A quarter of entrepreneurs in the United States are immigrants

A quarter of entrepreneurs in the United States are immigrants

According to a recent study by William Kerr and Sari Pekkala Kerr, immigrants make up 15% of the United States’ total population, but they become entrepreneurs much more often.

by Michael Blanding

The debates about the pros and cons of immigrant entrepreneurs to the US economy are hot, but one thing they lack stubbornly: the facts.

The arguments are now known. Immigrants have jobs with local Americans and are campaigning for a party that is committed to stronger immigration rules and policies. Advocates say that immigrants, far from cutting jobs, create jobs.

“These are more likely than those created by NATIVES, but those who have survived a greater employment experience”
“Immigration advocates often say that immigrants are responsible for many large companies,” says William Kerr, professor of Dmitri V. D’Arbeloff – MBA in 1955 at Harvard Business School. “After all, they say, Google founder Sergey Brin was an immigrant – look at the power of creating jobs that bring them.”

It’s hard to say who’s right. Apart from a few prominent examples, such as Brins, there was virtually no data to gauge the level at which immigrants create businesses and jobs. Kerr attempted to address this issue with a new National Economic Research Bureau working paper titled “Immigrant Entrepreneurship,” written with his wife, Sari Pekkala Kerr, Labor Economist at Wellesley College.

The paper uses a new, unique database to track the entrepreneurial activity of immigrants in recent decades, for example, the percentage of immigrants who became entrepreneurs, the ups and downs of their businesses, and the capacity of those firms. to create jobs.

“Previously, the most important source of information was self-employment statistics,” says Kerr. However, self-employment can mean a lot and is often not related to job creation; Independent contractors with no employees can call themselves independent, while the CEO of a fast-growing startup can not be.

Research shows that the share of immigrants in entrepreneurship is in America
has increased over time from 17% in 1995 to 28% in 2008. © iStockPhoto
Instead, Kerr and Pekkala Kerr used a comprehensive database of employers and employees developed by the US Census Bureau and the Longitudinal Household Employers Database (LEHD). by 2011. (Currently, the database contains records from 11 states, including California and Florida immigration centers, from 1992. Twenty-eight states are in from 2000)

“The size of the database is huge,” says Kerr. “They literally talk about billions of records.”

Pekkala Kerr, herself a Finnish immigrant who came to the United States as an exchange visitor, worked under the H1-B visa program and eventually became a US citizen. Track the employment history of individuals over the two decades. Kerr specializes in entrepreneurship and innovation research. Together, they were able to see how many people born outside the United States were responsible for start-ups and the characteristics of those companies.

First, the researchers had to specify what they meant by “entrepreneurs.” Employer Employee Employee databases are used around the world to examine the dynamics of entries and business transactions, but payroll information does not include ownership structures. As such, they followed a practice that was used in other contexts to focus on the three highest-paid employees in the first year of a new business and pursue them for the duration of the business. An advantage of their work in the United States over previous parameters was that they were able to test many variations of this formulation and use ancillary datasets to confirm the robustness of their methodology.

Kerr and Pekkala Kerr calculated that about 24% of entrepreneurs were immigrants during their sampling period – a disproportionate share, as immigrants account for only about 15% of the population. This contribution was largely consistent with some of Kerr’s previous work on immigrant contributions to US patents.

In addition, Kerr and Pekkala Kerr have shown for the first time that over time the proportion of entrepreneurs increased from 17% in 1995 to 28% in 2008 for a stable cohort of states throughout the period. The LEHD will be extended until 2012 and the authors will update the platform to expand it.

In addition, the researchers did not pursue the static measures to start a business, but followed the future of companies founded by immigrant entrepreneurs. In analyzing growth and survival statistics, they found that migrant companies were more likely to pursue bottom-up dynamics than those initiated by Aborigines.

“They fail more than native ones, but those who survive are experiencing higher employment growth,” explains Kerr. This ‘upwards or downwards momentum’ of change is often related to the way entrepreneurs create jobs, and this finding suggests that immigrants can play an important role in this process. “The way entrepreneurs create jobs is not about staying small and creating many businesses forever,” says Kerr. “It’s a small company that expands on Facebook or a chemical plant with 800 employees.”

Part of the reason why immigrant companies publish these properties may be related to where and what type of business they create.

“You can find more immigrants in riskier industries and more volatile business environments like California,” says Kerr. In terms of industry and geography, the researchers found that immigrant and domestic firms had similar growth rates and that immigrant companies could survive even longer. The authors also point out that the impact on employment in the high-wage and high-tech sectors is greater, and report on outcomes for companies that are supported by venture capital.

Overall, the new database provides a much clearer picture of the impact of immigration in the United States.

For example, although advocates often use examples like Brin to advocate for the expansion of the H-1B program used by adults for immigration, the founder of Google came to the United States as a child. A preliminary analysis by Kerr and Pekkala Kerr showed that immigrants entering the country from an early age do better business than those who come to the United States as adults.

So far, the analysis has only revealed the surface of what the platform could tell us about immigrants and job creation.

“We wrote a very long data annex to the document because we want researchers to intervene and think about it,” says Kerr. “With the results you get directly from the data source, you’ve been able to successfully complete several years.” In addition, despite its large size, the database could easily be linked to any database that contained information about data types. Dates. Jobs created by these companies, the productivity of companies, the type of employees they hire, their patents, etc.

It is more difficult to overlay the database with information about individual employees, says Kerr, although this is not impossible because the data contains anonymous personal identifiers consisting of social security numbers. The Holy Grail would cross the database of immigration visa information to determine the most effective visa programs for job creation. Career paths could also be traced – for example, the extent to which those who receive H-1B visas from a large company eventually become entrepreneurs when they become permanent residents. However, this type of reconciliation raises issues of access and confidentiality.

“The federal government keeps this information pretty tight,” says Kerr, “so I’m not counting on its availability in the near future.”

Whatever the possible applications of the data, it is clear that the new database platform can provide valuable information to inform the immigration debate. Last but not least, we hope that there will be better estimates and figures for the debate.

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