Immigrant Entrepreneurs Revitalize the Local Economy & Invest in America

Small businesses in the U.S. are becoming increasingly owned by immigrants into the United States, no matter the type of business. These businesses are helping to revitalize the economy as the recession has finally begun to slow and the economy is beginning to rebound. While most of these businesses are single-location businesses that do not directly impact the national economy in the same way that chain and franchised businesses do, they do have a strong impact on local economies, improving neighborhoods that have become impoverished and moving money in these areas that was not found before.

Immigrant small business owners have a strong foothold in the economy, making up a disproportionate number in almost every category. In health care and social services, immigrants make up 21% of the business owners, including 27% of the private offices of physicians. In wholesale trade, with its connections to both servicing retail and to import-export, immigrants make up 23% of business owners. And, immigrants are playing a big and often well-known role in high-tech businesses, making up 31% of owners of business that manufactures computer and peripheral equipment, 27% of businesses that produce aerospace products and parts, and 26% of those that produce medical equipment and supplies. These are higher-end businesses that have a direct impact on the larger economy and are typically owned and operated by those that have higher level degrees than the typical business owner. The economic impact of these businesses is more readily apparent, as they produce high-end, high-cost products that are typically ordered by other businesses in large numbers on a continual basis. They are more publicly visible to the population as a whole, as they provide goods and services that impact more than just their immediate area.

Over the last 15 years, immigrants have increased the rate by which they start businesses by more than 50%, while the native-born have seen their business generation rate decline by 10%. A good number of these businesses are what are known as Main Street businesses, of which immigrants make up 28% of all business owners. Main Street businesses are defined as those which fall into three broad categories: Retail, Accommodation and Food Service, and Neighborhood Services. These businesses include gas stations, dry cleaners, local grocery stores, nail salons, liquor stores, jewelry stores, florists, restaurants, bars, hotels, barber shops, dry cleaning, and car washes. Immigrants own a disproportionate number of these staple businesses, making up 61% of gas station owners, 58% of grocery store owners, 45% of nail salon owners, 43% of liquor store owners, 38% of restaurant owners, and 32% of both jewelry and clothing store owners.

Main Street businesses tend to be locally owned and operated. They are there to service the local community, becoming the backbones of the local economy, driving growth and job creation in the area, thus spurring local economic growth. This local economic growth then has impacts on the community at large, as more money is going back into the economy and money keeps moving. This local economic growth can also revitalize neighborhoods that have become depressed. As they are local businesses with only one location, not chain or franchise with many locations, the goods and services offered can only be found at one specific location, forcing those that wish to visit the business to come to the neighborhood where it is located. Often, these stores and restaurants begin to attract others from the community to that neighborhood, and they eventually break out and begin attracting the general population as word begins to spread about the business. Gradually, the neighborhood becomes more interesting, as more people frequent the area and explore, possibly moving there to be closer to their new favorite restaurants and stores, and with more “eyes on the street,” it starts to feel safer. Before long, a vibrant neighborhood takes root, as those with more money begin to move in, bringing with them more customers and businesses, giving the neighborhood a more unique flavor and personality. The challenges then may be more about rising rents than dangerous streets.

There have been 31 cities, 22 of which are in the top 50 most populated cities in the United States, in which immigrants make up all growth in this Main Street businesses ownership. The most striking is New York, where nearly 6000 immigrants opened new Main Street businesses between 2000-2013, while approximately 4500 native-born business owners sold or closed their businesses in the same time frame. Locally, Columbus, Ohio has also seen a trend of immigrant businesses owners outnumbering native business owners, though the numbers are not quite as shocking as New York. The differential is very slight, but there is still evidence that immigrant business owners locally are helping drive the economy by starting new businesses, while the native population has slowed opening business of the same kind.

This is not to say that immigrants have it easier than the native-born population when it comes to funding a Main Street businesses startup. Not only are there few governmental incentives to help these owners, but banks are also less likely to give immigrants loans than those born in the U.S. Immigrants often have no domestic credit to speak of and have not had much exposure to how the banking system in the U.S. operates, making them a high-risk population for loans. In fact, only 18% of immigrants are able to acquire small-business startup loans from banks, compared to 28% of native-born. This means that most business owners have depended on their savings and/or loans from sources other than banks, such as friends or family members, in order to have the capital needed to start the business. While native-born would-be business owners may be weary of making such a pricy commitment, given the state of the economy recently, immigrants may be more likely to do so, as they are optimistic upon coming to the U.S. and feel that this is the best decision, given their position.

These businesses tend to have very small profit margins, making it a risky investment, but one that immigrants are very willing to take, as the slim profit they are making here may still be better than anything they could have hoped for in their home country. They also find that owning a business allows them to make more money than those immigrants who are simply in the labor force. The median earnings for immigrants overall is currently $35,000, with immigrant Main Street business owners making slightly more at $37,000. The fact that owners only make slightly more than workers can be attributed to the fact that Main Street businesses, with their hyperlocal focus and being reduced to a single location, have a very slim profit margin, with almost all money made being reinvested in the business to buy goods, pay workers, and other expenses connected with running a business. The take home is only slightly more than what could be made by simply being in the work force, but the business owners are proud of their business and take care of it in ways that many workers do not take care of the businesses they work for.

As cities are becoming more multi-national, with populations being made up of immigrants at increasing rates, the number of Main Street, single-location, locally-owned and operated businesses is beginning to rise at a steady pace as well. The foreign-born population is more willing than the native-born population to take the risks associated with starting a business, even if it means depleting their own personal savings account. As the businesses improve the local economy, the make-up of the local population begins to change, shifting from low-wage workers with little disposable income, to those from other parts of the community, who bring with them more disposable income. As more and more people come from outside areas, police presence begins to increase, crime decreases, and the neighborhood begins to feel safer. This, in turn, allows those wishing to live in the area to move in as they feel more secure in the neighborhood. Rents begin to rise, jobs begin to pay better, and the entire community benefits as the Main Street businesses thrive. Immigrant business owners are slowly becoming the backbone of neighborhood economies, spurring growth and change in new and exciting ways as their businesses become destinations for those wishing to experience something slightly outside of the norm.

Contact Us

We will respond to your inquiry in a timely fashion. Thank you.

!
!
!

My Office