How immigrant business owners help boost the economy

The national conversation about immigration is focused on the U.S. southern border. Yet a strong consensus has emerged — among economists at least — that the influx of immigrants is a major reason why the U.S. can sustain strong payroll growth even as inflation pressure eases.

Less understood is the role immigrants also play in starting new businesses and making new hires for those businesses. Marketplace’s senior economics contributor Chris Farrell has been looking at the data. He spoke with “Marketplace Morning Report” host David Brancaccio. The following is an edited transcript of their conversation.

David Brancaccio: New businesses that may have the capacity to hire others — what do you see?

Chris Farrell: So, let’s take the results of recent surveys by Gusto. It’s a payroll, benefits, human resources technology provider for small businesses. And they surveyed business owners on its platform and found that 40% of new business owners in 2023, last year, were either immigrants or the children of immigrants.

Brancaccio: Interesting, but it’s one survey. What does broader economic research have to say about people who come from other countries being, what, more likely to start a business?

Farrell: They are, and, boy, it’s by a wide margin. And that’s the conclusion of a study by four economists. Now what they found, David, is, per capita, immigrants are about 80% more likely to create a firm compared to a U.S.-born citizen.

Brancaccio: Are these mostly, what, small firms?

Farrell: Immigrants not only create more firms overall, but, on average, they create more small firms, more medium-sized businesses and more large firms. And I want to add that well-educated immigrants, they rightly get a lot of focus when it comes to new business creation. I mean, think Silicon Valley. But in a recent conversation I had with Giovanni Peri — he’s an economist and immigration expert at the University of California, Davis — he stressed that less-educated immigrants are also very entrepreneurial.

Brancaccio: And this entrepreneurial activity, what does it do to overall employment in the U.S.? Because, that’s a key concern — immigrants taking jobs from people who were born here.

Farrell: I mean, look, we know that job growth disproportionately comes from new small businesses. Immigrant entrepreneurs in the U.S. are associated with a net gain in jobs. Specifically, they’re responsible for roughly one in four of all jobs in young firms. So, as the study about immigrant entrepreneurs put it, immigrant business owners are more “‘job creators’ than ‘job takers.’”

Brancaccio: Now, swirling across all of this more generally is a remarkable resurgence as we came out of the worst part of pandemic in entrepreneurship.

Farrell: Americans filed 5.5 million applications to start new businesses in 2023. And nearly 1.8 million are highly likely to hire employees. And this is according to estimates by the Economic Innovation Group, which is a think tank. Now, both figures represent high points for this data. Of course, we don’t know how many of these business applications are from immigrants and how many plans will turn into a real business. But I think it’s safe to say immigrants are well represented in the numbers. Immigrant entrepreneurs are vital to both future business creation and future job creation.