Problems and Prospects of Self-Employment as an Economic Independence Option for Welfare Recipients

As the welfare reform debate rages, it is important for social workers to participate fully in the debate by advocating programs and policies that will improve the material well-being of poor families. Social workers can provide effective leadership in changing social welfare policy only when they are informed about a wide range of policy and program options and their consequences. Self-employment development is among the policy options that merit attention. Social policymakers have begun to explore self-employment development, also known as microenterprise, as a route off welfare, but the profession of social work has paid little attention to this economic independence option. With the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193), it is important for social workers to understand the benefits and the limits of self-employment development. With this knowledge, social workers can more effectively influence the shaping welfare reform in the states. Self-Employment and Disadvantaged Groups Many people who are poor, unemployed, or socially marginal may pursue self-employment or informal sector activities because jobs are not available, not accessible, or not adequate in providing a living wage. For poor women, barriers such as the lack of child care and transportation, as well as little education and few job skills, further limit their employment opportunities (Hagen & Lurie, 1993; Miller, 1990). Although women must frequently deal with competing family and employment responsibilities, employment options for poor women rarely offer the ability to control their time to adequately handle the dual roles of parent and employee (Keeley, 1990; Raheim & Bolden, 1995). For recent immigrant and refugee populations, other kinds of obstacles exist. Language and other cultural barriers may make mainstream employment inaccessible. Discrimination and labor market segregation often limit employment opportunities for immigrants and refugees, people of color, and women. For members of marginalized and oppressed groups, self-employment can provide a level of freedom and flexibility, as well as an option for earning a living wage, that the labor market may not provide (Keeley, 1990; Raheim & Bolden, 1995). Unfortunately, the same factors that encourage members of marginalized groups to pursue self-employment may contribute to their economic marginalization as entrepreneurs (Brush, 1990; Keeley, 1990; Light, 1972). For some families, self-employment is their sole source of support. For others, income from informal sector activities is an important part of the family's total income package, which may include income from jobs or welfare benefits (Clark & Huston, 1993). A recent study by Spalter-Roth, Soto, and Zandniapour (1994) based on the 1984, 1986, 1987, and 1988 panels of the Survey of Income and Program Participation revealed that over 100,000 women were supporting their families through a combination of self-employment income and welfare benefits. In addition, almost 500,000 former welfare recipients were supporting themselves through self-employment. Barriers to Self-Employment Despite the number of low-income people engaged in self-employment activities, numerous barriers exist to starting and operating a viable business for people receiving public assistance. The primary obstacles are lack of business knowledge and skills, lack of access to capital and other resources, social welfare policy barriers, and psychosocial barriers. Lack of Business Knowledge and Skills The ability to start and operate a profitable business has been linked to business knowledge and skills, such as finance and marketing, as well as previous employment experience (Brush, 1990). When microentrepreneurs do not have the knowledge and skills needed to operate effectively and efficiently in the marketplace, their businesses may not generate sufficient income to support themselves and their families. …