Tag Archives: declining workforce

Why Immigrants Are Necessary To New Business Startups

In a prior post I raised the issue of the declining number of new entrepreneurs in the U.S. It seems we are producing fewer new businesses each year.

But now, let’s dig a little deeper and look at who in the entrepreneurial community is responsible for this continuing decline.

To do this we need to go back to the Kauffman Index of Entrepreneurial Activity and look at the data analysis of Robert Fairlie at the University of California, Santa Cruz.

Although entrepreneurship overall has been declining in recent years, here is an interesting finding presented by Dr. Fairlie:

“Immigrants were nearly twice as likely to start businesses each month as were the native-born in 2013.”

Here is a chart depicting the rate of new businesses created by each of these two groups of entrepreneurs:

 

Immigrant entrepreneurs

 

We’ve known for a long time that Immigrants play an important role in America’s economy, especially in the scientific and tech areas, primarily because the U.S. is not producing enough properly educated engineers and scientists.

Immigrants are successfully filling that gap.

Now, attention is being called to the disparity in the rate of business creation between native-born entrepreneurs and immigrant entrepreneurs.

Although this disparity has been in effect for some time, it has become much more pronounced over the past decade.

What is more disturbing is what I pointed out in my last post—that 25% of America’s long-term unemployed were leaving the workforce—simply “giving up.”

That is a lot of people who apparently no longer want to look for work… or start a business.

When considering that many American workers are “giving up,” and at the same time are starting fewer new businesses… it would appear that we will have to rely more and more on immigrants to start the businesses that will grow our economy.

So, who are these “immigrants?” I don’t claim to know, other than that they come from all nations around the world.

I think it is more important to know what they do—something like this:
 
(email subscribers watch video on my blog)

 

So, here is my take-away from this information:

  • Small businesses really are the backbone of the American economy… and I expect that is true of economies all over the world.
  • Native-born Americans are starting businesses at a lower rate than they were in 1996 (see above chart).
  • Immigrants are starting businesses at a rate far greater than native-born Americans (see above chart and the “Did You Know” column on the right).
  • It seems obvious to me that an influx of entrepreneurial immigrants is extremely important to the continued growth of new business startups—and the economy of the U.S.

What’s your take on this bit of comparative information—do you believe that immigrants have a key role in new business startups… and essentially in the American economy?

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