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The Most Overlooked (and Important) Part of Obama’s Jobs Proposal

There has certainly been a lot of talk about President Obama’s latest job proposal.  The purpose of this post is not to give my opinion on the many details of the plan.  What I wanted to do is make you aware of a part of the plan that the press has largely overlooked.  This proposal could have huge implications for workers and employers.

The provision I’m talking about is reform to federal unemployment insurance.

Traditionally, unemployment insurance has only been made available to unemployed individuals who were actively seeking a traditional job. These funds could only be accessed for personal use; all other uses — such as starting a business — were strictly prohibited, and only job seekers qualified for these funds. Individuals with a desire to seek self-employment opportunities were ineligible for any unemployment money.

Now, imagine if aspiring entrepreneurs — individuals whose main priority is to hire themselves, build revenues and hire others to grow — had access to this sort of guaranteed startup capital. Well, under the American Jobs Act, they will.

According to Obama’s plan, all 50 states would be able to establish Self-Employment Assistance (SEA) programs, enabling aspiring entrepreneurs to utilize unemployment insurance money to fund their businesses for up to 26 weeks —providing roughly $10,000 to $13,000 in assistance, or what I would refer to as “seed funding.” Not a bad deal when you consider that the cost of most startups, especially most service-based businesses and tech ventures, have relatively low startup and operating costs. In essence, the president’s plan will create a guaranteed source of startup capital for businesses without any of the traditional credit and collateral requirements as barriers — or the need to give away equity to investors.

So – you say – is this what unemployment insurance if for?  My first thought was no way!  Then I dug a bit deeper.  Actually, SEA programs have a proven track record of success in states that are both red and blue. According to a Department of Labor study of state self-employment assistance programs, SEA participants were 19 times more likely than eligible non-participants to be self-employed. In a handful of states where SEA programs are active, such as Arizona and Maryland, hundreds of businesses and new jobs have been created as a result. In Oregon, nearly half of the successful SEA entrepreneurs have each created an average of 2.63 new jobs.

Do I remain skeptical – oh my goodness yes.  I want to see more of the details of the plan and how it all shakes out.  However – if you read my previous post about the new way people work it seems that the government may be making some headway.

It will certainly be interesting to watch how the President’s bill moves through congress.  I’d be interested in your thoughts on this specific part of the President’s proposal.
Scott
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