What is microenterprise?
Microenterprise is the embodiment of the American traditions of entrepreneurship, ingenuity, and opportunity. Microenterprises, also called microbusinesses, are enterprises with fewer than five employees, including the owner. Ninety-two percent of all U.S. businesses are microenterprises. There are approximately 25.5 million microenterprises in the U.S., collectively employing 31 million people. But even these figures actually do not demonstrate the full impact of microenterprises.
According to the Association for Enterprise Opportunity, in 2011 the direct, indirect, and induced effects of microenterprises on employment amounted to 41.3 million jobs. Additionally, direct sales and receipts and indirect and induced economic input had an economic impact of almost $5 trillion; microbusinesses contributed $135.5 billion in tax and fee revenues to federal, state, and local governments. Microenterprises are not only critical to our nation’s economy, but they also hold the potential to increase inclusiveness and equality in our economy.
In an economy with a declining number of good-paying, middle class jobs, and increased outsourcing and use of temporary workers, microenterprise is becoming an increasingly attractive, feasible and, for some, necessary option. This is especially true for those groups that suffer the most during economic downturns, and do not always share fully in economic good times (Association for Enterprise Opportunity [AEO], 2013).
One of the purposes of the human services system is to help people who find themselves unable to fully meet their family’s needs, and assist them in overcoming barriers, often systemic, to full participation in our economy. Microenterprise programs offer an opportunity for human and workforce services, education, and economic development systems to work collaboratively to support their full participation in the economy through entrepreneurship.
Microenterprise programs help low-income, unemployed or underemployed workers build the necessary knowledge and skills, access supportive resources, and overcome barriers to becoming successful microenterprise entrepreneurs. Microenterprise programs are not new. Research conducted over the past two decades shows that microenterprise programs can help some workers generate self-employment income and build assets, and their return on investment demonstrates its cost effectiveness as an economic development strategy. Unfortunately, the microenterprise model is underutilized in workforce engagement efforts. Current trends in our nation’s economy and labor force, along with the evidence supporting the positive worker outcomes and cost effectiveness of microenterprise programs call for the revival of this approach to helping unemployed and underemployed workers overcome environmental and systemic barriers to gainful employment. The CEEWB will explore the latest research and developments in microenterprise programs and highlight states and localities that are successfully utilizing this approach to the economic and social empowerment of America’s disadvantaged workers.
Association for Enterprise Opportunity. (2013). Bigger than you think: The economic impact of microbusinesses in the United States. Washington, DC: Association for Enterprise Opportunity. Available at http://www.aeoworks.org/index.php/site/page/bigger_than_you_think_the_economic_impact_of_microbusiness_in_the_united_st.
Washington’s Self-Employment Assistance Program (SEAP) is a program through which eligible unemployed workers can enter into self-employment entrepreneurial training and receive business counseling. As long as they are enrolled full-time in an approved training program and are making satisfactory progress in the program, they can continue to collect unemployment benefits. Microenterprises provide employment for the program participant, and potentially other workers as the business grows, as well as stimulate the local economy. Self-employment can also offer entrepreneurs the flexibility and income opportunity that is not typically available through traditional employment.
FIELD at the Aspen Institute’s mission is to identify, develop and disseminate best practices, and to educate funders, policymakers and others about microenterprise as an anti-poverty strategy. FIELD’s work focuses on the U.S. microenterprise industry including exploring innovations, building up the industry's infrastructure, and disseminating best practices to practitioners. FIELD has studied a number of topics that should be of particular interest to the human services system, such as the informal economy, rural entrepreneurship, and women’s enterprise development. FIELD also has a site dedicated to the most up-to-date research on the quality of microenterprise jobs, GainfulJobs.org.
The Association of Enterprise Opportunity is another great resource for those interested in learning about microenterprise as an anti-poverty strategy. Its mission is to create economic opportunity for underserved entrepreneurs, and support the development of strong and effective US microbusiness initiatives to assist underserved entrepreneurs in starting, stabilizing, and expanding businesses. AEO’s work ranges from program initiatives, policy advocacy, and data and research.
The Corporation for Enterprise Development (CFED) entrepreneurship work focuses on informing, discovering and testing scalable product, program or policy strategies for addressing microbusiness owners’ greatest financial challenges. CFED’s most recent research study, In Search of Solid Ground: Understanding the Financial Vulnerabilities of Microbusiness Owners, examined the crucial financial product, service and capability needs of low- and moderate-income microbusiness owners and shed light on the extent to which they are being met by current market offerings.
The Self-Employment Assistance Center is a partnership between the U.S. Department of Labor and the Small Business Association. The Center provides information, resources, and tools to help build state entrepreneurial programs for individuals eligible for Unemployment Insurance compensation.
The Self-Employment Training (SET) Program is a demonstration program sponsored by the U.S. Department of Labor. SET demonstrations are being carried out in Chicago, IL, Cleveland, OH, Los Angeles, CA, and Portland, OR. Mathematica is conducting a multi-year random assignment evaluation of the SET demonstration program. The evaluation will examine the implementation of the SET program and assess the program’s impacts on employment, total earnings from self-employment and wage or salary employment, and other outcomes of interest 18 months after program application.
Papers, Briefs, and Reports
Dick M. Carpenter II, Institute for Justice, September 2015
Elizabeth Brown and Austin Nichols, The Urban Institute, May 2014
Elaine L. Edgcomb and Joyce A. Klein, FIELD, February 2005
Signe-Mary McKernan and Henry Chen, The Urban Institute, June 2005
Cynthia A. Guy, Fred Doolittle, and Barbara Fink, MDRC, August 1991
Raheim, S. (1997). Problems and prospects of self-employment as an economic
independence option for welfare recipients. Social Work, 42(1), 44-52.
Straatmann, S., and Sherraden, M. (2001). Welfare to self-employment: A case
study of the First Step Fund. Journal of Community Practice, 9(3), 73-94.
United States Department of Housing and Urban Development, Office of Public and Indian Housing, Office of Resident Initiatives. (1993). Creating economic lift: Jobs, training, and business opportunities in public and Indian housing (HUD-1433-PIH). Washington, DC: U.S. Government Printing Office.
United States Department of Labor, Employment and Training Administration, Unemployment Insurance Services. (1995). Self-employment programs: A new Reemployment strategy, final report on the UI Self-Employment Demonstration (Unemployment Insurance Occasional Paper 95-4). Washington, DC: U.S. Government Printing Office.
United States Department of Labor, Employment and Training Administration, Office of Policy and Research. (1994). Evaluation of the EDWAA Job Creation Demonstration (Research and Evaluation Report Series 94-G). Washington, DC: U.S. Government Printing Office.
Jessica A. Lee, The Avenue (Blog) Brookings Institute, September 2015
Webinars, Webcasts, and Toolkits
The Aspen Institute's Economic Opportunity Program and FIELD, November 2013