The Immigrant Answer to Recession

As America’s next big immigration debate gears up, it seems we have learned little from the past. Many of the old misconceptions persist, with xenophobic fear-mongering reaching new heights in the midst of economic recession.

After being buffeted by the healthcare debate, the Obama administration appears cautious about tackling another thorny issue so soon.
 But with millions of undocumented immigrants awaiting resolution of their fate, grass roots activists are clamoring for Obama to fulfill his promise to pass a new immigration law “in my first year as president.”

The debate remains as yet ill-defined. On the one hand, the activists are calling for a comprehensive immigration reform that would create a pathway to citizenship for millions of new Americans. Others seek more surgical reforms designed to let in highly skilled workers and potential entrepreneurs to help America innovate its way out of recession.

Various bills are already on the table. U.S. Rep. Luis Gutierrez (D-IL) led the way in December when he introduced a bill that would allow undocumented immigrants who came to the U.S. prior to Dec. 15, 2009, to apply for residency. Meanwhile Senators Charles Schumer (D-NY) and Lindsey Graham (R-S.C.) have proposed a bipartisan bill that also offers a path to citizenship for undocumented aliens. The White House praised the Senate bill, but has not indicated how much political weight it will put behind it.


But while Congress and the White House decide how far and how fast they want to go on immigration, there remains a tremendous disconnect between public perception and economic reality. While many Americans believe passionately that immigrants are a financial burden on the U.S. and take jobs away from those who were born here, an impressive body of statistical research indicates quite the opposite. Far from being a drag on the economy, immigrants are a vital engine of small business growth.


“One of our nation’s greatest assets is our diversity,” Sen. Mary Landrieu (D-LA) told an April 15 hearing of the Small Business and Entrepreneurship Committee. “We are literally the only nation that looks and speaks like every other nation on earth. That is a strength that allows us to be the most competitive nation in the growing global marketplace.”

Landrieu pointed out that the number of minority-owned businesses continues to grow, “adding to our competitive advantage.”

She cited data from the U.S. Small Business Administration’s (SBA) Office of Advocacy, showing that minority-owned small businesses are among the fastest growing segments of the small business community.


Minority-owned business enterprises accounted for more than 50 percent of the 2 million new businesses over the past 10 years, according to the SBA. “There are now more than 4 million minority-owned companies in the United States, with annual sales totaling nearly $700 billion,” Landrieu said.


About 25 percent of all high-tech start-ups in the last decade were founded or co-founded by an immigrant, according to the Kansas City-based Kauffman Foundation, which is devoted to entrepreneurship. “That is significant because immigrants make up only about 14 percent of the U.S. population,” points out Robert E. Litan, who directs research at the Kauffman Foundation. Engineers from China and India run roughly one quarter of all technology businesses started in Silicon Valley. Look no further for examples than Sergey Brin, the Russian-born co-founder of Google, or Vinod Khosla, the India-born co-founder of Sun Microsystems.


Hispanics are well represented across a wide spectrum of businesses, from Mexican-American Linda Alvarado, CEO of a major construction firm in Denver and part owner of the Colorado Rockies baseball team, to Ecuador-born Nina Vaca, founder of Pinnacle Technical Resources Inc., a major Dallas-based information technology solutions company, and Marcelo Claure, who moved to Miami from Bolivia in 1989 and now heads Brightstar, a multi-billion dollar cellphone company.


Through its Kauffman Index of Entrepreneurial Activity, the foundation monitors the start-up rates for new businesses. “We find the research highly supportive of giving green cards to people who graduate from U.S. universities—bachelors, masters or PhDs,” says Litan.
 In fact, between 1980 and 2005, virtually all net new jobs created in the U.S. were created by firms that were five years old or less, according to the index. That’s about 40 million jobs. More established firms created almost no net new jobs when firings and layoffs are subtracted from hirings.
“I think it is possible to reframe the immigration debate as a jobs-creation initiative,” Litan says. “I think that day will come. It’s not here now but give it a couple more months of high unemployment rates and politicians will begin looking at new policy tools,” he adds.


In order to foster the creation of new jobs, legislation should encourage immigrants to come to the U.S. to start companies and employ U.S. citizens, Litan says. He applauds a bill moving through the Senate that is sponsored by Senators John Kerry (D-MA) and Richard Lugar (R-IN) and would offer “entrepreneurship visas” that require angel funding or venture funding starting at $250,000. He distinguishes this bill from the existing EV-5 visa, where you have to bring $1 million of your own money. “It should not be tied to money, it should be tied to employment,” Litan says.


Then there are the more than 1 million skilled foreigners in the U.S. on temporary H-1B visas that allow U.S. employers to temporarily employ foreign workers in specialty occupations. What happens to those people when their visas run out? Litan suggests offering the opportunity to extend those visas if the beneficiaries start a business that creates jobs. Hispanic small business owners would be ideal candidates, from restaurants offering native cuisine to construction and maintenance companies.


Other studies have reached similar conclusions. Bill Kerr of Harvard Business School argues that immigrants play an important role in U.S. innovation in science and technology. In a study he found that in periods when H-1B visa numbers went down, so did patent applications filed by immigrants in the U.S. And when H-1B visa numbers went up, patent applications followed suit.


While small businesses continue to grow, they could be creating jobs at an even faster pace if they weren’t being held back by restrictions such as lack of credit for small businesses and immigration law, analysts say.
 “We need to fix these barriers for all groups. We don’t know where the talent is. It could be anywhere,” says Robert Fairlie, an economic professor at the University of California, Santa Cruz, and author of the Kauffman Index. Undocumented status limits entrepreneurship, he adds. When Mexican immigrants apply for amnesty the number of new businesses goes up.


Advocates of comprehensive immigration reform don’t like talk of favoring skilled workers over others. “We don’t believe in piecemeal. We don’t believe that part of the society should get relief while the rest of society suffers,” Rep. Gutierrez tells PODER in an interview. Gutierrez is upset by what he calls the stepping up of immigration enforcement measures under the Obama administration. “He has put more people on the border and he has deported more people, and has set up a quota for the deportation and destruction of more families,” he adds.


The Gutierrez bill would also allow certain immigrants in deportation proceedings, or facing removal, to apply for legalization on payment of a $500 fine, a far lower sum than other bills have proposed. Immigrants with criminal records would not be eligible. If approved, applicants would receive a six-year visa, prior to being able to seek permanent residency.

It would also incorporate provisions of the DREAM Act, which provides green cards to children who are in high school or college and who were brought to the U.S. by undocumented parents as minors.