Transfer Payment Diversion for Small Business Development: British and French Experience

Abstract

Government programs in Britain and France allow the unemployed to receive transfer payments while they attempt to create their own employment through new small businesses. This study finds that businesses formed under those programs, even more than most small enterprises, generate only limited incomes and unstable employment for their proprietors. Also, program participants most in need of help in finding stable employment—those with the sparsest qualifications and resources—are precisely those whose businesses are most likely to fail. The authors therefore conclude that policy makers should not expect this approach, now under consideration by Congress, to provide major assistance to the disadvantaged or long-term unemployed.