Reconsidering Immigrant Entrepreneurship —
An Examination of Self-Employment Among Natives and the Foreign-Born
by Steven A. Camarota
January 2000, ISBN 1-881290-05-0

Full- and Part-Time Self-Employment Rates

Full-Time Self-Employment

Table 1 (below) provides more detailed information on the self-employment patterns of immigrants and natives in 1998. The top portion of the table reports self-employment information for all immigrants and natives, while the bottom part reports it for immigrants by year of entry in 1997. The first column shows the average age for immigrants and natives. The second column reports the percentage of immigrants and natives who are self-employed full-time.⁸ As we have already seen, the non-farm native self-employment rate of 11.8 in 1997 was slightly higher than the 11.3 percent for immigrants.⁹ If self-employed farmers are included, the native advantage in self-employment increases. In 1997, the total self-employment rate of natives (including farmers) was 12.3 percent, almost one percentage point higher than the 11.4 percent for immigrants when farmers are included. Since farmers are overwhelming native-born, this result is certainly not surprising.

While natives do seem to be slightly more likely to be entrepreneurs than immigrants, even when self-employed farmers are included the native advantage still is small.¹⁰ Instead, what is striking about the full-time self-employment rates is the fact that the two groups are so similar and have been for almost 20 years. This similarity means that the presence of immigrants has no effect on the overall level of entrepreneurship in the United States. In 1997, the total self-employment rate (including immigrants) in the United States was 11.7 percent. If immigrants are excluded, the rate would have been 11.8. Put another way, immigrants make up 11.8 percent of the workforce¹¹ and they comprise 11.4 percent of the nation's entrepreneurs. Thus, immigration has no discernable impact on the overall level of entrepreneurship in the United States.

Part-Time Self-Employment

Some entrepreneurs continue to work at their regular jobs in addition to having their own businesses on the side. This is especially likely to be the case when they are trying to get a new business started. The third column in Table 1 shows the percentage of individuals who report having some self-employment income, but are not self-employed at their primary job. As is the case with full-time self-employment, natives are somewhat more likely than immigrants to be part-time entrepreneurs 2.3 percent compared to 1.4 percent of immigrants. While both groups have low part-time self-employment rates, the slightly higher rate for natives makes it clear that part-time self-employment is not a distinguishing characteristic of immigrants. Combining the full- and part-time self-employment rates of immigrants and natives indicates that 14.1 percent of natives compared to 12.7 percent of immigrants are entrepreneurs. Although the 1.4 percentage points separating the combined full and part-time self-employment rates of immigrants and with those of natives is still small, it is large enough to be statistically significant.¹² However, even though the difference is statistically significant, it would be a mistake to characterize this difference as large. What is important about the self-employment rates in Table 1 is not their statistical significance, but instead the fact that like many stereotypes, the perception that immigrants are uniquely entrepreneurial turns out to be incorrect. If anything, natives are slightly more entrepreneurial than immigrants.

Self-Employment by Year of Entry

The lower portion of Table 1 presents the self-employment rate of immigrants based on when they entered the country. Examining immigrants by entering cohort is important because it is one way to determine how immigrants perform over time. The table shows that the longer immigrants are in the country, the more likely they are to be self-employed. In 1998, 17 percent of immigrants who entered prior to 1970 were self-employed on a full-time basis, 5.2 percentage points higher than that of all natives. The high self-employment rate of pre-1970 immigrants is not surprising because, as we will see in Table 3, age is positively correlated with self-employment. Because the average age of pre-1970 immigrants is 51 years, nine years older than the average age for natives, the self-employment rate of pre-1970 immigrants should be correspondingly higher. Natives in their fifties have very similar self-employment rates. The high self-employment rate of pre-1970 immigrants may also reflect the fact that most of these immigrants were admitted under the system that existed prior to 1965, which tended to produce a more educated flow of immigrants.

Table 1 also illustrates that the self-employment rate for immigrants who arrived in 1970 or after is 10.1 1.7 percentage points lower than that of natives. Looking at immigrants who arrived in each of the last three decades since 1970 shows rising rates of self-employment over time. The self-employment rate of 6.1 percent for 1990s immigrants is the lowest of any decade. Like the high self-employment rate for pre-1970 immigrants, the low self-employment rate for 1990s immigrants is also not surprising. 1990s immigrants are on average 36 years old, five years younger than the average native. Moreover, because 1990s immigrants have been in the country for only a few years, they are less familiar with the economy, language, and culture of their new home.

The self-employment rate for 1980s immigrants of 10.8 percent and the 12.7 percent for 1970s immigrants indicates that, as immigrants become more familiar with their new country, they have self-employment rates that are very similar to those of natives. Moreover, these immigrants are about the same age as natives 1970s immigrants are one year older on average and 1980s immigrants are three years younger than natives. Looking at immigrants who arrived in the 1970s and the 1980s indicates that, after a few years, immigrants are about as likely as natives to be entrepreneurs, but their rate of self-employment does not exceed that of natives.

Only when immigrants are much older than natives, as are pre-1970s immigrants, are their self-employment rates much higher than those of natives. But even then, as we will see, their self-employment rates do not exceed those of natives who are the same age. Table 1 also illustrates that the same basic pattern of rising self-employment rates exists when we look at part-time self-employment. However, unlike full-time self-employment, the part-time self-employment rate of immigrants never reaches the 2.3 percent for natives, even when immigrants have been in the country for many years. Of immigrants who arrived prior to 1970, 1.7 percent are self-employed part-time; for 1970s immigrants the figure is 1.4 percent; for 1980s immigrants 1.3 percent are self-employed part-time; and 1.2 percent of the most recent arrivals are part-time entrepreneurs. While natives do have higher part-time self-employment rates than immigrants, regardless of year of entry, part-time self-employment is rare for both groups. Few workers, immigrant or native, seem to be able to hold a job while also operating their own business on the side.