COLUMN: Immigration: Can newcomers save America's economy?
This post is part of a series by Dr. Baker on Our Values about core American values. This week Dr. Baker is discussing immigration.
Immigrants are more likely than native-born Americans to start new businesses. Can they save the American economy?
They can, according to a new book on the subject with the provocative title, Immigrant, Inc. Why Immigrant Entrepreneurs Are Driving the New Economy (and how they will save the American worker).
Authors Richard T. Herman and Robert L. Smith point to examples like superstar companies Google, Intel and Sun Microsystems — all founded, at least in part, by immigrants to America. The authors back up their arguments with a host of information and data.
One source they used was the Kauffman Index of Entrepreneurial Activity, which monitors trends in new-business creation. I consulted a report on this index by economist Robert W. Fairlie and it tells an interesting story.
My interpretation of the report is that most of the new businesses that are founded won’t become the next Google. The reason is that most new businesses are in the low-income category — retail bakeries, grocery stories, landscaping, child care services and the like. Medium-income businesses like construction, furniture making, gasoline stations, and messenger services are next. High-end startups — those with the greatest potential for job creation — are the least common new business.
It is true, according to the report, that immigrants are more likely than native-born Americans to create new businesses. The gap between the two has been widening, but virtually all of the recent increase in immigrant-created new businesses has been in the low-income and medium-income categories. Yet it is also true that immigrants are more likely than native-born Americans to create new businesses with high-income potential.
Michigan Gov. Snyder’s initiative to attract immigrant entrepreneurs, which I discussed yesterday, is aimed at the right kind of immigrant: those who would be starting up high-tech companies with high-income potential. These have the potential to be job creators.
It’s important to know that new business formation is not the cure-all or panacea to our economic woes. The vast numbers of new businesses that are founded don’t have the potential to be job-creation machines.
Dr. Wayne E. Baker is a sociologist on the faculty of the University of Michigan Ross School of Business. Baker blogs daily at Our Values and can be reached at firstname.lastname@example.org or on Facebook.