Self- -Employed Immigrants Employed Immigrants Self Wing Young - PowerPoint PPT Presentation

Self- -Employed Immigrants Employed Immigrants Self Wing Young Hurie Maude Toussaint- -Comeau Comeau Maude Toussaint Federal Reserve Bank of Chicago Federal Reserve Bank of Chicago The views expressed are the author’s and do not necessarily reflect the views of the Federal Reserve Bank of ect the views of the Federal Reserve Bank of The views expressed are the author’s and do not necessarily refl Chicago or the Board of Governors of the Federal Reserve System. Chicago or the Board of Governors of the Federal Reserve System. The author thanks Robin Newberger for providing valuable research assistance h assistance The author thanks Robin Newberger for providing valuable researc

Motivation Motivation • Immigrant businesses are an important contributor to: Immigrant businesses are an important contributor to: • • the socioeconomic mobility of immigrants and their the socioeconomic mobility of immigrants and their • integration in the mainstream economy. integration in the mainstream economy. • the revitalization and economic development of the revitalization and economic development of • many urban neighborhoods and communities. many urban neighborhoods and communities. • economic growth in the U.S., as they account for economic growth in the U.S., as they account for • much of the growth of the minority small business much of the growth of the minority small business sector. sector. 2 2

Presentation Outline Presentation Outline • Size and growth of minority/ethnic/immigrant Size and growth of minority/ethnic/immigrant • businesses in the U.S. businesses in the U.S. • Challenges for immigrant self Challenges for immigrant self- -employment. employment. • • Socioconomic Socioconomic characteristics/factors affecting the self characteristics/factors affecting the self- - • employment decision of immigrants. employment decision of immigrants. • Conclusions and policy implications. Conclusions and policy implications. • 3 3

Number of Businesses Number of Businesses by Race/Ethnicity and Minority Status, 1997 by Race/Ethnicity and Minority Status, 1997 Number Percent Total U.S. firms 20,821,934 100.0 Hispanic-owned 1,199,896 5.7 Asian-owned 912,959 4.3 Black-owned 823,499 4.0 Nonminority-owned 17,782,901 85.4 Minority-owned 3,039,033 14.6 4 4 Source: U.S. Census Bureau, Survey of Minority-Owned Business Enterprises (SMOBE), 1997.

Immigrant Proportion of the Self- -Employed and Total Population Employed and Total Population Immigrant Proportion of the Self by Race/Ethnicity, 1999 by Race/Ethnicity, 1999 89.4 90 79.4 80 66.8 70 54.5 foreign born Percent 60 % of respective 50 population 40 30 foreign-born % of respective 8.8 11.8 20 10.0 self-employed 5.8 10 population 0 White Black Hispanic Asian Source: The percent of the foreign-born population is based on data from U.S. Census Bureau, Profile of General Demographic Characteristics, 2000 . Author’s calculation of the percentage of self-employed foreign-born population is based on U.S. Census Bureau, 5 5 Public Use Micro Statistics (PUMS), 2000.

Estimated Number of Immigrant Businesses Estimated Number of Immigrant Businesses by Race/Ethnicity by Race/Ethnicity % of % of all minority Number firms firms Estimated Hispanic immigrant- owned 801,531 3.8 26.4 Estimated Asian immigrant- owned 816,185 3.9 26.9 Estimated Black immigrant- owned 97,173 0.5 3.2 Estimated nonminority immigrant-owned 1,031,408 4.9 33.9 Estimated total immigrant- owned 2,746,297 13.2 90.4 Source: Author’s calculation based on SMOBE, 1997, and PUMS, 2000. Recall total U.S. firms = 20,821, 934 and total minority firms = 3,039,033. 6 6

Growth of Minority- -Owned Businesses, 1982 Owned Businesses, 1982- -1997 1997 Growth of Minority 1200000 1000000 Hispanic- Owned Number of Firms 800000 Asian- Owned 600000 Black- Owned 400000 200000 0 1997 Year 1982 1987 1992 7 7 Source: SMOBE, 1982, 1987, 1992, 1997.

