Immigrants Own Nearly One in Five U.S. Small Businesses

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Ruben Castro owns La Fiesta Brava, a Mexican restaurant in Laurel, Mississippi.

Washington — Immigrants own nearly one in five of the small businesses operated in the United States, according to a recent study.

The study, the first of its kind, was conducted by the Fiscal Policy Institute, an independent, nonpartisan, nonprofit, research and education organization based in New York.

Using data published by the U.S. Census Bureau, the institute found that immigrants make up 18 percent of the small business owners in the United States, although immigrants are only 13 percent of the total U.S. population.

Small businesses are defined as having fewer than 100 people working for them. Small businesses employ an estimated 35 million people and account for some 30 percent of all private-sector employment, according to the study. Of this number, immigrant small business owners employ an estimated 4.7 million people and generated an estimated $776 billion in receipts in 2007, the most recent year for which these data are available.

The most common types of small businesses operated by immigrants are restaurants, physician’s offices, real estate companies, grocery stores and truck transportation services, the study says.

Mexicans make up the largest number of immigrant small business owners — about 12 percent — followed by immigrants born in India, Korea, Cuba, China and Vietnam.

Immigrant small business owners are typically located in cities where the immigrant share of the labor force is high. Miami tops the list with 47 percent of the labor force being foreign born and where 45 percent of business owners are foreign born. Other U.S. cities with large foreign-born labor forces and a large number of immigrant owners of small businesses are Los Angeles, New York and Houston.

 

Immigrant small business owners are represented disproportionately in some industries, the report says. For example, immigrants make up 43 percent of hotel and motel owners, 37 percent of restaurant owners, 65 percent of taxi service firms, 54 percent of dry cleaning and laundry services, 53 percent of gas station owners and 49 percent of grocery store owners.

The median earning for immigrant small business owners is $49,000 per year. Although that number is about 84 percent of the median earnings for U.S.-born small business owners, it is 50 percent higher than for immigrants overall, the study says.

The majority of immigrant small business owners (58 percent), like the majority of their U.S.-born counterparts (56 percent), do not have a college degree, the study says.

Women in general are underrepresented as business owners, but immigrant women do slightly better than their U.S.-born sisters. The study found that 29 percent of foreign-born small business owners are women, compared to 28 percent for U.S.-born small business owners.

“One big factor in how likely immigrants are to be business owners is how long they have been in the United States,” the study says. As immigrants become more established, they are more likely to have an incorporated business.

The study finds that immigrants who have been in the United States for 10 years or more are more likely than U.S.-born workers to own a small business.

“Among immigrants who have been in the United States for 10 years or more, 4.4 percent own an incorporated business, compared to 3.3 percent for U.S. born and 3.5 percent for immigrants who have been in the United States for less than 10 years,” the study says.

The full report, Immigrant Small Business Owners: A Significant and Growing Part of the Economy (PDF, 490KB), is available on the Fiscal Policy Institute website.