Immigrant Entrepreneurs Boost ‘Main Streets’ in Nashville

January 14, 2015. A front page story in The Tennessean talks about FPI’s study on immigrants’ role in Main Street businesses. The report has data about immigrant entrepreneurship around the country, and includes case studies from three metro areas: Philadelphia, Minneapolis-St. Paul, and Nashville.

Here’s the lede:

When Nashville voters rejected a 2009 referendum that would have banned government officials from using non-English languages in their work, they sent a message that the city welcomed its immigrant community. Years later, their vote also would prove to support the city’s economic growth as immigrants’ businesses have proliferated Nashville, creating jobs and transforming neighborhoods.

Nashville immigrants have made a significant contribution to the local economy, especially through an outsized presence among local “main street” businesses, according to a new report by the Fiscal Policy Institute, a New York-based nonpartisan research nonprofit. In the larger Nashville metro area, immigrants account for 8 percent of the population and 9 percent of business owners, yet they make up a disproportionate 29 percent of Main Street business owners.


Immigrant Entrepreneurs Prosper on Main Street

January 13, 2015. The Wall Street Journal features FPI’s new report on Immigrant Main Street business owners:

In the U.S. from 2000 to 2013, including in 31 of the 50 largest metro areas, immigrants accounted for all the growth in so-called Main Street businesses, according to a new study based on analysis of census data. Such firms are grouped in three categories: lodging and food, retail and neighborhood services such as dry cleaning and beauty salons. Immigrants made up nearly one out of three owners of these small, independent businesses in 2013, said the report by the nonpartisan Fiscal Policy Institute. That year, immigrants were 13% of the U.S. population and 16% of its labor force.

“These are businesses that don’t often get a lot of attention from economic development officials, and don’t have huge profits. But they play a big role in neighborhood revitalization, and they can be an important economic step up for the entrepreneurs,” said David Kallick, author of the report.

Immigrant “Main Street” Business Owners Playing an Outsized Role

Manny Gonzalez, owner of Manny's Tortas, Midtown Global Market, St. Paul

January 14, 2015. Immigrants are a little more likely to own businesses than their U.S.-born counterparts, but they are a lot more likely to own Main Street businesses such as grocery stores, restaurants, and barber shops, finds a new study released today by the Fiscal Policy Institute and Americas Society/Council of the Americas. Immigrants make up 16 percent of the labor force and 18 percent of business owners, but 28 percent of Main Street businesses (defined as retail, food services and accommodation, and neighborhood services such as nail salons, beauty shops, and gas stations).

“These are types of businesses that don’t often get a lot of attention from economic development officials. But anyone thinking about economic growth should pay attention: these businesses play a big role in neighborhood revitalization, and they can be an important economic step up for entrepreneurs,” says David Dyssegaard Kallick, director of the Immigration Research Initiative at the Fiscal Policy Institute and author of the report.

The report includes data on the 50 largest metropolitan areas in the country, and focuses in depth on three case studies that hone in on ways state and local government can help make the most of of immigrant entrepreneurship: Philadelphia, Minneapolis-St. Paul, and Nashville.

Click for:

press release

full report


Interactive map of metro areas

Interactive population charts for 50 cities

selected media coverage

Immigrants Are More Likely to Be Business Owners …but They’re Not “Super-Entrepreneurs”

January 14, 2015. Immigrants are entrepreneurial—that is by now well established. But how much more is not as widely understood.

As I was working on a report about immigrant business ownership, Bringing Vitality to Main Street, released today by the Americas Society/Council of the Americas with the Fiscal Policy Institute, I dug into what the research shows.

What I found is that there is broad consensus that immigrants are a little more likely to own businesses than their U.S.-born counterparts, but not a lot more likely. Specifically, immigrants are about 10-15 percent more likely to own businesses than their U.S.-born counterparts.

Our study finds that in 2013, immigrants made up 16.3 percent of the labor force in the United States, and 18.2 percent of business owners. That 1.9 percentage point difference that means immigrants are 12 percent more likely to be business owners than their U.S.-born counterparts.

