In the US, migrants more likely to start businesses and create jobs

A new study has found that migrants are more likely to establish new businesses in the United States than native-born citizens of the country.

The study analyses registered businesses across the US and finds that foreign-born residents are, per capita, 80 percent more likely to found new firms. It also finds that migrant-founded firms have, on average, one percent more employees than those established by US natives. 

“The findings suggest that immigrants act more as ‘job creators’ than ‘job takers’ and that non-US born founders play outsised roles in US high-growth entrepreneurship,” the authors write in the paper published by the American Economic Review, and co-authored by an economist from the Massachusetts Institute of Technology (MIT).

Titled ‘Immigration and Entrepreneurship in the United States’, the study analyses tax records and US Census Bureau data for more than a million businesses created in the US between 2005 and 2010, and found that 0.83 percent of US migrants founded a firm in those years compared with 0.46 percent of native-born US citizens. It used additional data from a Census Survey of Business Owners and Fortune 500 to compare firms founded before 2005, wielding similar results.

“It’s not the case that [migrants] only create growth-oriented startups. It’s not the case they just create subsistence businesses. They create all kinds of businesses, and they create a lot of them,” said Pierre Azoulay, an economist at the MIT Sloan School of Management and co-author of the report.

Contrary to the widespread perception that migrants take jobs from natives, the study shows they are net contributors to job creation in the US.

While the study’s purpose is not to analyse why this might be the case, Azoulay says that difficulties in accessing the US job market could be among the reasons, as could be the fact that many foreigners who arrive in the US as students remain in the country to establish tech startups.

In the US, migrants represent just over 14 percent of the population but account for over 20 percent of the self-employed workforce and 25 percent of startup founders. 

According to a 2018 policy paper by the National Foundation for American Policy, 55 percent of US startup companies valued at $1 billion or more had at least one migrant founder and nearly a quarter had a founder who came to the US as a student. Recent research into migrant entrepreneurship showed that those who have taken the decision to migrate to another country tend to be more willing to take risks.

“There can’t be just one explanation,” Azoulay says, “there is probably a different story for the firms that eventually grow to be large, and for the firms that start small and stay small.”