Immigrants: the Unsung Heroes of the U.S. Economy
While illegal immigration attracts the spotlight, another facet of the issue is just coming into view: Immigrant entrepreneurs are helping fuel the U.S. economy. Recent studies show not only that immigrants are starting businesses at a faster rate than native-born Americans but that many of those businesses are refreshing neglected inner-city neighborhoods.
That's what Alfredo Rodriguez wants to do in a small corner of Newark, N.J. The native of the Dominican Republic moved to New York when he was 5 years old and has worked in the grocery business since he was 12. In 2002, he bought a 53,000-square-foot supermarket and transformed it to meet the tastes of Hispanic shoppers. Now about 90 percent of his customers are Latin American immigrants. Every week 5,000 customers visit his store for staples like frozen plantains, boosting his annual sales to $9 million.
"Hispanic immigrants spend more than traditional customers," says Rodriguez, a U.S. citizen. Not only are they willing to pay more for items that remind them of home, but many also like to cook generous portions in case an unexpected visitor drops by, he says. He wants to expand his Xtra Supermarket and make the surrounding strip into a center that caters to immigrants.
It's the kind of pattern that's enlivening immigrant pockets in cities like New York and Los Angeles, according to the Center for an Urban Future. In 2005, first-generation immigrants started 22 of L.A.'s 100 fastest-growing companies, the center says. From 1994 through 2004, while the number of new companies grew 9.6 percent in New York overall, in the Flushing neighborhood of Queens, an immigrant magnet, they grew 54.6 percent.
Billions. Like Rodriguez, many of the new entrepreneurs are starting companies that cater to local communities, whether by selling India's Bollywood movies or East Asia's bubble tea. "They are the first ones to be able to respond to the consumer face of the immigrant community," says Michael Barrera, head of the U.S. Hispanic Chamber of Commerce. Barrera estimates that by 2010 the number of Hispanic-owned businesses will grow to 3.2 million from 2 million today and will generate $465 billion in goods and services.
About 85,000 immigrants started new companies in 2005, according to the Kauffman Foundation. That newcomers start businesses at a higher rate than native-born Americans "comes as no surprise," says Robert Litan, Kauffman's vice president of research and policy. "Immigrants have a higher propensity to be self-employed, because often it is the only way to crack the economic system."
Even highly educated immigrants may lack the language skills or cultural knowledge necessary to break into corporate America, says Susan Au Allen, president of the U.S. Pan Asian American Chamber of Commerce. They often prefer to be their own boss, she says. About a quarter of the engineering and technology companies started from 1995 through 2005 had at least one immigrant founder, according to a Duke University and University of California-Berkeley study.
To get started, immigrants typically tap into family networks with established local roots, says Litan. It's how Rodriguez got his start in the grocery business. In 1985, he bought his first grocery in Queens with the $25 a week his mother had been setting aside for him for a decade. After he sold that store, he began working at his father-in-law's stores before branching out on his own again. "It's just natural," Rodriguez says, that he followed in other immigrants' footsteps.
This story appears in the February 26, 2007 print edition of U.S. News & World Report.