The Entrepreneurial Side of Immigration

by Russ Roberts on April 11, 2006

in Immigration

Immigrants are not a random selection of the world’s population. John Gartner explains in today’s Washington Post:

If you’ve been following the big immigration debate, you might get
the impression that the primary economic advantage of liberal economic
immigration policies is that they supply America with low-wage workers
willing to do grueling, unskilled jobs that native-born Americans won’t
touch. Not true: They are the source of America’s success.

The
secret to America’s wealth is that we were settled by restless, driven,
overconfident, risk-taking dreamers.

Gartner continues:

America is an amazing natural experiment — a continent populated
largely by self-selected immigrants. All these people had the
get-up-and-go to pull up stakes and come here, a temperament that made
them different from their friends and relatives who stayed home.
Immigrants are the original venture capitalists, risking their human
capital — their lives — on a dangerous and arduous voyage into the
unknown.

Not surprisingly, given this entrepreneurial spirit,
immigrants are self-employed at much higher rates than native-born
people, regardless of what nation they emigrate to or from. And the
rate of entrepreneurial activity in a nation is correlated with the
number of immigrants it absorbs. According to a cross-national study,
"The Global Entrepreneurship Monitor," conducted jointly by Babson
College and the London School of Economics, the four nations with the
highest per capita creation of new companies are the United States,
Canada, Israel and Australia — all nations of immigrants. New company
creation per capita is a strong predictor of gross domestic product,
and so the conclusion is simple: Immigrants equal national wealth.

Andrew Carnegie, a 19th century Scottish immigrant and, quite a manic
personality, who started working in a factory for pennies a day and
became the richest man in the world by mass-producing steel, made the
same argument. Immigrants, he wrote, were unusually "capable, energetic
and ambitious" people. They had to be. "The old and the destitute, the
idle and the contented do not brave the waves of the stormy Atlantic,
but sit helplessly at home." He called the flow of people into America
the "golden stream" that contributed more to America’s wealth than "all
the gold mines in the world." It’s as true today as it was then. The
Scottish, Irish, Italians, Japanese and Eastern Europeans were last
century’s Mexicans — unwashed hordes, thought to be good only for
cheap labor.

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{ 23 comments }

RWP April 11, 2006 at 9:50 am

Everyone else had to save a sum and come to America by ship.
The question remains whether or not crossing the border is the same. Should we make it equally expensive to cross the border so that we only get the immigrants that really want to be here?
I would like to see the percentage numbers for self-employeed immigrants for all nationalities. That would help answer the question.

bbartlog April 11, 2006 at 9:51 am

That's funny. Gartner is willing to acknowledge systematic group differences between immigrants and stay-at-homes in support of his argument, but then proceeds to assume that Mexicans are really just like Europeans in every way that might matter to us. It's not clear whether he believes the entrepreneurial spirit is heritable; I expect he would dodge the question.
In the case of Australia, Canada and Israel, it should be noted that while they promote immigration, they have standards they apply before allowing people in. The same has been true of the US for most of its history.

Don Mynack April 11, 2006 at 10:45 am

By this logic, would it not be better to import Asians, rather than Mexicans? After all, they are better skilled, do better in school, and break the cycle of poverty at a much higher rate, if they even enter it at all.

Of course, we should not underestimate the hardship and risk one endures to cross the border. Illegals are as motivated to succeed as other immigrants, however, they are for the most part far less skilled.

We are still avoiding the central question in this entire debate – when are we going to compel the Mexican government to reform its broken society? Or is it fundamentally un-fixable? When is it in our best interest to fix it for them?

onesmallvoice April 11, 2006 at 10:49 am

Of course during much of our history immigrants weren't drawn here by the lure of welfare payments and free medical care. It would be interesting to see how this change has effected the ratio of entrepeneurs to loafers in the stream of border crossers.

Swimmy April 11, 2006 at 2:07 pm

"Golden stream" is an unfortunate metaphor.

I don't believe the expense of crossing the Atlantic is comparable to crossing the Rio Grande. This doesn't invalidate the argument. The U.S. is still likely to attract entrepreneurs from other countries simply because of our relatively favorable legal practices.

tom April 11, 2006 at 2:52 pm

What will Russ's thoughts be on massive voter fraud when illegal aliens vote in November?

http://michellemalkin.com/archives/004957.htm

John Dewey April 11, 2006 at 3:17 pm

swagy,

I pay two Spanish-speaking guys $25 a week to mow and trim my lawn. I didn't set the price, they did. I've never asked if they are illegal immigrant entrepreneurs or legal immigrant entrepreneurs or citizen entrepreneurs. I just like the job they do.

