PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Immigrants: Entrepreneurship, the Labor Force and the Economy

By at 20 May, 2021, 9:31 am

By RAYMOND J. KEATING –

In recent times, the heated political rhetoric of immigration often overwhelms or drowns out sound economics on immigration. Unfortunately, despite the U.S. truly being a nation of immigrants, this is not a unique situation in our history.

Nonetheless, there are opportunities to consider some straightforward and instructive data on immigration, and that includes the “Foreign-Born Workers: Labor Force Characteristics – 2020” report released on May 18 by the U.S. Bureau of Labor Statistics.

Of course, 2020 was a brutal year in terms of the havoc wrought by COVID-19 in terms of lives lost, businesses closed, and jobs eliminated. Understanding that reality, let’s consider some key points from this report.

Immigrant Workers Hit Hard

First, it’s clear that immigrant workers were hit hard. For example, while foreign-born workers accounted for 17.0 percent of the labor force in 2020, versus 17.4 percent in 2019, foreign-born workers accounted for 1.1 million of the 2.8 million decline in the labor force – or 38.4 percent – from 2019 to 2020. (Keep in mind that the data are averages for the year.)

As for the changes in employment from 2019 to 2020, the native-born decline came in at -7.1 million, or -5.4 percent, while the foreign-born decline registered -2.7 million, or -9.8 percent.

Foreign-Born, Native-Born and Age

Second, as has been the case in previous years, foreign-born men had a much higher labor force participation rate in 2020 at 76.6 percent compared to the 65.9 percent rate among native-born men. A significant portion of the difference is attributed to age, that is, a larger share of immigrants are in prime working years. In fact, 71.8 percent of the male foreign-born labor force fell into the 25-to-54-year-old age group, compared to 62.2 percent for the native born.

Meanwhile, the participation rate among women was lower for the foreign born (53.2 percent) than for the native born (56.8 percent).

Overall, the foreign-born labor force participation rate in 2020 registered 64.5 percent, while the native-born rate was 61.2 percent.

Educational Attainment

Third, the native born unsurprisingly generally have higher levels of educational attainment compared to the foreign born, for example, with 19.0 percent of the foreign-born labor force age 25 and over not completing high school, versus 3.5 percent among the native born. And those with some college or an associate degree came in at 16.2 percent among the foreign born compared to 28.1 percent among the native born.

However, more similar were high school graduates – 24.5 percent among the foreign born and 24.8 percent among the native born – and those earning bachelor’s or higher degrees – 40.3 percent among the foreign born and 43.6 percent among the native born.

Entrepreneurship Higher Among Foreign Born

Most critically, the rate of entrepreneurship among the foreign born has been much higher than the native-born rate. That’s not surprising given that the very act of leaving one’s native country to journey and build a life in another nation is an act packed with uncertainty and risk – as is the case with entrepreneurship.

According to the latest data from the Kauffman Indicators of Entrepreneurship, the rate of new entrepreneurs was 74 percent higher than the native-born rate in 2020, that is, 0.59 percent among immigrants and 0.34 percent among the native born. Kauffman’s measure “captures all new business owners, including those who own incorporated or unincorporated businesses, and those who are employers or non-employers.”

Given the central role that entrepreneurship plays in terms of innovation and economic growth, this is a critical measure.

Immigration Fuels Economic Vitality and Dynamism

As we continue to emerge from the pandemic economy, the U.S. is need of more entrepreneurship, as well as an expanding labor force. Immigration has been a vital source of entrepreneurship, and of workers who do work that complements, and thereby enhances the productivity, of native-born workers.

It is essential for the U.S that the political clouds around immigration part to reveal the actual economics of immigration, with policy than aligning itself with that economics.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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