Robert W. Fairlie, a pioneer in this field, uses a different methodology but comes to the same conclusion. In a 2012 report commissioned by the Small Business Administration, Fairlie calculates the numbers a little differently, and finds that 10.5 percent of the immigrant labor force owns a business, compared with 9.3 percent of the U.S.-born labor force. That 2.2 percentage point gap represents a difference of 13 percent.

But, maybe you’ve heard immigrants are much more entrepreneurial than other people—maybe even twice as likely to be entrepreneurs as the U.S.-born labor force?

The confusion may come from what seems like a subtle nuance: the difference between “business starts” and “business ownership.”

Fairlie’s work has stressed the role of immigrants in starting businesses. Churn in the economy, he reasonably argues, is important to consider. And, his methodology shows that immigrants are substantially more likely to start a business, even if they may also be more likely to close that business. In a 2008 study, also commissioned by the Small Business Administration, Fairlie found that immigrants are “nearly 30 percent more likely to start a business than nonimmigrants.” In a more recent data, commissioned by the Partnership for a New American Economy, Fairlie uses post-recession data to find that “immigrants are now more than twice as likely to start a business as their U.S.-born counterparts.”

If immigrants are a lot more likely to start a business but just a little more likely to be a business owner, that must mean more immigrant-owned businesses close as well. Fairlie acknowledges this, though others reading his work have sometimes missed this point.

The idea that there is more churn in immigrant-owned businesses is intriguing, and it certainly seems plausible. Immigrants may have a harder time getting bank loans, or navigating the necessary licensing processes, for example. And, not all business closings are a bad thing. An immigrant who hangs up a shingle as an accountant but then gets offered a job by an established accounting firm, for example, might happily make the move.

But, while my curiosity is piqued by the finding, I’m not completely convinced yet. Here’s why: Fairlie’s work uses self-employment as a proxy for business ownership. Everyone who is self-employed is counted as a business owner, and everyone who moves from being not self-employed in one month to being self-employed in the next month is counted as starting a business.

That strikes me as problematic. Day laborers and most domestic workers, for example, are self-employed. They don’t have a single regular employer…but that doesn’t mean they should be considered business owners.

Many people who do have a regular employer are also may be “misclassified workers,” that is, their employers pay them as independent contractors to avoid responsibility for taxes or benefits. This is illegal, but a common enough practice that there are Misclassification Task Forces in New York, Tennessee, Iowa, and New Hampshire, to name a few.

Finally, we’ve just been through a very steep recession, when millions lost their jobs. Some of the newly self-employed may be people who got creative and started a new business, a real and important source of future growth. But, how many of the newly self-employed are really people who are piecing together what work they can get while they hope for something more permanent?

There is a readily available alternative to using self-employment as a proxy for business ownership. The Census Bureau—in the decennial Census, the American Community Survey, and the Current Population Survey—asks some further questions of people who are self-employed. Do you own your own incorporated business? Is running that business your full-time job?

Several factors make it seem preferable to count only people with incorporated businesses as business owners. It is telling, for instance, that people who are self-employed and have an incorporated business typically have a higher income than workers overall, while people who are self-employed but do not have an incorporated business typically have lower wages. And, while immigrants are somewhat less likely than U.S.-born workers to have a construction business that is incorporated, they are considerably more likely to be in the construction industry and self-employed but not incorporated. This fits with the notion that unincorporated self-employed in construction may be day laborers or misclassified workers than business owners. It also fits with the findings of Giovanni Peri and Chad Sparber that when immigrants first enter the labor force they move primarily into jobs requiring manual skills while U.S.-born workers move to positions requiring communication skills.

At the Fiscal Policy Institute, and in our joint research with the Americas Society/Council of the Americas, we have defined business ownership as people whose full-time job is to run an incorporated business, and we think it continues to lead to very credible findings.

What we discover in our new report is that immigrants are genuinely playing an outsized role in the area of Main Street businesses—the grocery stores, restaurants, retail shops, and beauty salons that help give a neighborhood its character and play an important role in urban revitalization. Measuring all Main Street businesses (retail, accommodations and food services, and a handful of “other services” such as nail salons and dry cleaners), we find that immigrants make up 28 percent of all Main Street business owners in the United States. That’s a stunningly high share.

To make that finding meaningful, it’s important to understand that in general immigrants are a little, not a lot, more likely to be business owners.

