A recent report from the Fiscal Policy Institute (FPI) seems to imply that immigrants are particularly entrepreneurial. The authors of the report, "Immigrant Small Business Owners: A Significant and Growing part of the Economy", never really say this because the data does not support such a conclusion. But some of the coverage of the report is not as careful; see, for instance, "When You Think 'Immigrant,' Think 'Small Business Owner'", or "Immigrants Make Big Impact through Small Business".
The idea that immigrants are uniquely entrepreneurial is longstanding and common, but it is largely mistaken. It is true that immigrants were once more likely to operate their own business, but this has not been true for decades. For at least the last 20 years government surveys have repeatedly shown that there is no meaningful difference in the share of immigrants and natives who operate their own business.
Data from the Census Bureau's March 2011 Current Population Survey (CPS), for example, shows that 11.5 percent of working immigrants 25 and older are self-employed compared to 11.7 percent among the native-born. (The CPS is collected monthly and the March file is extra-large and is called the Annual Social and Economic Supplement.) The same data also asks about self-employment income as well as the number of workers in the firm. The responses to these questions also show that immigrants and natives have similar-sized businesses. Thus the best data show that entrepreneurship is not a distinguishing characteristic of immigrants nor is it a trait lacking among immigrants.
Although it uses somewhat different data, the Fiscal Policy Institute study actually shows the same thing, although the authors try to put the most positive spin on the data possible. For example, Figure 24 on p. 24 of the study shows that immigrants are 16 percent of the labor force (ages 16 and older) and 17 percent of business owners, based on the public use file of the American Community Survey (ACS), which is similar to the CPS I cited above. This means that the Institute's own analysis shows that immigrants are not particularly entrepreneurial. They are about the same share of business owners as they are of the labor force.
The FPI study also used the 2007 Survey of Business Owners (SBO) conducted by the Census Bureau. But according to the Institute, 29 percent of business owners with fewer than 100 employees did not answer the question about place of birth in the survey so their nativity could not be determined. For this reason, their report also relied on the ACS. The report makes a big deal of the fact that 18 percent of business owners are immigrants based on SBO, despite the significant problems with that data. But whether you use the 17 percent from the ACS or the 18 percent from the SBO, it makes little difference, because 17 percent of those in the labor force ages 25 to 65 are immigrants. This is really the relevant age group for comparison because 25 to 65 year olds operate the vast majority of businesses in the United States – immigrant or native.
When considering the characteristics of immigrants it is always important to place figures in their demographic context. Reporting the share of business owners who are immigrants without making it clear that this is roughly equal to their share of the relevant population is like reporting that one in five prison inmates in some county or state are immigrants without pointing out immigrants' share of the local adult population. Put things into their demographic context is important. That is why calculating a self-employment rate, as I do in the second paragraph of this blog, is really the best way to think about the issue, rather than simply reporting the share of the self-employed who are immigrants.
The bottom line is that the Fiscal Policy Institute's study shows that immigrants are about the same share of business owners as they are of the relevant population, whether the ACS or the Survey of Business Owners is used. By definition this means they are not particularly entrepreneurial. Put a different way, if there were no immigrants in the United States, the nation's self-employment rate would be virtually unchanged. There are many arguments for and against immigration, but the level of immigrant entrepreneurship is really a non-issue. One must look elsewhere to support or oppose today's high levels of immigration.
