Little-Known Government Program Pays the Self-Employed

February 03, 2009 10:29 AM
by Josh Katz
As the recession continues, some people may be averse to self-employment, fearing a loss of unemployment benefits; but that is not always the case.

Self-Employment Assistance Not Well Publicized, Says Journalist

Self-employment rises during economic downturns, according to small business journalist Dawn Rivers Baker in Open Forum, and that should be especially true right now: about 3 million jobs have been lost since the recession began in the United States.

The problem with self-employment is that it bars individuals from collecting unemployment benefits in certain cases, possibly discouraging them from pursuing such a career path. However, Baker says that the government has “a little known, little used type of unemployment insurance” called Self-Employment Assistance, and several states have adopted it: Delaware, Maine, Maryland, New Jersey, New York, Oregon and Pennsylvania. Other states have not yet opted for this voluntary program.

According to the United States Department of Labor, Self-Employment Assistance is “designed to encourage and enable unemployed workers to create their own jobs by starting their own small businesses.”

To receive Self-Employment Assistance, one must be eligible for unemployment benefits. Furthermore, the state must also label an individual “likely to exhaust regular unemployment benefits” to be eligible—in other words, likely to continue collecting unemployment checks from the government for the maximum period. Recipients of the assistance receive the same amount of money they would collect with unemployment insurance.

According to Baker, “Maybe, if word about it spreads, more states will be forced to sign on. And maybe, if enough people start using it, the federal government will finally begin to see that self-employment is an economic trend that isn’t going to go away.”

Background: The birth of unemployment benefits

On Aug. 14, 1935, the Social Security Act was signed into law. Social Security provided “a wide range of programs to meet the nation’s needs. In addition to the program we now think of as Social Security, it included unemployment insurance, old-age assistance, aid to dependent children and grants to the states to provide various forms of medical care.” Those eligible for Social Security were supported by employer and employee contributions from payroll taxes. Although it generated a great deal of controversy initially for being too radical, Social Security is now widely hailed as one the American government’s most successful programs.

Related Topic: Obama’s stimulus package extends unemployment benefits

President Barack Obama’s economic stimulus plan has been passed by the U.S. House of Representatives but is still being debated in the Senate. If approved as is, the plan will allocate $43 billion over two years to bolster unemployment benefits, among other changes. The unemployment aid in the bill would allow jobless Americans to collect unemployment benefits for up to 33 additional weeks.

Besides helping the unemployed, the stimulus provides substantial funding for education, health care, alternative energy and infrastructure, while also allowing for tax cuts.

Reference: Starting a business


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