What about the question of churn? It seems to me that the question deserves further exploration. Maybe the same type of analysis Fairlie has done could be done using data about people who have an incorporated business and whose main job is to run that business? On the other hand, there are some advantages to including people who are self-employed but do not have an incorporated business in the picture when looking at business starts in particular. After all, many businesses start informally, and make a gradual transition to incorporation. Perhaps future analysis might look for ways to filter out people who are working on their own and not in any real sense starting a business?

Meantime, it is much more widely agreed upon than is generally understood that immigrants are a little, but not a lot, more likely to be business owners. But, as our new report shows, immigrants are truly playing an outsized role as owners of Main Street businesses.

David Dyssegaard Kallick

Interactive immigration graphic

This redirects the viewer directly to the link below. This page does not get displayed. This goes with the AS/COA report done by David.

Acknowledgements for Bringing Vitality to Main Street

In the research and writing of Bringing Vitality to Main Street: How Immigrant Small Businesses Help Local Economies Grow, I am deeply indebted to so many people that the full page of acknowledgments has to be posted online. —David Dyssegaard Kallick, author, Bringing Vitality to Main Street: How Immigrant Small Businesses Help Local Economies Grow.

Kate Brick policy manager at the Americas Society/Council of the Americas (AS/COA), was a valuable partner from beginning to end in the conception, design, and editing of this report. Former AS/COA policy manager Richard André was also a key part of the initial framing of the research, and policy associate Steven McCutcheon Rubio played the central role in editing the final report. And Adriana La Rotta, director of media relations for AS/COA, was tremendous in helping to get this report out to the press. I know that more of AS/COA’s staff worked in ways I didn’t even see, for which I am also thankful.

My colleagues at the Fiscal Policy Institute (FPI) were central to the project. James Parrott, deputy director and chief economist of FPI, gave valuable input on a daily basis every step of the way. Interim executive director Ron Deutsch provided support and encouragement as well as overall guidance to the project. Bryan LaVigne, director of administration and development, helped keep the considerable logistics around the report on track. Research associates Hui Liu and Eloy Fisher performed the data analysis that is the basis for our charts and tables, as well as much more that informed the research and didn’t make it into the final report. FPI’s partners at the Center on Budget and Policy Priorities, particularly Michael Leachman, director of state fiscal research, provided invaluable guidance on how to make this research most useful to groups in its State Priorities Partnership around the country.

FPI is grateful, as am I personally, for the tremendously valuable input of the expert advisory panel to our Immigration Research Initiative: Jared Bernstein, senior fellow of the Center on Budget and Policy Priorities, and former chief economist and economic advisor to Vice President Joe Biden; Muzaffar Chishti, director of the Migration Policy Institute’s office at the New York University School of Law; Gregory DeFreitas, professor of economics and director of the labor studies program, Hofstra University; Héctor Figueroa, secretary-treasurer, 32BJ of the Service Employees International Union and member of the editorial board of the New Labor Forum; Nancy Foner, distinguished professor of sociology at Hunter College and the Graduate Center of the City University of New York; Philip Kasinitz, professor of Sociology, CUNY Graduate Center; Peter Kwong, professor of urban affairs, Hunter College; Ray Marshall, Former Secretary of Labor, Audre and Bernard Rapoport Centennial Chair in Economics and Public Affairs at the University of Texas, Austin, and chair of the AFL-CIO Immigration Task Force; John H. Mollenkopf, distinguished professor of Political Science and Sociology at the Graduate Center of the City University of New York and director of the Center for Urban Research; Jeffrey S. Passel, senior demographer, Pew Hispanic Center; Max J. Pfeffer, Professor of Development Sociology at Cornell University; Audrey Singer, senior fellow in the Metropolitan Policy Program at the Brookings Institution; and Roger Waldinger, distinguished professor of Sociology at UCLA. Jill Wilson at the Brookings Institution shared with us her geographical coding and general expertise, which was a tremendous help in our metro area analysis. Steve Tobocman, director of Global Detroit, shared his insights as well as extensive contacts. And, Colin Gordon, Colin Gordon, Professor of History at the University of Iowa and a Senior Research Consultant at the Iowa Policy Project, helped us get our interactive web features online.

And, in the three metro areas I interviewed the following people, whose willingness to take time out to talk with me I enormously appreciate.

