Immigrant entrepreneur contributions to US economy lost in debate

Whenever the topic of immigration reform comes up, opponents and proponents line up along familiar battle lines.  There is rarely debate about the rate of self-employment among immigrants. Data from the Kauffman Index of Entrepreneurial Activity show 43 business owners per 10,000 immigrants vs. 25 business owners per 10,000 native-born workers. 

Surprisingly, this recent post claims that immigrants are not more likely to be entrepreneurial.  The author of this post notes that there is a negative relationship between the share of immigrants in the U.S. and new employer firms per thousand people for the TOTAL population from 1970 to 2010. Unfortunately, the article misses an important point: Immigrants only represent a small percentage of the U.S. workforce and their self-employment rate is not necessarily reflected in the rate for the total population.  In addition, this evidence does not tell us anything about the rate at which immigrants are starting businesses.

Our own analysis using Decennial Census of Population and Housing microdata shows that between 1980 and 2010, immigrants are consistently more likely than those born in the U.S. to establish incorporated businesses, reaching a rate of 3.61 percent in 2010 after three decades of increases.  This adds one more piece of information to the already robust evidence in the literature on immigrants’ higher business ownership.  

{mosads}Some critics of immigration reform might argue that even though immigrants start more businesses, immigrant entrepreneurs have low earnings and participate in low-skilled enterprises.  This assertion also has been shown to be false, or at least outdated.  Our recent work investigating immigrant entrepreneurs in high-tech industries in the U.S. demonstrates that, while immigrants constitute less than 13 percent of the total U.S. population, they are more likely to be high-tech entrepreneurs than those born in the U.S. as they comprise 17 percent of high-tech entrepreneurs . Establishment-level data also show that immigrant-owned businesses are more likely to engage in transnational activities, including exporting, outsourcing jobs and setting up overseas establishments, thus strengthening the global linkages of the U.S. economy. Immigrant-owned firms are also characterized by higher average employment size and higher share of employer firms (firms with employees) than other firms based on evidence from Georgia.

The conclusion from the literature is that immigrants are job creators, both for themselves and for others.  These facts alone do not suggest the more beneficial structure of immigration reform for the country, but it does suggest that stopping the flow of high-skilled immigrants to the U.S. will have detrimental effects on the U.S. economy. Many state and local governments already have initiated policies to further attract and retain immigrant entrepreneurs to boost their local economies. These programs include The Mosaic Project in St. Louis, Welcome Dayton and Global Detroit, among others.  Given what we know about the impact of immigrants on business activity, it is policies like these that will provide additional opportunities for economic growth in regions in the United States. 

Liu is associate professor at the Andrew Young School of Policy Studies at Georgia State University and Painter is director of graduate programs at the Sol Price School of Public Policy at the University of Southern California.