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

Socio-Economic Characteristics

The comparisons made in this study so far have been for all employed persons 25 and older, with self-employed farmers excluded. This section of the report examines differences based on various socio-economic characteristics.

Self-Employment by Age and Education

Table 3 (below) reports self-employment rates by age for persons 25 and older. The table shows that as they age, both immigrants and natives are increasingly likely to be self-employed. The difference in self-employment rates for the two groups is one percentage point or less in every age group with the exception of persons 55 and over. But even in this category, the 2.8 percentage-point advantage enjoyed by natives is not very large.

Table 4 (page 24) reports self-employment rates by education. The table shows that the more education a person has, the more likely he or she is to be self-employed. While there is more variation in self-employment rates between immigrants and natives by education than by age, in most educational categories immigrants and natives have very similar self-employment rates. Only among high school dropouts do natives seem to be somewhat more likely to be self-employed, and only among college graduates do immigrants have somewhat higher levels of self-employment. In general, Tables 3 and 4 indicate that there is not much difference between the two groups by education or age.

Self-Employment by Industry

All the evidence examined so far indicates that immigration does not have a significant impact on the overall level of entrepreneurship in the United States. Perhaps, however, immigrants benefit the American economy not by having higher rates of entrepreneurship or by the size of the businesses they create, but instead by the kind of businesses they operate. If immigrants start businesses very different from those started by natives, this might create significant benefits for natives because it could mean that immigrant businesses offer goods and services that might not otherwise be available. This in turn could create more choices for consumers and new opportunities for workers and native-owned businesses.

Table 5 (page 24) presents the percentage of native and immigrant entrepreneurs in each industry. The table reads as follows: In 1997, 6.2 percent of native entrepreneurs worked in manufacturing, compared to 5.4 percent of immigrant entrepreneurs. The table shows that immigrant and native entrepreneurs have a similar distribution across industries. The main exception is that native entrepreneurs are more likely to be in the construction business, while self-employed immigrants are more heavily concentrated in retail sales. It seems unlikely, however, that this difference is enough to significantly change the mix of businesses in the U.S. economy. The higher rate of self-employment in retail sales for immigrants increases the overall number of self-employed people in that industry in the U.S. economy by only 7.7 percent.¹⁶ This is not likely to make a significant difference in the overall economy, especially because a very large share of self-employed persons in retail sales are street vendors with particularly modest operations.

Immigrant businesses may be different from those of natives, but the data presented here are too aggregated to discern these differences. Given the sample size of the CPS, it is not possible to further divide self-employed immigrants into more detailed industrial classifications and still obtain reasonable estimates. With a larger sample and greater divisions by industry, significant differences might emerge. Based on this evidence, however, it seems unlikely that immigrants create a significant benefit to the economy by fundamentally changing the mix of businesses operating in the United States. They operate businesses very similar to their native-born counterparts.