By: Ron Wyden
May 25, 2012
In June of 2008, Adam Lowry and Michael Richardson found themselves unemployed. The tech startup where they worked in Portland, Vidoop, had just closed its doors, and employees were being offered company laptops in lieu of back wages. Common sense would dictate that these promising young programmers should file for unemployment insurance (UI) and begin their search for new employment--which they did. In a way.
After working at a startup, Lowry and Richardson caught the entrepreneurial bug and wanted to build a business for themselves. In order to do it right, they needed to devote a huge amount of time to building the business-- a difficult undertaking if they were also searching for full-time jobs, as the unemployment office required.
Instead, these two friends availed themselves of a versatile and often underused form of unemployment insurance known as Self-Employment Assistance (SEA). The program gives entrepreneurs like Lowry and Richardson the freedom to collect unemployment insurance as well as guidance in small business development while starting their own businesses. Together, the pair pooled their resources and launched Urban Airship. Today, Lowry and Richardson's company not only provides full-time employment for these two successful entrepreneurs, but also employs dozens of additional workers.
More so than many older generations, Millennials like Lowry and Richardson want to start their own businesses and be their own bosses. Unfortunately, their entrepreneurial spirit is matched only by current economic hardship. Shouldn't we be finding cost-effective ways to help them create new jobs?
How Self-Employment Assistance Works
To understand SEA, it's necessary to first understand the general mechanics of the UI system. The federal government and the states work in partnership to run the system-- states have an individual UI trust fund used to pay out weekly benefits to workers who have lost their jobs. The states administer the programs and set eligibility requirements, benefit amounts and employer tax rates. The federal government sets broader guidelines, requiring employers to pay a minimum tax rate into their state trust fund on behalf of employees.
In most states, recipients are required to:
Have become unemployed involuntarily through no fault of their own.
Have earned a minimum amount in the time preceding the unemployment--known as the "base period."
Be actively seeking full-time work.
Accept a reasonable offer of work.
Although the cost to the UI system is virtually the same, only a handful of states have used federal authority to create SEA programs. Those who do participate are required to have a viable business plan and receive entrepreneurial training in order to qualify -- weeding out those seeking to game the system and improving the likelihood of success.
The success seen in Oregon should make for a compelling argument. According to a survey of SEA participants, nearly half of the successful SEA entrepreneurs in the state have created an average of 2.63 new jobs. It is well-known that UI is an economic multiplier, but with SEA, the unemployment insurance program can become a job multiplier as well. This idea is not new. I have advocated for the expansion of SEA since I first learned of its success (and introduced legislation to expand SEA) more than twenty-five years ago.
Still, SEA programs have yet to take off. This is often due to a simple lack of information about the program's existence and the fact that measures of the UI program's effectiveness doesn't take into account those who start their own business. But the swelling tide of youth entrepreneurship and prolonged inability of the public or private sector to create plentiful jobs should encourage more states to give SEA a chance.
Last fall, I authored S. 1826, the Startup Technical Assistance for Reemployment Training and Unemployment Prevention (STARTUP) Act. In February, it was passed as part of the payroll tax cut extension and allows states to pay out federal emergency unemployment benefits in the form of SEA. It also instructed the Department of Labor (DOL) to develop model language to help states gain awareness of SEA and facilitate the enactment of permanent-law SEA programs. Yesterday, the DOL released guidance to states on how they can take advantage of this new law and draw down their share of $35 million dollars to establish (or improve) their own SEA programs.
Though this program can only directly benefit workers who have recently been employed in wage or salaried jobs, young people who have lost their jobs are among the best candidates for SEA. They are less likely to have families and own their own homes, and with fewer financial obligations, the value of SEA benefits (the average UI benefit check is just $295 per week) can be stretched much further.
The biggest hurdle we face now is awareness. We need a concerted effort to show state officials the potential of a program that invests in entrepreneurs and their capability to lift themselves and many others off of the UI rolls. That is why the example set by Urban Airship is so compelling.
Adam Lowry and Michael Richardson are now the lead engineers of one of the best-known technology startups to emerge in Oregon in years. In late 2011, Urban Airship announced that it arranged $15.1 million in strategic investment from Salesforce.com and Verizon, as well as the acquisition of a California-based mobile developer. As of November 2011, Urban Airship employed a work force of fifty-one, and continues to hire.
All of this may not have been possible if it weren't for Self-Employment Assistance. We owe it to the Lowrys and Richardsons of the world to give young entrepreneurs the means to build businesses that create jobs for themselves and others. Most of all, we owe the next generation of bright, inspired young people a chance to turn unemployment into a track for success.