Immigrant Entrepreneurs Are Vital Components of Main Street and U.S. Economy

Some of our country’s most quintessentially American companies — Google, eBay, Procter & Gamble — were founded or co-founded by immigrant entrepreneurs. All told, foreign-born businessmen and women, or their children, have founded more than 40 percent of Fortune 500 companies. Although there is some debate among economists on the actual figures, all are in agreement that immigrant-owned businesses boost the U.S. economy and improve wages and employment for native-born Americans each year.

According to a 2012 report by the Partnership for a New American Economy — a coalition of business owners and mayors that works to influence comprehensive immigration reform policies — immigrant-owned businesses employ one out of 10 U.S. workers and annually contribute more than $775 billion to the economy. The report also found that immigrants are more than twice as likely to launch a business as their U.S-born peers. Moreover, research by the nonpartisan, nonprofit Fiscal Policy Institute (FPI) shows that, more often, foreign-born entrepreneurs start what are referred to as “Main Street” businesses, which have a unique and beneficial effect on local economies.

Immigrants comprise 16 percent of the overall labor workforce and 18 percent of business owners. However, they account for 28 percent of Main Street businesses, ventures that include grocery and retail stores, restaurants, gas stations, dry cleaners, and nail salons.

David Dyssegaard Kallick
David Dyssegaard Kallick

“Main Street businesses … [are] the kinds of places that give a downtown area its character,” says David Dyssegaard Kallick, senior fellow at the FPI and director of its Immigration Research Initiative. “This is an area where immigrants have been playing a really outsized role, and they are the types of businesses that don’t require a lot of capital to start — just a good idea, a willingness to take a chance, and a lot of hard work, often from the whole family.”

The prevalence of these types of businesses is also good for revitalizing the neighborhoods in which they are located, and they create a demand for local goods.

Immigrants are not only employed in small or blue-collar businesses, however; Kallick says 46 percent of immigrants.— documented or otherwise — work in white-collar careers. According to the nonprofit Kauffman Foundation, 44 percent of Silicon Valley tech companies founded between 2006 and 2012 are the product of immigrant entrepreneurs. These figures also include undocumented immigrants.

“While undocumented immigrants confront many obstacles in starting a business, there are in fact some undocumented business owners,” Kallick says. “It is possible to have an incorporated business even without having legal permission to work in the U.S.”

Despite the large economic benefits to be derived from their businesses large and small, immigrant entrepreneurs of all legal statuses face unique challenges. Launching a business requires an understanding of how the American market functions, which is not always self-evident. If immigrants come from a country with a cash market, they may struggle to navigate the predominantly credit-based American market. Additionally, if the practices of securing bank loans or establishing credit are uncommon in their home country, they may rely more on savings and family contributions for capital. For these enterprising immigrants, a little planning goes a
long way.

Patricia Abbin
Patricia Abbin

This is what Patricia Abbin has discovered in her experience working with immigrant business owners in the South Valley of Albuquerque, N.M. — an area with a large Hispanic and immigrant population. Abbin is a business adviser for the Small Business Development Center (SBDC) at Central New Mexico Community College (CNM), one of a number of centers throughout the state focused on furthering economic development.

“Money and marketing are probably the two biggest challenges immigrants face when starting a business— also, how to deal with a mostly credit market. In Mexico, for example, when you go outside the larger tourist cities, most transactions are done with cash,” Abbin says. “I help immigrant entrepreneurs understand credit, as well as how to charge taxes and how to price goods and services, which they typically underprice.”

Abbin says most of the immigrants she works with are undocumented, but legal status is not foremost among their concerns.

“I’ve had very few say they are worried about deportation; almost none of the undocumented immigrants I work with are worried about [it],” she says. “They’re more concerned about paying taxes while sustaining and supporting their families. The government and the IRS don’t care whether you’re documented or not — you are expected to pay your taxes.”

In fact, a study done by the Institute on Taxation and Economic Policy (ITEP) earlier this year shows that undocumented immigrants annually contribute $11.6 billion in state and local taxes and in sales, income, and property taxes. ITEP estimates they would contribute an additional $2.1 billion if comprehensive immigration reform were passed.

The future of such reforms is unclear given the current political cycle, but Kallick believes immigration reform could be a catalyst for more immigrants to start businesses.

“Undocumented immigrants who currently face very real limitations would make the investments of time and energy to start or expand a business,” he says. “I have heard stories like the one about an undocumented immigrant who owns several restaurants but can’t get a driver’s license, so he has to be driven by others just to see the night’s progress.”

And while studies have shown that immigrant-owned businesses close at a higher rate, Kallick says the reasons for this may be more nuanced.

“A business closing does not always mean the business failed,” he says. “An immigrant who has a background in accounting who can’t find a job with an accounting firm may hang up a shingle and start a new business. If, after a few years, that person is hired by a bigger firm, that may be a real success for that person.”●

Rebecca Prinster is a contributing writer for INSIGHT Into Diversity.