Immigrant Entrepreneurs in the U.S. Economy - No Need for Bailout!

Foreign investment in the United States has been enshrined in U.S. immigration statutes and regulations for more than 50 years, beginning with the enactment of the treaty investor provisions. The Foreign Affairs Manual (FAM) urges U.S. consular officers to adjudicate E-2 treaty investor visa applications in accord with the spirit of encouraging bilateral investment. 1

U.S. Department of State Foreign Affairs Manual, 9 FAM 41.51 N.1 (2002), directing consular officers to adjudicate E visa applications in the spirit of facilitating economic and commercial interaction between the treaty countries.

The principal reason for encouraging liberality in issuing such visas is that foreign investment tends to create economic benefits beyond merely a visa benefit for the investor.

Investments in small businesses are especially significant to the national interest of the United States. The Small Business Administration (SBA) estimates that 99 percent of the firms in the United States are small businesses, and small firms have generated 60 to 80 percent of the net new jobs annually over the past decade.

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See U.S. Bureau of the Census available at www.sba.gov/advo/research/data.html#us. Small businesses employ 41 percent of high-tech workers and produce 13 to14 times more patents per employee thanlarge firms.

Immigrants have an ever-increasing role in the creation of small businesses. Immigrant entrepreneurship is widely recognized as having a significant impact on traditional industries such as retail, ethnic restaurants and markets, and garment manufacturing. But new industries in the technology sectors are playing an increasingly important role in the domestic economy and in creating professional links with the international markets in their countries of origin. The highly-educated immigrant entrepreneurs of Silicon Valley, for instance, show the future of international business models. Immigrant-operated companies accounted for $19.5 billion in sales and 72,839 jobs by the end of the 1990s.

Overall, across the economy the number of immigrant self-employed business owners increased by 384,000 from 2000 to 2003.

As immigrants have increased their share of the labor force, they also have increased their share of self-employment, from 10.9 percent of the total self-employed in 1994 to 14.7 percent in 2003.

Regional studies in cities across the United States have shown a wage increase for some nonimmigrant minority groups in direct correlation with the presence of immigrant entrepreneurs who provide employment in some formerly depressed regions. This influx of immigrant entrepreneurs and labor not only benefits minority groups, but also generates new jobs for certain industries that otherwise would be declining without the infusion of immigrant labor.

Immigrant entrepreneurs have an effect on the supply and demand of labor since they require additional labor for their businesses. Consequently, this increase in labor has a positive effect on supporting industries. For example, a small ethnic clothing store may employ salespeople to conduct basic operations but also will require workers to produce the ethnic apparel, and contract workers who assist with displays, make repairs, or clean the store. Thus, immigrant entrepreneurs have a positive effect on employment by expanding both the demand for and supply of workers.

The economic literature, moreover, supports the view that immigrant entrepreneurs do not displace native entrepreneurs, but rather can increase the demand for labor and thus increase wages.

In addition to these direct benefits, many successful immigrant entrepreneurs find numerous ways to give back to the community by investing, providing loans, or giving business advice to others interested in starting a new business in the community. Indeed, one of an immigrant’s greatest strengths comes from the support of their ethnic community. Immigrant entrepreneurs are able to raise capital from within their group or enclave, particularly from members of their extended family.

Immigrant entrepreneurs are an increasingly important force in the U.S. economy. Self-employed immigrants help the nation integrate into the global marketplace while at the same time generating jobs, exports, and wealth. Immigrant entrepreneurs are more likely to become a part of the transnational communities that link the United States to markets across the globe. The benefits of small business investments go beyond that of the individual investor, and have an impact on the U.S. economy as a whole. Perhaps with more investors like these will will not need to discuss bailouts and will start be resonsible for our actions.