Serpents At The Gates? Today’s Immigrants Are Tomorrow’s Entrepreneurs

February 27, 2018

4 minutes

In his scripted moments, President Trump sometimes casts immigration reform as an economic argument. “We must replace our current system of extended-family chain migration with a merit-based system of admissions that selects new arrivals based on their ability to contribute to our economy, to support themselves financially, and to strengthen our country,” he told the World Economic Forum in Davos, Switzerland, back in January. But when he goes off-script, as he did last week at the Conservative Political Action Conference in Washington, he likens immigrants to venomous snakes. And that, as we all now know, is nothing compared to what he apparently says behind closed doors. To President Trump’s supporters and his opponents alike, the implications of these remarks are clear: the proposals his surrogates in Congress have put forth to overturn decades-old policy are meant to “whiten” immigration.

All of which raises an interesting question: can the reprehensible goal even be reconciled with the more respectable one? That is to say, would an immigration policy meant to produce a more European (we’ll throw in Canada and Australia here) cohort of immigrants also supercharge the economy? Spoiler alert: probably not. And on close inspection, those proposals don’t even try.

There is broad agreement that the source of economic growth is innovation, and the source innovation is entrepreneurs starting new companies. And the source of entrepreneurship? More than many might think, it’s immigration.

According to a 2016 study by Boston area professors William Kerr and Sari Kerr, immigrants, who account for about 15 percent of the US workforce, comprised 27 percent of our entrepreneurs in 2008, a share that climbed steadily since the 1990s. The figure is even higher among venture capital-financed start-ups — the companies presumed to deliver the fastest growth in sales, profits, and employment. Thirty-seven percent of new firms have an immigrant founder. One-quarter of US inventors are immigrants.

A second 2016 study, from the Information Technology and Innovation Foundation, drills down into science and technology, investigating “high-value innovations” of the previous five years and the people behind them. It found that about 36 percent of top-tier innovators were foreign born. Europeans were over-represented, but so also were Asian immigrants, who comprised 18 percent of all innovators in the US. One striking finding: immigrant innovators are far more likely to be women than US-born innovators.

In other words, the current immigration system of family reunification (or “chain migration,” as the president puts it) and diversity lottery has done a much better job of producing entrepreneurs and innovators than the American birthright. “Immigrants are twice as likely to launch a new business as native-born Americans,” says John Dearie, who founded the Center for American Entrepreneurship last year to reverse a decline in US startups that began more than a decade ago and has not recovered. “To leave your family, to leave your culture, to leave your country, to go to a new country at great financial risk — to be an immigrant is a profoundly entrepreneurial act. So it shouldn’t surprise us that once these people get here they continue to be incredibly entrepreneurial.”

Dearie believes one solution to the entrepreneur shortage is to import more of them — he supports an “entrepreneur visa” for immigrants with a bona fide business plan and at least $100,000 in funding commitments that would offer temporary residency, which could be extended as long as the business has revenues and creates jobs. Ideally, he says, such a program might create as many as 150,000 new visas — a similar bill in Congress, currently stalled, would create half as many — and it would still broadly reflect the current mix of immigrants. “If you know anything about the talent distribution around the world, it’s every color, every background, every ethnicity,” he says. “And we learned that recently in the debate after that unfortunate alleged comment of ‘shithole countries’ — the average education level of African immigrants is even higher than the education level of the average American.”

Notably, the Senate immigration bill that President Trump has thrown his support behind, the RAISE Act, has no provision for an entrepreneur visa, even though sponsors Tom Cotton of Arkansas and David Perdue of Georgia insisted that they crafted their legislation with “the needs of our economy” top in mind. The bill would replace the current preferences for skilled workers and investors with a system that awards points for achievement. (Nobel Laureate? Extra points!) The points scheme broadly mirrors the current priorities, except that, as the American Immigration Council notes, it trades flexibility for employers for a rigid hierarchy of traits. And crucially, it doesn’t expand the program.

In other words, the RAISE Act does nothing to more closely tailor immigration policies to “the needs of our economy.” Instead, it primarily reduces the number of new arrivals, drying up a proven wellspring of entrepreneurship. The bill’s authors see it differently, of course — they claim they are turning off a spigot of unskilled, low-wage workers, and boosting native wages. Last spring, nearly 1,500 economists wrote a letter to the president and leaders of Congress to dispute that notion.

“Too many Americans look at the economy as a closed sandbox with a fixed number jobs — by definition, every new arrival takes a job from a native-born American,” Dearie says. “And that’s not true. All of the evidence shows that immigrants not only don’t take jobs from Americans, they actually create jobs for Americans.”


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