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Immigrants' Big Role in Small Business

Immigrants are over-represented among small business owners and account for 30% of all small business growth, a new report concludes.
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Just take a look at your local community, from taxi services and restaurants to the local healthcare providers, and it will probably come as no shock that immigrants make up a healthy percentage of small business owners.

But exactly how many businesses are owned by those who came to America from abroad? What types of businesses do immigrants gravitate toward? Do they grow their companies in the same way as native-born entrepreneurs?

A recent study of businesses with fewer than 100 employees by the non-partisan Fiscal Policy Institute's Immigration Research Center aimed to carefully study these and related questions, adding some hard facts into the often heated debate around immigration and economics. Drawing on data from the Survey of Business Owners and the American Community Survey the report finds that while immigrants make up 13% of the U.S. population in general, they make up 18% of small business owners.

The report also concluded that firms that are half or more owned by immigrants account for 14% of private sector employment and generated $776 billion in receipts in 2007, the most recent year for which data are available. In which sectors are these job and wealth-creating immigrant owned businesses? Professional services was the most popular with 141,000 business owners. Retail, construction, education, social services, and hospitality were the next most popular sectors. Immigrants dominate some less than shocking industries--65% of taxi drivers are immigrants, 54% of dry cleaning and laundry businesses are owned by immigrants, and 53% of gas stations are immigrant owned. 

Speaking loudly to the accomplishments of immigrant business owners is the impressive share of small business growth that can be attributed to them. Between 1990 and 2010, the report concludes:

The number of small business owners grew by 1.8 million, from 3.1 to 4.9 million. Immigrants made up 30 percent of that growth, as the immigrant share of small business owners kept in step with the increasing immigrant share of the labor force. As a result, there were 539,000 more immigrant small business owners in 2010 than in 1990.

Check out the complete report for further details on exactly where these immigrant small business owners come from, their education levels, where their businesses are located and the role of women immigrants, among other findings. Several economists commenting on the study caution that we shouldn't conclude from the report that immigrants are somehow "super entrepreneurs." Instead, labor economist Mark Price of Keystone Research Center told CBS News in Philadelphia that the over-representation of immigrants among business owners probably reflects the difficulties they face in finding employment through traditional channels.

“Immigrants tend to do a better job of forming small businesses than they represent of the larger economy. It can be easier to make your way in the U.S. economy as a small business owner than as an employee,” he said, citing language and cultural barriers. Founding small businesses may primarily be a good route for immigrants looking to establish themselves in a foreign country, but the effects on the economy in general are also good. As David Dyssegaard Kallick, a fellow at the institute who authored the report, told Businessweek:

The conversation around immigrants’ role in the economy is often dominated by two oversimplified ideas… Immigrants are either seen as strictly in competition with native-born workers for jobs, or immigration is seen as magic bullet to revive stagnant economies. While the impact of immigrants on job growth can be overstated… people sometimes don’t realize that when immigrants come into the economy, the economy also grows.

Are you surprised by any of the report's findings?

Last updated: Jul 2, 2012

JESSICA STILLMAN

Jessica Stillman is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist.




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