In Philadelphia: Gilberto Alfaro, Jr, business district manager, HACE; Amanda Bergson-Shilcock, senior analyst at the National Skills Coalition and at the time of the interview vice president for policy and evaluation at the Welcoming Center for New Pennyslvanians; Etan Brandt-Finnell, member experience, Impact Hub; Samuel Kuang-hsien Chueh, business services manager, Philadelphia Department of Commerce; Hyunjin Choi, owner, Koko Discount; Abou Diallo, vendor on 52nd Street; Varsovia Fernandez, president and CEO, Philadelphia Hispanic Chamber of Commerce; Peter Gonzales, president and CEO, Welcoming Center for New Pennsylvanians; Laurel Klein, community kitchen project at Impact Hub; Ted Hall, president of the fashion store Babe; Lee Huang, senior vice president and principal, Econsult Solutions; Luis Mora, president and founder, FINANTA; Mercy Mosquera, general manager of Mixto and Tierra restaurants;Mohamed Mostafa, Variety Plus; Anatoli Murha, marketing and business development manager, Ukranian Self-reliance Federal Credit Union; Baba Njoro, vendor on 52nd Street; Herman Nyamunga, director, global enterprise hub & small business development, Welcoming Center for New Pennyslvanians; Anne O’Callaghan, founder, Welcoming Center for New Pennsylvanians; Jennifer Rodriguez, executive director of the Mayor’s Office of Immigrant and Multicultural Affairs; Aron Starosta, program manager, Digital Health Accelerator; Fernando Treviño, deputy executive director of the Mayor’s Office of Immigrant and Multicultural Affairs; Ahmad Qardi, vendor on 52nd Street; Helen Woo, owner of King’s Fashion.

In Minneapolis-St. Paul: Abdirahman Ahmed, owner, Sabri Somali restaurant; Bill Blazar, interim president, Minnesota Chamber of Commerce; Bruce P. Corrie, associate vice president for university relations and professor of economics at Concordia University, and an invaluable resource regarding immigrant entrepreneurship in the twin cities; Becky George, cultural events and property manager, Neighborhood Development Center; Hector Garcia, Chicano Latino Affairs Council; Gene Gelgelu, African Economic Development Solutions; Manny Gonzalez, owner of Manny’s Tortas; Ben Johnson, real estate project developer, Neighborhood Development Center; Jan Jordet, senior director of consulting and financing services, Metropolitan Economic Development Association (MEDA); Michou Kokodoko, senior project manager, community development, Federal Reserve Bank of Minneapolis; Kathy Moriarty, director of training and chief administrative officer, Neighborhood Development Center; Kathy Mouacheupao, Local Initiatives Support Corporation; Adam Platt, executive editor, Twin Cities BusinessNieeta Presley, The Aurora/St. Anthony Neighborhood Development Corporation; Earlworth Baba Letang, market manager of Midtown Global Market, Neighborhood Development Center; Samir Saikali, manager of grants and data, Neighborhood Development Center; Nasibu Sareva, executive director, African Development Center; Brian Singer, director of lending, Neighborhood Development Center; Lisa Tabor, Intercultural Cities Project; Mihailo Temali, founder and CEO of the Neighborhood Development Center; Va-Megn Thog, Asian American Development Association; and Jay Walljasper, senior fellow and editor of On the Commons.

In Nashville: Rick Bernhardt, executive director, Metropolitan Nashville-Davidson County Planning Department; Yuri Cunza, president, Nashville Hispanic Chamber of Commerce; Katharine Donato, professor and chair of Sociology, Vanderbilt University; Paul Galloway, incoming executive director, American Center for Outreach; Howard Gentry, county clerk, Davidson County Criminal Court; José Gonzalez, instructor of entrepreneurship and management, Belmont University, and a co-founder of Connexión Américas; Frank Harrison, member of the Nashville Metropolitan Council; Garrett Harper, vice president of research, Nashville Area Chamber of Commerce; Shanna Singh Hughey, director of the Mayor’s Office of New Americans; Galen Spencer Hull, president of Hull International and a dynamic and tireless advocate for immigrant entrepreneurs in Nashville; Nicholas Lindeman, economic and systems data analyst, Nashville Area Metropolitan Planning Organization; Avi Poster, a retired school teacher and administrator and leader in Nashville groups addressing among other issuers race relations, immigration, and disability rights; Michael Skipper, executive director, Nashville Area Metropolitan Planning Organization; Renata Soto, co-founder of Connexión Américas; Remziya Suleyman, outgoing executive director of American Center for Outreach; Stephanie Teatro, interim co-director, Tennessee Immigrant Rights Coalition; Gatluak Thach, president and CEO of the Nashville International Center for Empowerment; and Matt Wiltshire, director of the Economic and Community Development Office of the Mayor of Nashville.