Challenges to Immigrant- -Owned Businesses Owned Businesses Challenges to Immigrant • Some immigrant groups, as is the case for Some immigrant groups, as is the case for • minorities, are underrepresented in the minorities, are underrepresented in the small business sector. small business sector. 8 8

Business Representation Business Representation by Ethnic/Racial Immigrant Status by Ethnic/Racial Immigrant Status Immigrant Population population per business per immigrant owner business owner Immigrants --- 12.9 U.S.-born 12.5 --- White 11.0 8.8 Hispanic 17.8 16.0 Asian 12.6 10.9 Black 27.6 19.5 Source: Author’s calculations based on PUMS, 2000. 9 9

Challenges to Immigrant Self- -Employment Employment Challenges to Immigrant Self • Immigrants have more limited relationships with Immigrants have more limited relationships with • financial markets. financial markets. • They tend to be more likely to lack capital and They tend to be more likely to lack capital and • sufficient credit history to borrow from banks and sufficient credit history to borrow from banks and financial institutions (Bates, 1996). financial institutions (Bates, 1996). • The majority of some immigrant groups (i.e., Hmong The majority of some immigrant groups (i.e., Hmong • in MNP/St. Paul; Mexicans in Little Village, in MNP/St. Paul; Mexicans in Little Village, Chicago) leverage heavily on personal savings and do Chicago) leverage heavily on personal savings and do not even apply for a loan to start their business not even apply for a loan to start their business (Federal Reserve Bank of Chicago Neighborhood (Federal Reserve Bank of Chicago Neighborhood Surveys). Surveys). 10 10

Relationship with Banks Relationship with Banks Immigrant business owners U.S.-born business owners 82% 68% 18% 32% Banked Unbanked Source: Survey of Income Program and Participation (SIPP), 1996 Panel, Wave 12 (Aug. 99-Feb. 2000). 11 11

Relationship with Banks Relationship with Banks Mexican and Asian Mexican and Asian Mexican-born business Asian-born business owners owners 32% 48% 52% 68% Banked Unbanked 12 12 Source: SIPP (Aug. 99-Feb. 2000).

Characteristics of Immigrants Characteristics of Immigrants • Language Proficiency Language Proficiency • • Gender Gender • • Years Since Migration Years Since Migration • • Country/Region of Origin Country/Region of Origin • • Ethnic Concentration Ethnic Concentration • • Educational Attainment Educational Attainment • 13 13

Self- -Employment Rates Employment Rates Self by Immigrant Status and Gender by Immigrant Status and Gender 7.7 Immigrant Female 10.3 Immigrant Male 6.1 U.S.-Born Female 10.5 U.S.-Born Male 0 2 4 6 8 10 12 Source: 2000 PUMS. The population is defined as 18 to 64, with positive earnings, in labor force, residing in metropolitan areas. 14

Self- -Employment Rates Employment Rates Self by Selected Region/Region of Origin by Selected Region/Region of Origin 19.4 20 18 16.4 14.8 16 14 12.4 11.7 percent 10.5 12 10.5 10.3 9.0 10 7.9 8.0 6.9 8 6 4 2 0 s a n t n a o a p e n a a t c a r n i c i y p a b s c i s o t r g a i o e s i A u x A b e r r i E b r f e C - m k g A u . S . / b M a E i E t E m A i s . P r U a a . . m / . N S a E C C I i d e d n l n d I a d i . M S Source: 2000 PUMS. The population is defined as males, 18 to 64, with positive earnings, in labor force, residing in metropolitan areas. 15

Assimilation and Propensity for Self- -Employment Employment Assimilation and Propensity for Self 20 18 self-employment rate 16 14 12 10 8 6 4 2 0 After 1990- 1985- 1980- 1975- 1970- 1965- 1960- Before 1995 1994 1989 1984 1979 1974 1969 1959 1950 year of arrival Source: 2000 PUMS. The population defined as males, 18 to 64, with positive earnings, in labor force, residing in metropolitan areas. 16

Average Years Since Migration Average Years Since Migration by Self- -Employment Status and Region/Country of Origin Employment Status and Region/Country of Origin by Self 30 25 20 15 10 5 0 a a a a s e o i n t i n b c a s t s p p c a a i n c u A A r y o i i t e a x C f r s g r A b e . r e . u E i E E g k b M m E . . / i a i S t m N r A s P a a m / C . a E S I i d . d M n n I a . C Waged Employed Self Employed Source: PUMS, 2000. The population is defined as males 18 to 64, with positive earnings, in labor force, residing in metropolitan areas. 17 17

Average Years of Schooling Average Years of Schooling by Self- -Employment Status and Region/Country of Origin Employment Status and Region/Country of Origin by Self 18 16 14 12 10 8 6 4 2 0 C. and S. America N.E. Asia India/Pakistan M. East/Egypt U.S.-born Immigrants Mexico S.E. Asia Caribbean Africa Europe Cuba Waged Employed Self Employed Source: 2000 PUMS. The population here is defined as 18 to 64 males, with positive earnings, in labor force, residing in metropolitan areas. 18 18