Economics of Immigration

Economics of Immigration

Immigration has long been one of the great underrated stimuli for the American economy. The Senate’s immigration reform bill (S.744) would help America’s overall economy and reduce the deficit. Numerous studies and papers have been written that provide evidence of the net positive impact immigration has on the American economy. We share data from various sources on how immigrants affect the economy through:


Immigrants as American Entrepreneurs

immigrant entrepreneur businessman
Photo by Jazz Guy

Immigrants have firmly established themselves as innovators in the American economy. Conservative columnist George F. Will writes that immigration is an “entrepreneurial act.” Immigrants that are willing to leave their native culture in pursuit of more promising opportunity in America are the same type of people that are willing to challenge the status quo in business, science and technology.

Immigrants are more than twice as likely to start a business as the native-born. In 2011, the immigrant business-formation rate was 550 new businesses per month for every 100,000 immigrants, while the native-born rate was only 270 new businesses per month for every 100,000 native-born.
Source: The Partnership for a New American Economy

In recent decades, the number of Hispanic entrepreneurs has grown exponentially. From 1990 to 2012, the number of Hispanic entrepreneurs in America more than tripled, going from 577,000 to more than 2.0 million. This surge far outstripped population growth among the working-age Hispanic American population. It also dwarfed the growth in the number of self-employed non-Hispanics during that period, which grew by just 14.0 percent—roughly one eighteenth as fast as the Hispanic rate.
Source: The Partnership for a New American Economy

Initial public offerings of venture-funded companies with an immigrant founder jumped from 20 percent prior to 2006 to 33 percent after 2006. The study also found that one-third of the entrepreneurs starting privately-held venture-backed companies were foreign-born.
Source: National Venture Capital Association

Immigrants started 28 percent of all new U.S. businesses in 2011, despite accounting for just 12.9 percent of the U.S. population. Just a decade and a half earlier, in 1996, only 15 percent of new U.S. businesses were founded by immigrants.
Source: The Partnership for a New American Economy

immigrantbusinessownership

Source: Fiscal Policy Institute

Immigrant businesses are smaller than those started by the native-born, but their collective impact on the U.S. economy is huge and growing. Over the last decade the income generated by native-owned businesses increased just 14 percent and failed to keep pace with inflation. Income from immigrant-owned businesses, meanwhile, increased by more than 60 percent. Immigrant-owned firms now generate more than $775 billion revenue, $125 billion in payroll, and $100 billion in income, employing one out of every 10 workers along the way.
Source: The Partnership for a New American Economy

In 2012, immigrants were nearly twice as likely as the native-born to start businesses each month. Additionally, from 1996 to 2012, the share of entrepreneurs who are immigrants grew from 13.7 percent to 27.1 percent.
Source: Kauffman Index of Entrepreneurial Activity

Immigrants start more than 25 percent of all businesses in seven of eight sectors of the economy that the U.S. government expects to grow the fastest over the next decade. From 2007 to 2011, immigrants founded an outsized share of new businesses in health care and social assistance (28.7 percent), professional and business services (25.4 percent, construction (31.8 percent), retail trade (29.1 percent), leisure and hospitality (23.9 percent), educational services (28.7 percent), “other services” (28.2 percent), and transportation and utilities (29.4 percent).
Source: The Partnership for a New American Economy

Immigrants are increasingly like to start a business, while the rate of new-business generation among the native-born is declining. The rate at which immigrants start new businesses grew by more than 50 percent between 1996 and 2011. During the same period, the business-formation rate for the native-born declined by 10 percent.
Source: The Partnership for a New American Economy

Immigrant-owned businesses are more than 60 percent more likely to export than non-immigrant owned businesses and are more than two and a half times more likely to be high-exporting companies.
Source: The Partnership for a New American Economy

Immigrant-owned businesses generated more than $775 billion in sales and more than $100 billion in income in 2010.
Source: The Partnership for a New American Economy

The $109 billion in business income generated by immigrant-owned firms in 2010 was a 60 percent increase over 2000. This growth greatly outpaced the increase in business income generated by native-owned firms, whose 14 percent rise failed to outpace inflation.
Source: The Partnership for a New American Economy


Immigrants’ Impact on Jobs and the GDP

sebelius-serves-employeesMuch of the attention goes to low-skilled workers, but in many cases the economy’s growth is being led by immigrant business. From small business to the Fortune 500, immigrant businesses contribute substantially to job growth and the gross domestic product in the United States.

The Fortune 500 companies started by immigrants or their children (40% of Fortune 500 companies) generated revenue greater than the GDP of nearly every country in the world (except Japan, China, and the United States). $1.7 trillion in revenues is attributable to the companies founded by immigrants, and that figure rises to $4.2 trillion when combined with the revenues of companies founded by the children of immigrants.
Source: The Partnership for a New American Economy – The “New American” Fortune 500

Immigration positively influences job growth in metropolitan areas. Through an analysis of 505 metropolitan areas from 2005 to 2011, economist Jack Strauss at the University of Denver found that an increasing number of immigrants moving to an area leads to significantly higher employment growth and a decline in the unemployment rate. Immigrants’ self-employment appears to be the mechanism through which immigration positively impacts job opportunities in a metro area.
Source: Jack Strauss and Hailong Qian

One in every 10 people employed at a privately-owned U.S. company works at an immigrant-owned firm and immigrant-owned businesses pay out $126 billion in payroll per year.
Source: The Partnership for a New American Economy