New York City Taxes Ripe for Reform

January 13, 2015. The City of New York taxes its wealthiest residents much less than middle- and low-income residents, and state and local officials should fix three major City tax breaks that expire this year, according to a new report from the Fiscal Policy Institute (FPI). In a sweeping report that reviews decades of tax changes and trends, FPI pinpoints inequities, tallies the cost of broken tax breaks, and urges tax reforms that reflect today’s economy and current challenges. A report summary is also available.

The three largest New York City tax breaks that together account for $2.2 billion in foregone taxes expire this year and the Mayor, the City Council, the State Legislature, and the Governor will need to decide whether to fix flaws or allow millions more in taxpayer dollars to be squandered.  These tax breaks include: 421-a (which provides hefty tax breaks to luxury housing, expiring June 15); the Industrial and Commercial Abatement Program or ICAP (which provides tax breaks for real estate investments that likely would happen anyway, expiring March 1); and the Co-op/Condo Property Tax Abatement (which poorly targets tax breaks in a way that benefits high-income neighborhoods while shifting the tax burden to rental properties, expiring June 20).

In addition, given worsening income disparities and stagnant incomes for most families, lawmakers can no longer ignore glaring inequities in the City taxes that most directly affect the average household—residential property, personal income and sales taxes. The report estimates that the wealthiest 1% of households in the City pay 5.1% of their income in City property, income and sales taxes while the 80% of households with middle- and low-incomes pay 9-11% of their income in taxes, about twice as much as the wealthiest.

“There’s more to ‘tax reform’ than cutting taxes,” said James Parrott FPI’s Deputy Director and Chief Economist and the report’s author. “The City really needs to take a close look at tax breaks to make sure it’s getting a good bang for the buck, and there is no reason that the poor and the middle class should be paying more of their income in taxes than the richest City residents,” Parrott continued.

“This is not about raising taxes, but about fixing the City’s tax structure and making sense out of a plethora of business tax breaks whose cost is rising twice as fast as the tax base and that need to be seriously re-thought,” said Ron Deutsch, FPI’s Interim Executive Director.

Among the report’s highlights:

  • With federal aid declining and state aid operating under sharply capped increases, local taxes fund a growing share of the City budget, 64% today, up from 53% in 1980.
  • New York State taxes fund one of the smallest shares of combined state and local expenses in the country; this fact and actions by the state to repeal the commuter tax and short-change the City on school aid have meant that the state has shifted about $10 billion in funding responsibility to the City, close to one-fifth of all taxes.
  • The biggest shift in the City’s tax structure since 1980 has been the increase in the personal income tax share relative to the property tax share—personal income taxes were 13% of the total in 1980 but 21% today; the property tax share, still the largest, dropped from 46 to 42%.
  • It is surprising that the personal income tax share of city taxes has remained around 20-21% over the past 20 years, given the continued concentration of income. From 1995 to 2012, the share of total income going to the richest 1% in the city nearly doubled from 20% to 39%.
  • In 2011, the top 1% of City tax filers, those with incomes over $600,000, had 35% of all income but paid only 27% of local taxes. At the same time, the “bottom 80 percent”–those with incomes under $71,000—paid a greater share of City taxes than their share of income. This disparity reflects the fact that the regressivity of the City sales and property taxes overwhelms the City’s slightly progressive personal income tax.
  • The City’s income tax structure is more compressed than it used to be, making it considerably less progressive. Currently, there are 5 brackets separated by less than one percentage point of tax liability, whereas from 1976 to 1986, there were 14 brackets and a 3.4 percentage point spread. At 3.88%, the current top City personal income tax rate is about one-tenth lower than its 1977 rate of 4.3%.
  • About 200,000 low-income households pay income tax to the City although they have no state or federal income tax liability.
  • The City’s total tax expenditures—tax breaks mainly given to businesses to spur jobs and investment and to developers to subsidize housing—were $7.1 billion in 2014: $3.4 billion is housing-related, $3 billion is business-related, and roughly $800 million benefits households.
  • The 421-a property tax exemption has become the City’s costliest tax break at $1.1 billion, and it is of questionable value, particularly since in Manhattan there are more non-primary resident owners benefiting from 421-a tax breaks than primary residents.
  • Most business tax expenditures were put in place in the 1980s when the city’s economy was recovering from the 1970s out-migration of people and businesses. Routinely, these breaks have been extended without any evaluation of their value. Their $3 billion cost has more than tripled since 2001, and has grown more than twice as fast as total City tax collections.