Please explain it to me. If Sergio and Miguel are actually illegal immigrants, how does that make me a "scumbag" or a "lowlifer"?

I'll admit that it gets pretty hot here in Dallas. For that reason you may feel my lawn guys "are suffering in sub standard conditions of work." But they're always smiling, so it can't be that bad.

Kevin S. April 11, 2006 at 3:35 pm

"The scumbags that want a cheap maid or gardener or picker of crops are the ones that perpetuate this inequitable system. They in turn need to be the ones to pay the price. Prosecute those low lifers and most of the problem will go away."

If I can't afford an expensive maid or gardener then my option is to do those chores myself and not help to create a job for a willing worker at an agreed price. How is this helpful?

Furthermore, if I have to do those chores myself it may take away time from my own earning potential. If I can make more money then I can afford to hire more (or more skilled) workers.

bbartlog April 11, 2006 at 3:54 pm

Assuming that I wanted to hire a maid or gardener or crop picker, I'd want to hire them at the lowest price I could. I don't see how that makes me a scumbag. I don't support illegal immigration as a policy (nor any mass immigration of poor unskilled workers to the USA, legal or otherwise), but your objection is pretty much class-warfare cant. The crackdown on employers is also not a very promising route politically. If the current laws regarding the employment of illegals are not enforced, why would you expect harsher ones to be?

tom April 11, 2006 at 3:54 pm

John,

What if Sergio and Miguel were selling you stolen merchandise? You didn’t set the price for the stolen items they did. And you never asked if the items were stolen…ignorance is bliss. You really don’t care if the merchandise is illegal, you just like the services those items provide. Services from illegal labor or services from illegal merchandise –what’s the difference, right?

happyjuggler0 April 11, 2006 at 4:31 pm

swagy,

Yeah, cutting off the supply worked so well with drugs, let's try it with jobs too and arrest homeowners who hire someone to mow their lawns without checking for id first. Make it a felony too.

Is your objection the fact that they are here illegally, or that someone is hiring immigrants? A snap of the fingers and we could make them legal if we wanted to. Are people that hire the newly legal immigrants scumbags? Or the lawmakers who make them legal, are they scumbags?

I think the lawmakers who make immigration illegal are the scumbags, and arguably the citizens who vote for those same law scummy lawmakers are also scumbags.

If someone wants to work, why stop them? If they get here, and the jobs available to them are low paying while the business owners make out like bandits, and they look around and say: "Hey I can be the one doing the hiring, I think I'll start a business", and they hire Americans, is that bad? How so?

DSH April 11, 2006 at 4:53 pm

The immigrants of the late-19th C. and the early-20th C. are totally different from today's Latin American immigration. Despite linguistic assimilation, an economic necessity, little cultural assimilation is occuring today. And even though the illegal pays taxes through mandated withholding, too many illegals use hospitals, schools (esp. for ESL), and other social services disproportionately to their demographics. And, today's immigrant may start off as agribusiness labor, but soon find "other" employment, necessitating yet still more immigrants to replace those who have found work elsewhere. The vicious cycle repeats until 12 million illegals are now a part of the fabric no one knows what to do with. The only feasible solution is to prevent future illegals by punative fines on employers who would hire them in the first place. Impose a $50,000/incident fine on any employer who hires an illegal, we can rest assured that the mass influx will trickle to nothing. It's the exploitation of cheap labor that starts the whole process, and only by making that process grossly expensive can we end it.

TGGP April 11, 2006 at 5:29 pm

Maybe rather than the immigrants selecting themselves, we should select our immigrants based on the skills they bring? I believe this is what Canada and other countries do. The only thing our system favors is family reunification, although I think non-Mexicans crossing the Mexican border are treated less favorably than Mexicans crossing the same border, likely because the Mexican government has more influence and is more interested in getting their people across (remmittances are the only thing keeping their corrupt system afloat) than foreigners (consider how poorly they treat those that cross the Southern border of Mexico).

happyjuggler0 April 11, 2006 at 5:38 pm

DSH,

First, anyone who goes to K-12 is an asset, not a liability. If you think immigrant kids are a liability, then so are kids born in America.

