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America Needs More Legal Immigration

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America Needs More Legal Immigration

April 25, 2018

Next week the Labor Department will release employment estimates for the month of April. With an unemployment rate close to 4 percent, and the labor force participation rate at 1970s levels, more legal visas for immigrants are needed to meet employers’ demand for labor.

The Startup Act, sponsored by Senator Jerry Moran (R-KS), would permit an additional 75,000 visas for immigrants attempting to start high-potential companies. The International Entrepreneur Rule allows the Department of Homeland Security to grant a period of authorized stay to entrepreneurial immigrants if they are able to prove that staying in the United States “would provide significant public benefit through their business venture.”

The Startup Act, if passed, would allow entrepreneurial immigrants, who would likely benefit the economy, to remain in the country. New evidence for the benefits of the Act comes from a working paper from the National Bureau of Economic Research entitled “Immigrant Entrepreneurship in America: Evidence from the survey of business owners 2007 & 2012.”

Utilizing the Survey of Business Owners (SBO), economists Sari Kerr and William Kerr compared the success and growth of firms founded by native-born Americans against the success and growth of immigrant-founded businesses. According to their research, immigrants start about 25 percent of new U.S. businesses. In states with more immigrants, such as California and New York, the share of firms founded by immigrants rises to about 40 percent.

Kerr and Kerr found that many of the differences between first-generation immigrant firm owners and native-born firm owners were diminished when looking at second-generation immigrants.

This trend of high immigrant entrepreneurship is consistent with previous research from the Kauffman Foundation.  In 2016, the Foundation reported that immigrants are more than twice more likely to become entrepreneurs than native-born Americans. Additionally, the Foundation found that between 2006 and 2012, approximately 25 percent of engineering and technology companies created in the United States had at least one key founder who was an immigrant.

Immigrant-owned businesses offer new job opportunities for native-born workers and immigrants. First-generation immigrant-owned firms account for about 16 million jobs. When including second-generation immigrant-owned firms, the number of jobs increases to 20 million.

Although the jobs created by immigrant owners are typically lower paying and offer fewer benefits when compared to jobs created by native-born owners, when accounting for other variables, this difference can be partially explained by the types of firms founded. The majority of firms owned by immigrants are in retail trade, professional and technical services, and accommodation and food services.

According to research from the Center of American Entrepreneurship, approximately 43 percent (or 216 firms) of 2017 Fortune 500 companies were founded or co-founded by immigrants or children of immigrants. This includes about 45 percent of high-tech companies.

Although entrepreneurial business growth, as measured by the Kauffman Index of Growth Entrepreneurship, is up approximately 0.2, the number of jobs created by new businesses is down by about 1.5 million since the late 1990s. To boost job growth through new businesses, the United States needs to continue to encourage immigration of both high- and low-skill workers into the United States.  A 2016 National Bureau of Economic Research working paper by economists Ran Abramitzky and Leah Boustan concluded that if prior immigration policies had been more selective, many immigrant-founded companies that exist today would not have been created.

Opponents of increasing immigration in the United States argue that immigrants pose a high cost to America because of crime and the costs that communities face with higher numbers of immigrants. It is clear that visas for immigrants should be revoked if a crime is committed.

In the recent court case Session v. Dimaya, the Supreme Court held that under the Immigration and Nationality Act, which allows noncitizens of the United States convicted of an aggravated felony to be deported, the phrase “crime of violence” is unconstitutionally vague. Although President Trump has claimed this opens a loophole for violent immigrants to remain in the country, immigrants can still be charged under “aggravated felony,” which includes a long list of unaffected violent crimes such as murder, rape, and other violent and burglary offenses.

In order to reduce the cost of immigrants to communities, economists Pia Orrenius, Giovanni Peri, and Madeline Zavodny have suggested charging fees on employers and/or the immigrants themselves to acquire a visa. Both groups have shown a willingness to pay for visas, and the proceeds from the visas could go towards education and other costs.

Immigrants are vital to the development of new U.S. businesses and the advancement of our economy. For enduring economic growth, America should continue to encourage the legal immigration and assimilation of foreign-born workers.

 

Emily Top is a research associate at Economics21.

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