnibus Budget Reconciliation Act of 1987, Massachusetts’ Enterprise Project was a federally sponsored self-employment demonstration program for unemployed workers. The goal was to determine whether self-employment was a viable reemployment strategy for UI claimants. The Enterprise Project was conducted in seven sites statewide and focused on UI claimants who were likely to exhaust their UI benefits. This study included 521 claimants, 263 of whom were randomized to the treatment group and 258 to the control group.
Treatment group members were required to attend counseling sessions with a personal business counselor and a series of six two-hour Enterprise workshops. The program provided biweekly payments equal to claimants’ regular UI benefits and exempted them from the UI work search requirement. The control group received regular UI benefits and services.
To estimate the Enterprise Project’s impacts, the researchers used data from a follow-up telephone survey administered to all study participants about 19 months after random assignment. The survey captured data on employment and earnings, unemployment, time spent looking for work, and Enterprise Project experiences. The authors also used administrative data collected from several state agencies on program enrollment and activity, UI wages, and business activity. The authors estimated impacts using a multivariate regression framework.

Findings

Employment

  • The study found that, compared with those in the control group, treatment group members were 18.6 percentage points more likely to ever be self-employed over the follow-up period (47.2 percent compared with 28.6 percent). Treatment group members also, on average, entered self-employment 2.2 months faster and were self-employed 1.5 months longer than those in the control group. These differences were statistically significant. However, they did not translate into statistically significant differences in monthly earnings from self-employment or total earnings from self-employment over the follow-up period.

Earnings and wages

  • Conversely, treatment group members were no more or less likely than control group members to enter wage and salary employment over the follow-up period. However, they did stay employed 1.3 months longer and earn $5,364 more in wage and salary employment than control group members, on average. These differences were statistically significant.

Public benefits receipt

  • The Enterprise Project reduced the length of the first UI spell by 2.1 weeks and reduced the amount of UI benefits received during that spell by an average of $718.

Considerations for Interpreting the Findings

The study included only claimants who passed an extensive screening process and expressed interest and motivation to enter self-employment. The economic situation in Massachusetts changed during the study period from relative health in 1990 to a recession by the end of 1991. The authors noted that previous experience suggested that a higher unemployment rate makes people more interested in self-employment.

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 impacts are attributable to the Enterprise Project, and not other factors.

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