Second, illegal immigrants avoid hospitals like the plague. Hospitals mean paperwork, and that means a huge risk of deportation. They don't strain our medical network at all. The people using too many government giveaways are mostly Americans, and the solution to too many government giveaways has nothing to do with immigrants. Simply stop government transfer payments.

Third, what is wrong with cheap labor? It creates lower priced goods. It frees up capital to employ more people. It creates consumers, and in case you didn't read the blog, it creates new jobs via entreprenuership.

Fourth, we can hire them here, or we can export low skill jobs overseas, either directly via existing employers, future employers who never start in the US, or foreign companies that would never be here in the first place.

Fifth, cultural assimilation is going on, in both directions.

Kevin S. April 11, 2006 at 5:57 pm

DSH,
Fifth and a half, have you ever been to South Texas or New Mexico? Assimilation is working quite nicely with hispanics and anglos work at all levels of society.

Sixth, immigrants finding "other" work is the beauty of capitalism and a free society. How is the chance to improve one's lot in life a bad thing?

Henri Hein April 12, 2006 at 2:06 am

"What if Sergio and Miguel were selling you stolen merchandise?"

This analogy was thin to begin with, and is now wearing old. Stolen merchandise leaves a victim. Immigration, legal or not, is victimless.

tom April 12, 2006 at 9:12 am

Oh Henri,

Let’s not mix legal immigrants with illegal immigrants. The victims of illegal immigration are the legal immigrants. Legal immigrants are waiting in line, following the rules and an illegal immigrant breaks the rules and steps to the front of the line to become a US citizen. In addition, legal immigrants who come here and become citizens have relatives back home whom they would like to see come here. Again, they follow the rules, have they relatives waiting in line, going through time consuming legal steps to get their relatives here and, what, an illegal immigrant steps to the front of the line an enters the US. It can take years of waiting to get in to this country if at all.

Henri, next time you are at the grocery store, cut to the front of the line, then tell the shoppers behind you that there are no victims here and hope you don’t get your teeth knocked out.

By hiring illegal immigrants you encourage other illegal to step to the front of the line. It is a slap in the face to legal immigrants who follow the rules.

bbartlog April 12, 2006 at 12:13 pm

Tom -
bad analogy. If I cut in line at the grocery store, everyone else has to wait longer. If an illegal immigrant enters the country, there is no effect on the time a legal immigrant has to wait. The illegal immigrant has avoided the queue entirely, not jumped to the front of it.

Juggler0 -
your claim that illegal immigrants 'don't strain our medical network at all' is a product of your imagination. They use emergency room services at roughly half the frequency of the native-born. Given that they are about four times as likely to be uninsured (60% vs 15%), they can and do pose a large burden in areas where they are numerous. LA County reports spending $340 million to cover the costs of emergency room care for illegal immigrants.

A bill was proposed in 2004 that would have required emergency room personnel to ask about immigration status, but it was defeated. This probably allays the fear of deportation, though it could still be a factor in explaining why emergency room visits by illegal immigrants are less frequent than those by others.

tom April 12, 2006 at 1:48 pm

bbartlog,

Get real! There are limits on the amount of legal immigrants that are allowed to enter the country each year. Companies have to beg congress to increase the amount of H-1 visa for certain types of workers. When the country is flooded with illegal aliens this will impacts Congress's thinking on the amount of legal immigrants to allow to enter. Illegals are going to cause the line of legal immigration to move slower.

Henri Hein April 12, 2006 at 5:29 pm

"The victims of illegal immigration are the legal immigrants"

I'm a legal immigrant, and in no way victimized by illegal immigrants. If illegal immigration doubled, absolutely nothing would happen to my status with the USCIS.

Henri Hein April 12, 2006 at 5:43 pm

"Illegals are going to cause the line of legal immigration to move slower"

Can you cite a case when this has happened? Seems backwards to me. When illegal immigration increases, congress' reaction could just as well be, "oh, we need more immigrants."

Kevin S. April 12, 2006 at 7:37 pm

The problem with the "getting in line" analogy is that once in line all have equal standing. The truth is legal immigrants who are able to get in line have significant amounts of money and influence. But for poor Mexicans or Central Americans, its kind of chilling to think that the risk of losing your life savings for transport to the border and risk of losing your life crossing the desert is a preferrable and significantly more affordable option to hopelessly waiting in line.

Russell Nelson April 14, 2006 at 2:28 am

"No Mexicans need apply" somehow doesn't have the smae thing to it as "No Irish need apply".

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