Alexander Table 1: Immigrant Entrepreneurship Programmes in the US

 

 

 

 

 

Alexander Ebolor:
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Table
of Contents
List of
Figures. 3
List of
Tables. 4
1.0       Section Introduction.. 5
2.0       The Immigrant Entrepreneurship Programs. 6
3.0       The Impacts. 8
3.1       Employment Creation: 9
3.2       Impact on Global Competitiveness. 11
3.3       Tax Contribution.. 12
4.0       Conclusion.. 13
Bibliography. 14
 

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List of Figures

Figure 1: Share of Immigrant-Founded Fortune 500 Companies.
Source: (Centre For American Entrepreneurship, 2017) 8

Figure 2: Fortune 500 Companies Founded by Immigrants.
Source (Fortune 500, 2017) 11

 

List of
Tables

Table 1: Immigrant Entrepreneurship Programmes in the US and
Canada. Source: (Author’s Analysis of Official Immigration websites of the US
and Canada) 7

Table 2: Recent Immigrant Founded Companies in the US
and Jobs Created. Source (NVCA, 2016) 10

Table 3: Distribution of Private Incorporated
Businesses in Canada by Age Group (Source: Green David et. Al, 2016: adapted
from Statistics Canada) 11

Table 5: Analysis of Tax Contributions of Select
Fortune 500 Companies. 13

 

1.0    Section Introduction

The question, if there
are positive economic impacts by immigrant entrepreneurs in the United States
and Canada has been the origin of multiple studies to address the avalanche of
discontent on the part of native born towards their foreign born counterparts. While
a lot of the questions are based on sentiments and not on any empirical data or
studies, a valid question to ask that sets the pace for meaningful studies
which could confirm or disprove such fears would be; what is the net economic
impact of immigrants on the economy of the host countries? Net economic impact
could be described as the difference in value between what the immigrants
receive from publicly funded services and immigrant administrative costs on the
one hand, and what they contribute in taxes, social contribution and employment
generation (Friesen, 2012).

Although immigrants on
average have lower incomes than the native born, immigrants generally pay more
in taxes than they consume in services and other support benefits. An example
which also holds true for a lot of cities in the United States and Canada with
significant immigrant population, immigrants admitted in Toronto, between 1980
and 1995 paid more in taxes than they received from unemployment benefits (Wang &
Lo, 2000).

This research focuses
specifically on foreign born entrepreneurs in the United States and Canada. A
study published in 2016, that sorts of puts to rest a lot of the unanswered
questions and discontent was titled ‘Immigration, Business Ownership, and
Employment in Canada.’ The study provided “conclusive evidence” that immigrants
admitted to Canada under all programs are far more likely than the native born
Canadians to start a business, which is a key driver of economic growth (Immigration
Canada, 2017).
It is also suggested that Canada’s prosperity is largely correlated to its
immigration rates (ImmiGroup, 2014) and Canadians need the foreign talents
to sustain its demographic and economic growth (Gignac, 2013). The study relied on
datasets from T5 tax returns filed by incorporated companies, T1 tax returns by
unincorporated companies, and T2 filings by Canadian business concerns, which
were extracted for the 30 year period between 1980 and 2010 (Green, Liu,
Ostrovsky, & Picot, 2016).

2.0    The Immigrant Entrepreneurship Programs

In Canada, there are
three major economic impacting immigration programmes. The Start-Up Visa
Program targeting immigrants with the skills and potentials to start and build
businesses in Canada that create jobs and can compete globally; the
self-employed immigrant visa for those who have experience in cultural
activities, athletic activities and operating a farmland; and the Immigrant
Investor Capital Pilot Program (IICPP) for foreign investors with a minimum
net-worth of $10 million and $2 million minimum investment commitment; (IRCC, 2017). Besides the
nationally coordinated immigrant visa programmes, there exists also in Canada
the Provincial Nomination programmes for immigrants in all but two of Canada’s
provinces and territories. The exceptions are Alberta and Nunavut (Global
Diversity Exchange, 2015).

Table 1: Immigrant Entrepreneurship Programmes in the
US and Canada. Source: (Author’s Analysis of Official Immigration websites of
the US and Canada)

As the economic
benefits continue to accrue and public awareness increases, about 75% of
Canadians agree that Canadian Entrepreneurs are being publicly recognized for
their contribution to the Canadian economy (Momanni, 2016). To be clear, the
goal of the Entrepreneur Immigration Program in Canada is not only to
repopulate decreasing working age populations and sparsely occupied
geographical areas, but also to attract people that can launch innovative
businesses and increase the flow of foreign direct investments (FDIs) to Canada
by foreign concerns who finance Canadian businesses (The Conference Board of Canada, 2017). It is important to
note here, that Canadian businesses started by immigrants also attract foreign
investments through their network from home countries and other external
sources. This props up the FDIs significantly. This is also true for the US
E1/2 Treaty visa program which seeks to leverage on the contacts and markets
of the immigrant entrepreneurs’ home country.

In the United States,
the story is a little bit different as there are no official startup visas for
immigrants. However, with the Venture Capitalists’ backed International Entrepreneur
Rule (IER) which grants executive “parole” status for immigrants who want to
build a business in the United States, there appears to be a “workaround” to
the legislative hurdles (USCIS, 2017). Another window that
exists for immigrants to carry out entrepreneurial activities are; the
E1/E2Treaty Visa for immigrants from select countries having a treaty agreement
with the US; the O1 visa for highly skilled immigrants with expertise in
business, science and the arts, and the EB-5 visas for immigrants with a
minimum $500,000 investment that will create at least 10 jobs in the US (American
Immigration Council, 2016).

