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Immigrants Lead U.S. Entrepreneurship

Thursday, May 29, 2014

A recent study from the Kauffman Foundation points toward a burgeoning economic recovery – led largely by the entrepreneurial activities of immigrants. Indeed, last year, immigrant-owned entrepreneurial starts were nearly double those of U.S.-born business owners.
The leading sectors were new construction and service businesses, according to the Kauffman Index of Entrepreneurial Activity, which is released annually. Immigrant-led business creation in these, as well as other, areas is an indicator that the economy may be on its way to recovery. Using data of the Census Bureau and the Bureau of Labor Statistics, the index gauges the various aspects of new business creation in the United States.
In a statement released with the report, Dane Stangler, vice president of research and policy at the Kauffman Foundation, said “The 2013 business creation rate signifies a return to levels that we haven't seen since before the recession. While we have speculated in recent years that changes in entrepreneurship rates could be driven by labor market conditions, this new data provides the strongest evidence we've seen of this correlation."
From 2012 to 2013, the composite index decreased from 0.30 percent to 0.28 percent, which is actually the second year of decrease. However, the levels are still typical of those found in the 10 years prior the start of the Great Recession, which is pinpointed to December 2007. In 2013, each month saw the creation of nearly 500,000 new businesses, almost two-thirds of which are attributable to immigrants.
The index for immigrant business creation stands at 0.43 percent, compared to 0.28 for natives in 2013. Although the immigrant business creation rate decreased 0.06 percentage points from 2012, the drop puts these businesses back at pre-recessionary levels, Kauffman reported.
By sector, new construction businesses increased the most in 2013, at a rate of 1.27 percent. That compares to rates of 0.10 percent for manufacturing and 0.37 percent for service businesses. Construction and manufacturing business creation is currently higher than levels achieved prior to the recession, whereas service business levels are still lower than pre-recession levels.
Almost every age group experienced decreases in company creation. Those between 45 and 54, however, experienced an increase, with the index for this group jumping 2 basis points to 0.36 percent.
The Kauffman Foundation’s report serves to underscore immigration’s importance to and positive effects on the U.S. economy. Rather than being a drain on American jobs, the contrary is true: immigrants are creating new job and business opportunities at a rate that’s nearly twice that of native-born citizens. 

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