A new study published late last week shows that immigrants are driving the startup economy in the U.S. — along with showing a boom in immigrant Latino entrepreneurs starting new businesses.
The Kauffman Index of Startup Activity 2015, paid for and published recently by the nonprofit Kauffman Foundation, shows just how valuable immigrant entrepreneurs, and especially Latino immigrants, are for the nation’s startup economy.
The researchers found that immigrants tended to start new businesses or otherwise be self-employed at twice the rate of native-born Americans.
While immigrants accounted for 12.9 percent of the U.S. population, according to 2012 U.S. Census data, immigrant entrepreneurs were the driving force behind 28.5 percent of U.S. startups in 2014, an increase from 25.9 percent in 2013 — and more than double the rate compared to 1996.
Moreover, the Latino share of new businesses created in 2014 has increased from 20.4 percent in 2013 to 22.1 percent in 2014 — which is also more than double the rate compared to 1996. As of 2013, Latinos made up about 17.1 percent of the U.S. population, up from just over 10 percent in 1996.
“This rebound in entrepreneurial activity lines up with the strength we’ve seen in other economic indicators, and should generate hope for further economic expansion,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation, in the organization’s release. “But it’s important to view this short-term uptick in context of the bigger picture — we are still in a long-term decline of activity, which affects job creation, innovation and economic growth.”
Digging Into the Numbers, It’s Not All Good News
When it comes to self-employment and starting new businesses, the climbing numbers for immigrant and Latino startup creation is a double-edged bellwether for the U.S. economy and for immigrant opportunities within it.
On the one hand, the boom of startups could reflect increasing opportunities for entrepreneurs. As the Kauffman Foundation noted, “opportunity entrepreneurs” — those who were neither unemployed nor looking for a job before they started their new business, accounted for 79.6 percent of the total number of new entrepreneurs.
But the trend also likely reflects barriers that are still in place for immigrants, especially Latinos, to find employment beyond what they can create for themselves.
As Alberto Dávila, chairman of economics and finance at the University of Texas-Pan American in Edinburg, Texas, told The Wall Street Journal, “If you dig into the numbers, it’s really Mexican self-employment that is carrying this growth.”
Such so-called “mom-and-pop” businesses, while fueled by entrepreneurial spirit, don’t generally reach close to the same levels of success of other startups, like those famous high-tech, VC-funded “startups” that carry multibillion dollar valuations. Instead, Latino immigrant businesses are more likely to be family-based, and less likely to be funded by outside sources — an increasingly essential step for expanding a startup beyond its initial phases.
Still, even small businesses make an impact on the local scale, and immigrant entrepreneurs are hugely driving that part of the economy.
For example, according to figures from the Fiscal Policy Institute and the Council of the Americas cited by WSJ, over the last three years in the majority of the 50 largest metropolitan areas in the U.S., the net growth of new local businesses — like restaurants, salons, and local retailers — accounted for by immigrant entrepreneurs? 100 percent.