In a move which also
portrays an informed recognition of the value of immigrants to the US economy,
the state of Massachusetts introduced the Global Entrepreneur in Residence
Program (GEIRP). This program allows immigrants with verifiable idea for a
business that can grow in the US to get a quota-exempt H1-B visa through a part
time mentoring position with any university or college in Massachusetts (GlobalEIR,
2015).
  

3.0    The Impacts

In a groundbreaking
study which analyses the origin of the founders or co-founders of the Fortune
500 companies, the results show that one in five of the Fortune 500 companies
were started by first generation immigrants. It holds true for both the 2011
and 2017 Fortune 500 companies (New American Economy, 2011). When the analysis
was escalated to include children of first generation immigrants, it resulted
in two in five of the Fortune 500 companies. This means that 100 of the largest
companies in the US by 2016 revenue was founded or co-founded by an immigrant.
This section looks at specific ways immigrants have impacted the economies of
the US and Canada. Three specific impacts have been identified. They are;

·        
Employment
creation

·        
Global
Competitiveness

·        
Tax
contribution

Figure
1: Share of Immigrant-Founded Fortune 500
Companies. Source: (Centre For American Entrepreneurship, 2017)

3.1     Employment Creation:

Immigrant
entrepreneurs add jobs to the economy by primarily creating jobs for themselves
when they work in the business and for others if they have employees. The
number of jobs that are created increase as business form changes from
unincorporated to incorporated, and although job creation rates for recent
immigrants are comparatively lower both in Canada and the United States, they
tend to surpass those created by the native born after a settling-in period of between
four to seven years (Green, Liu, Ostrovsky, & Picot, 2016).

A study of the
companies in the United States values at a minimum of $1billion reveals that a
minimum of 51% of those companies have at least one immigrant founder. 88
companies were participated in the study. On average, each of the companies provides
employment for 760 people. The immigrant founded companies in the 2017 Fortune
500 employ almost 4 million people worldwide. Also important to note is that
the much canvassed for Start-up visa in the United States if implemented, is
expected to create up to 3.2 million new jobs over a 10 year period.

Table 2: Recent Immigrant Founded Companies in the US
and Jobs Created. Source (NVCA, 2016)

Table 3: Distribution of Private Incorporated
Businesses in Canada by Age Group (Source: Green David et. Al, 2016: adapted
from Statistics Canada)

 

3.2     Impact on Global Competitiveness

Immigrant founded
companies have helped to strengthen the global economic competitiveness of the
United States and Canada. The over 100 immigrant founded companies in the
recent Fortune 500 are industry leaders providing products and services for the
world market and generating revenues in the deca-billion dollar range and more.

Figure
2: Fortune 500 Companies Founded by Immigrants. Source
(Fortune 500, 2017)

For Canada, the latest
report by the World Economic Forum (WEP), places Canada as the 14th
most competitive economy among 137 economies reported (World
Economic Forum, 2017). The 2006-2007 Global Competitiveness Report
co-produced by Michael Porter from Harvard University ranked Canada 16th (World
Economic Forum, 2006). While the position of Canada has only
marginally increased from 16th to 14th, the influx of
immigrant entrepreneurs has largely contributed to Canada maintaining her
competitiveness over the past decade. Between 2001 and 2007, Canada dropped
from 3rd to 16th most competitive economy (World Economic Forum, 2001).  In its 2017 report to Parliament on
immigration, the Canadian Immigration, Refugees and Citizenship Minister stated
clearly that “immigration is…helping to spur economic growth, job creation and
economic prosperity” (IRCC, 2017)

The effort of the
redefined Canadian Entrepreneurship programs which properly qualifies immigrant
entrepreneurs and investors most likely to succeed have paid off in the last
decade.

3.3     Tax Contribution

Businesses pay taxes,
at least when they make a profit. Three main categories of taxes are attributed
directly and indirectly to businesses. Taxes are paid on the profits of the
business; taxes are paid on dividends; and personal income taxes on the
employees of the business. Due to the huge number of businesses that have been
successfully started by immigrants, applying the three categories of taxes for
each business with employee generates a substantial part of Canada’s or the
United States’ tax revenues.

Table 5: Analysis of Tax Contributions of Select
Fortune 500 Companies

 

4.0    Conclusion

The positive net tax
contributions by the immigrant-founded companies, employment generated and
supporting the global competitiveness of the United States and Canada as seen
from the various studies and analysis in this report give empirical evidence
that immigrants contribute positively to the economies of the host countries and
dissuades long held sentiments and hysteria about the negative impacts of
immigrants in general and the entrepreneurial class in particular.

Notwithstanding the
benefits that these group of immigrants provide, there is still a long way to
go especially in the United States to fully harness and maximise the potentials
of immigrant entrepreneurs through the creation of immigrant entrepreneur
specific visas with a sufficient quota to allow for the most innovative and
high-growth businesses to be built in the US. The US has such a huge pull as
the largest single market among the developed countries with strong institutions
that support entrepreneurial activities especially in the hi-tech industries
like Silicon Valley and Wall Street. It therefore remains a default choice for
entrepreneurs who want to build their businesses abroad.

 

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