The national debate on immigration has centered on the U.S. southern border. But there is a strong consensus, at least among economists, that the influx of immigrants is a key reason the United States has been able to maintain strong job growth even as inflationary pressures ease.
The role that immigrants play in starting new businesses and hiring new employees for those businesses is also poorly understood. Marketplace senior economics contributor Chris Farrell examines this data. He spoke with Marketplace Morning Report host David Brancaccio. Below is an edited transcript of their conversation.
David Brancaccio: A new business that could potentially employ other people — what do you think?
Chris Farrell: So let's take a look at the results of a recent survey conducted by Gusto. A provider of payroll, benefits, and HR technology for small and medium-sized businesses. The company surveyed business owners on its platform and found that 40% of new business owners in 2023 were immigrants or children of immigrants.
Brancaccio: Interesting, but this is one study. What does broader economic research tell us about how people from other countries are more likely to start a business?
Farrell: They are, and, well, that's by a long shot. This is the conclusion of a study by four economists. Well, what they found, David, is that on a per capita basis, immigrants are about 80% more likely to start a company than U.S.-born nationals.
Brancaccio: Are most of these small and medium-sized enterprises?
Farrell: Immigrants not only create more businesses overall, they also create more small businesses, more midsize businesses, and more large businesses on average. And I would also like to add that well-educated immigrants rightly get a lot of attention when it comes to creating new businesses. I mean, think of Silicon Valley. But in a recent conversation I had with Giovanni Peri, an economist and immigration expert at the University of California, Davis, he said that immigrants with less education can also be highly entrepreneurial. emphasized.
Brancaccio: And how does this entrepreneurial activity affect employment across the United States? Because a key concern is that immigrants take jobs away from people born here.
Farrell: So we know that job growth is disproportionately driven by new small businesses. Immigrant entrepreneurs in the United States are associated with a net increase in employment. Specifically, they handle about a quarter of all jobs in young companies. In other words, as research on immigrant entrepreneurs states, immigrant business owners are more job creators than job takers.
Brancaccio: Now, swirling all this around more generally is a remarkable resurgence as we emerge from the worst part of the pandemic in entrepreneurship.
Farrell: Americans have filed 5.5 million applications to start new businesses in 2023, and nearly 1.8 million are likely to hire employees. This is according to an estimate by the Economic Innovation Group, a think tank. Now, both numbers represent the high point of this data. Of course, we don't know how many of these business applications come from immigrants and how many plans will lead to actual business. However, I think it is no exaggeration to say that immigration is well reflected in the numbers. Immigrant entrepreneurs are essential to both future business creation and future job creation.
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