Immigrant entrepreneurs’ companies create new jobs in the U.S. Immigrant-founded venture-backed public companies employ approximately 600,000 people, mostly in the United States.
Source: National Venture Capital Association

Hispanic immigrants help revitalize communities across the U.S., including Ottumwa, Iowa, a 30,000-person city southeast of Des Moines, which according to The Wall Street Journal, saw its taxable property value double in the last 10 years after making a concerted push to bring in new immigrants who opened up shops to replace shuttered storefronts.
Source: Wall Street Journal

Comprehensive immigration reform would create 1.4 million U.S. jobs.
Source: Center for American Progress

Immigrants start more than 25 percent of all businesses in seven of the eight sectors of the economy that the U.S. government expects to grow fastest over the next decade.
Source: The Partnership for a New American Economy

For every $1 increase in immigrants’ incomes, there is a $1.17 increase in GDP.
Source: Center for the Study of Immigration Integration

Immigrant-founded venture-backed companies create extraordinary value. As of June 2013, such publicly traded companies have a total market capitalization of $900 billion. If this group of companies were a country, they would be among the top twenty economies in the world.
Source: National Venture Capital Association

Immigrant-owned small businesses are more likely to be able to connect to the global marketplace. Over 7 percent of immigrant firms export their goods and services, whereas just over 4 percent of non-immigrant firms export.
Source: U.S. Small Business Administration

Immigrant-owned businesses generate more than 20 percent of all income in the retail trade; transportation; health care and social assistance; and accommodation, recreation and entertainment sectors.
Source: The Partnership for a New American Economy

With immigration reform, newly authorized immigrant workers would produce enough new consumer spending to support 750,000 to 900,000 jobs.
Source: U.S. Small Business Administration

Every low-skilled, non-agricultural, temporary worker who comes to the U.S. to fill a job that may otherwise be left open creates an average of 4.64 U.S. jobs. These low-skilled jobs are the necessary backbone to support higher-skilled positions.
Source: The Partnership for a New American Economy and American Enterprise Institute for Public Policy Research

Passage of the DREAM Act would add $329 billion to the U.S. economy and create 1.4 million new jobs by 2030.
Source: Center for American Progress

Without immigrants, the U.S. will not have enough new workers to support retirees. Seventy years ago, there were 150 workers per 20 seniors; 10 years ago, there were 100 workers per 20 seniors. By 2050, there will be only 56 workers for every 20 seniors. The U.S. needs new taxpayers to help fund Social Security and Medicare and new workers to fill retirees’ positions and provide their health care services.
Source: Immigration Policy Center

An expansion of the high-skilled visa program could create an estimated 1.3 million new jobs in the U.S. by 2045. This expansion could also add around $158 billion to Gross Domestic Product by 2045.
Source: Regional Economic Models Inc.


Immigrants’ Contribution to STEM

immigrant stem science technology engineering and mathThe influx of motivated bright minds is a driving force in America’s ability to stay competitive in the areas of science, technology, engineering and math (STEM). Immigrants in the United States contribute to the country’s innovation economy by earning patents on new research, products, and ideas.

In 2009, “non-resident aliens” comprised almost 41 percent of all masters and doctorate degrees in STEM fields. 40 percent of STEM masters degrees and 45 percent of STEM doctorates were awarded to “non-resident aliens”.
Source: Partnership for a New American Economy

76 percent of patents awarded to the top ten patent-producing U.S. universities in 2011 had at least one foreign-born inventor. For high-tech and cutting-edge fields, the rate of foreign-born patenting at those institutions was even greater: semiconductor device manufacturing (87 percent), information technology (84 percent), pulse or digital communications (83 percent), pharmaceutical drugs or compounds (79 percent), and optics (77 percent).
Source: Partnership for a New American Economy

There were 106 metropolitan areas across the United States that had at least 250 requests for H-1B workers in 2010-2011, demonstrating that cities across America show a demand for high-skilled workers.
Source: Brookings Institution

Although the presence of research universities accounts for H-1B high-skilled demand in many areas, private industry accounts for the demand and intensity in other areas, including companies such as HTC Global, Wal-Mart, Merrill Lynch, Educational Testing Service, Caterpillar Inc., Credit Suisse, JPMorgan Chase & Co., Bank of America, Wells Fargo Bank, and Mayo Clinic.
Source: Brookings Institution


Immigrants & Taxes

On average, immigrants, including the undocumented, pay nearly $1,800 more in taxes than they receive in benefits.
Source: The National Academies

Comprehensive immigration reform would reduce the federal budget deficit by $897 billion over the next 20 years. That’s more than $122 million per day!
Source: Congressional Budget Office

Undocumented immigrants currently contribute significantly to state and local taxes, collectively paying an estimated $10.6 billion in 2010 with contributions ranging from less than $2 million in Montana to more than $2.2 billion in California. This means these families are likely paying about 6.4 percent on average of their income in state and local taxes.
Source: Institute on Taxation and Economic Policy

Comprehensive immigration reform would increase state tax revenues an estimated $748 billion by 2033.
Source: Congressional Budget Office

Comprehensive immigration reform would inject an additional $914 billion to the Social Security system by 2033, far exceeding the additional outlays.
Source: Congressional Budget Office

Allowing undocumented immigrants to work in the United States legally would increase their state and local tax contributions by an estimated $2 billion a year. Their effective state and local tax rate would also increase to 7 percent on average, which would put their tax contributions more in line with documented taxpayers with similar incomes.
Source: Institute on Taxation and Economic Policy