Overstating Immigrant Entrepreneurship

By Jason Richwine on March 21, 2016

There is no doubt that immigrants have helped start many successful companies in the United States, but immigration advocacy groups sometimes overstate the case. Take the latest report from the National Foundation for American Policy (NFAP), an organization that advocates expanded immigration. As highlighted in Friday's Wall Street Journal, the NFAP report states that 44 out of 87 private companies worth over $1 billion were founded by immigrants.

Although this is an interesting finding, it is less impressive than it sounds.

Many of the companies have multiple founders, but it takes just one immigrant to qualify as an "immigrant-founded company." For example, the richest company on NFAP’s immigrant-founded list is Uber, the popular taxi service. Uber was founded by both Garret Camp (an immigrant from Canada) and Travis Kalanick (an American native). The second-richest company is Palantir Technologies, which was founded by German-born Peter Thiel (who immigrated with his family as an infant). But Palantir has four other founders, all of whom appear to be American natives.

There are lots of immigrants living in the U.S. – they make up 17 percent of the age-25 and over population – so we would expect many to be involved in founding companies even if their innovative spirit were unexceptional on average. It would be better to know the percentage of all the co-founders of those 87 companies who are immigrants. The NFAP does not provide this information.

There is another, more straightforward way to compare the entrepreneurship of immigrants and natives – namely, self-employment rates. The March 2015 Current Population Survey shows that of employed immigrants 25 and older, 11.4 percent are self-employed compared to 11.1 percent of natives. When we include part-time self-employment, the total self-employment rate rises to 12.8 percent for natives and 12.4 percent for immigrants. In terms of company size, about 19 percent of self-employed natives have 10 or more workers, compared to 16 percent for immigrant companies. None of these differences is particularly large or striking.

Even to the extent that brilliant, tech-savvy immigrants are boosting our economy, that is a case for the limited entry of "Einsteins," not for mass immigration. Nonetheless, the NFAP supports amnesty, guest workers, birthright citizenship, and extended-family reunification – all policies that bring substantial numbers of low-skill immigrants, but not many captains of industry. Tellingly, just one out of the 60 immigrant co-founders (1.7 percent) identified by the NFAP is from Latin America, even though 52.5 percent of immigrants age 25 and over in the U.S. are from that region. So although immigration certainly brings benefits as well as costs, Americans need to be careful about designing a policy that works as intended.

Jason Richwine is an independent public policy analyst and contributing writer to National Review.