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It’s well known that entrepreneurship is a fundamental driver of economic growth, directly fueling job creation, innovation, and long-term prosperity. The connection between immigration and entrepreneurship is profound, as immigrants have consistently been significant drivers of entrepreneurial success. In fact, one of the most critical yet underestimated factors affecting the growth of new businesses and our workforce in this country is immigration.
As economic developers, it is crucial that we understand the trends that foster economic growth. How does immigration drive entrepreneurial activity locally and regionally? What happens when immigration slows? And how can communities support immigrant entrepreneurs outside of policy debates?
This article explores the role of immigration in entrepreneurship, the risks of slowing immigration, and the actionable strategies economic developers can use to support inclusive business development in their communities.
How Immigrants Impact Entrepreneurship and the Economy
According to the American Immigration Council, immigrants start new businesses at higher rates than native-born individuals, driving economic vitality in communities nationwide. Despite making up just 14.3% of the US population in 2023, immigrants accounted for 23.6% of entrepreneurs and 25% of all new businesses. In 2023 alone, immigrant-owned businesses generated $116.2 billion in business income.
The economic contributions of immigrants extend beyond business ownership. According to the US Bureau of Labor and Statistics, foreign-born workers made up nearly 19% of the US labor force in 2023, filling critical roles in healthcare, construction, hospitality, and technology industries.
Immigrants also contribute significantly to the US economy, paying over $600 billion in taxes and holding $1.7 trillion in spending power in 2023.
Immigrants play a vital role in both high-growth startups and local small businesses, but their contributions in each sector differ in scale, impact, and industry.
Immigrants are vital to the startup ecosystem, particularly in sectors that drive innovation and economic transformation. These sectors often utilize global business connections to expand market opportunities, boost trade, and attract investment. This strategy not only enables rapid scaling but also generates numerous jobs and propels economic growth on a larger scale.
Immigrant-owned small businesses play a crucial role in local economies. Immigrant businesses in various sectors, such as restaurants, personal service businesses, etc., often fill gaps in local markets. In many declining urban and rural areas, immigrant entrepreneurs bring economic activity and foster local employment opportunities for both immigrants and native-born workers.
Many immigrant entrepreneurs start with limited access to capital but build successful businesses through community support, informal lending networks, and hard work.
The Economic Risks of Slowing Immigration
The decline in immigration presents a significant economic risk that impacts various sectors of our local and regional economies. One immediate effect is the emergence of labor shortages. Industries such as agriculture, healthcare, and technology are particularly vulnerable, as they rely heavily on immigrant labor to sustain their operations. Without a steady influx of workers, these sectors may face production slowdowns and increased operational costs, ultimately affecting efficiency and profitability.
Immigrants play essential roles by filling critical jobs, starting businesses, and contributing to consumer demand, all of which are vital to a thriving economy. Research shows a decline in immigration can lead to slower Gross Domestic Product (GDP) growth as the economy loses the dynamism and entrepreneurial spirit that immigrants bring. This drop in economic activity can have long-term consequences, stifling innovation and diminishing the economy’s overall competitiveness.
Another major concern is our aging workforce. A study from the National Foundation of American Policy concluded, “Without continued net inflows of immigrants, the US working-age population will shrink over the next two decades, and by 2040, the United States will have over 6 million fewer working-age people than in 2022.”
“Without continued net inflows of immigrants, the US working-age population will shrink over the next two decades, and by 2040, the United States will have over 6 million fewer working-age people than in 2022.” – National Foundation of American Policy study
Immigrants help balance a country’s age demographics, ensuring a healthy ratio of working-age individuals to retirees. Many smaller communities rely on immigration to offset population decline and labor shortages.
With fewer immigrants, the workforce may age more rapidly, leading to higher dependency ratios and increased pressure on social services. This demographic shift can strain public resources and necessitate higher spending on healthcare and pensions, further complicating fiscal planning.
What Economic Developers Can Do in Response
Understanding the characteristics of immigrant entrepreneurship is important for economic developers when discussing levers to grow economies and create jobs.
Economic developers and community leadership are crucial in implementing workforce initiatives and entrepreneurship strategies that foster a supportive environment. We can take proactive steps to address the challenges posed by slowing immigration trends and/or mass deportations. These steps will allow us to address current and future workforce needs effectively.
Workforce-Related Initiatives
Monitor Immigration Data in Your Community. Establish clear metrics to track the impact of immigrant participation on the workforce and entrepreneurial activities. Data-driven approaches help justify resource allocation and demonstrate a return on investment for supportive programs. Documenting and sharing success stories provide powerful examples that can shift public perception and inspire future initiatives.
Resources:
Encourage Workforce Development Programs that Support Immigrant Workers. Implement, advocate, and champion workforce development programs that support immigrant workers. These programs include language training, vocational education, and business management courses to help acquire the necessary skills.
Identify At-Risk Industries in Your Community. Assess which industries and business sectors in your community are most vulnerable to the impacts of reduced immigration. This helps prioritize support and resources where they are most needed.
Work with Policymakers to Advocate for Business-Friendly Policies. Champion community-wide efforts to directly influence policy changes that will positively impact immigrant populations. These initiatives might include streamlining licensing, public education campaigns, and integration programs.
Entrepreneurship Strategies
Strengthen Local Business Support Programs. Enhance programs that provide financial resources, mentorship, and technical assistance to immigrant entrepreneurs to help them overcome barriers and succeed. Tailored support can make a difference in their ability to thrive.
Resources:
- Toolkit: Supporting Immigrant and Refugee Entrepreneurs
- Boundless Immigration Resources for Businesses and HR Leaders
Camoin Associates Project Example: City of Essex, MD: Retail Market Analysis and Business Retention and Recruitment Plan
Foster Inclusive Business Environments. Partner with local organizations that serve immigrants to create inclusive business environments that attract and retain diverse entrepreneurs. This can promote inclusiveness and provide crucial support.
We can also foster valuable partnerships and growth opportunities by organizing networking events, workshops, and forums that connect immigrant entrepreneurs with mainstream business networks.
Camoin Associates Project Example: City of Albany, NY – Central Improvement District Opportunity Study
Connect Immigrant Entrepreneurs to the Greater Entrepreneurial Ecosystem. Connect immigrant entrepreneurs with essential business resources to create a robust support network. This includes industry-specific knowledge, networking opportunities, and local business and organization partnerships. A comprehensive ecosystem helps people tackle the complex nature of starting and growing a business.
Support Access to Capital. Financial barriers hinder immigrant entrepreneurs from realizing their business potential. Community-based lending programs, micro-loans, and credit-building initiatives can provide the necessary capital to start and expand a business.
Camoin Associates Project Example: City of Hartford, CT – Arrowhead Gateway Small Business Assessment
Mentorship and Business Incubators. Mentorships and business incubator programs tailored to immigrant entrepreneurs can accelerate business growth. These programs provide guidance on regulatory requirements, marketing strategies, and operational best practices.
For more information about the impact of immigration on the economy at the national, state, county, metro area, and district levels, visit the American Immigration Council’s Map the Impact interactive data tool.
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📍 Related Article: Data Tool Shows How Immigrants Contribute to Economic Growth and Prosperity