The report makes these tax reform recommendations:

  • Reduce serious inequities in the residential property tax system caused by assessment caps and by the requirement that co-ops and condos be assessed as if they were rental properties. If changes equalize effective tax rates for residential properties and neighborhoods, there will be no need for the co-op/condo tax abatement.
  • The 421-a property tax exemption should be re-vamped to concentrate benefits on the construction of truly affordable housing units.
  • The City’s personal income tax should be made more progressive by increasing the number of brackets below the current top rate, increasing the Earned Income Tax Credit and extending it to young workers, 21-24, older workers, 65-66, and to childless couples. Before raising the top tax rate, the City should add a rate benefit recapture provision like the State’s.
  • The 23 percent credit on the personal income tax for unincorporated business tax liability that goes mostly to millionaire households should be reduced to help fund low-income tax relief.
  • The State should redress the politically-dubious 1999 repeal of the City’s modest commuter tax; there are 900,000 commuters who account for 35% of all New York City earnings.
  • Because a growing number of non-primary residents own high-value apartments and townhouses, but do not pay City income tax or much in property taxes, the City should institute a pied-à-terre tax on residential properties valued above $5 million.
  • The City should update its business taxes to conform to state tax changes that broaden the base and levels the playing field among large businesses, and that is revenue neutral or better by raising the capital base tax to $10 million and increasing the minimum tax from $5,000 to $200,000. The City should keep the corporate tax rate at 8.85%, and if there are sufficient offsetting revenues, reduce the tax rate for small businesses and manufacturers.
  • Beginning with restricting the Industrial and Commercial Abatement Program that now subsidizes many developments that would take place even without tax breaks, the City should evaluate its various business tax breaks to focus benefits where truly needed, freeing up resources that could fund more promising economic development interventions.
  • The City should close the carried interest exemption loophole under the unincorporated business tax, saving $200 million a year and promoting fairness among business taxpayers.
  • The City should re-assess the need for costly property tax and other subsidies in Hudson Yards since the district has clearly demonstrated its commercial viability

In addition to these specific measures, the City’s Executive branch should develop the capacity to analyze the distributional impact of local taxes across income classes, to guide its efforts as it approaches tax reform or entertains any tax proposals.

At present, State action is needed to make almost any change in New York City’s tax system.  Based on his review of the history of tax policy changes over the past four decades, Parrott concluded: “The state legislature and governor should give New York City greater authority to make adjustments to existing taxes within a defined range and to periodically extend or modify existing tax policies and programs. The State constitution permits that, and there are already some instances where such authority is delegated to the City, as with the authorization provided to the City to impose a sales tax on a broader range of services than the State or other local governments.”

PDF of Press Release

PDF of Report

PDF of Report Summary

An Aging U.S. is Revitalized by Immigrants

January 6, 2015. FPI’s Immigration Research Initiative David Dyssegaard Kallick was asked to contribute to the New York Times feature, Room for Debate. In the entry, he countered a report that was the focus of the discussion, arguing:

To say all of the net gain in employment since 2007 has gone to immigrants, as a recent backgrounder from the Center for Immigration Studies does, is a strained interpretation of the facts, not to mention an odd way to spin positive economic results as something vaguely dark and threatening.

Immigrants are part of America’s DNA. Rather than looking for scapegoats in an economy that is growing we should concentrate on improving opportunities for all Americans, both immigrants and U.S.-born.