Immigrant-owned businesses are fundamental to American cities

Earlier this week I read Tech and the City: The Making of New York's Startup Community, by journalist Maria Teresa Cometto and venture capitalist‎ Alessandro Piol. For those of you who don’t know already, there is an impressive amount of technology entrepreneurship happening in New York City, going back at least two decades. I learned a lot and it was an easy and fun read.

In the section that discusses why New York is such a great place to have a startup—including, access to world class talent, a collaborative environment, and a front row seat to most exciting city in America—there is a chapter on the value of New York’s cultural diversity. In particular, how a preponderance of immigrant-run businesses is attractive to foreign-born high-tech entrepreneurs coming to the United States.

Immigrant-owned businesses are one of my favorite things about New York—or any city really. They expose us to sights and tastes from around the world, and demonstrate what hard work and adventurism can get you in this country. In my view, it is the living ethos of America.

That got me thinking, just how concentrated is New York with foreign-born business owners? What about other American cities? So, I dug into U.S. Census Bureau data to find out.

The chart below shows the share of businesses with owners that are foreign-born in 2015 by metropolitan area (data are available for the 50 largest metropolitan areas only). The 20 most concentrated metros are shown here.

fig1.png

At 41 percent, San Jose has the highest concentration of businesses with owners that are foreign-born, followed by Miami (40 percent), Los Angeles (38 percent), San Francisco (34 percent), and New York (31 percent). For the nation as a whole, that figure is 16 percent.

Looking at the absolute number of immigrant-owned businesses reveals a further “spikiness” among U.S. metropolitan areas. The chart below shows the percent contribution each metro area makes to immigrant-owned businesses and native-owned businesses for the entire United States. Again, the top 20 metros are shown.

fig3.png

Two insights stand out. First is just how concentrated immigrant-owned businesses are among a small number of cities. New York and Los Angeles alone account for more than a quarter of all such businesses in the U.S. The top 5 cities, which include New York, LA, Miami, Chicago, and San Francisco account for 40 percent. Going further down the list, the top 10 account for more than 50 percent, and the top 20 account for two-thirds!

A second insight is the difference between these cities’ contributions to total immigrant-owned businesses nationally and their contributions to U.S. native-owned businesses nationally. New York and LA account for just 9 percent of native-owned businesses, the top 5 account for 16 percent, the top 10 for 23 percent, and the top 20 for 34 percent. That’s half the contribution these cities make to immigrant-owned businesses nationally.

Of course, immigration policy is made not at the city level but nationally. Politically speaking, the anti-immigration rhetoric has been led by President Trump and Congressional Republicans. Perhaps to no surprise, cities with many immigrant-owned businesses overwhelming voted for Hillary Clinton in 2016. The figure below demonstrates this relationship for all 50 metros in our dataset.

fig2.png

Though just 30 of the 50 largest metro areas voted in favor of Clinton, 18 of the 22 metros with above-average concentration of immigrant-owned businesses did. In terms of absolute number of immigrant-owned businesses, only two metros in the top 20 voted for Donald Trump—Tampa and Phoenix. In other words, the largest cities and those with the most immigrant-owned businesses overwhelming voted for Clinton. President Trump and Congressional Republicans may have fewer reasons to support an immigrant-friendly agenda.

The importance of immigrants to American entrepreneurship is well-established. Immigrants found one quarter of all new U.S. businesses, nearly one-third of venture-backed companies, and half of Silicon Valley high-tech startups. Cities that welcomed immigrants in the past have higher incomes, less poverty and unemployment, and greater educational attainment today. Immigrants make outsized contributions to science and technology, patent productivity, and Nobel Prizes.

Those contributions aside, immigrant-owned businesses—of the local services variety—are vital to the culture and quality of life in many U.S. cities. This is just one of the many ways that the anti-immigration rhetoric in the United States today will be shouldered primarily by cities—in particular our most economically important ones. Imagine New York City without all of those local services businesses run by immigrants, enjoyed by residents and tourists alike. What a loss that would be.