Dr. Benjamin F. Jones’ research uses data to demonstrate the tremendous benefits that immigrant entrepreneurs bring to the U.S. As a professor of entrepreneurship and strategy, he’s an expert in how immigrant founders create jobs for all Americans. Listen to learn why he believes immigrants innovate at high rates.
Transcript
Denzil Mohammed: I’m Denzil Mohammed. Welcome to JobMakers! Immigrants are job makers. It’s the premise of this podcast. We get the stories of immigrants from everywhere from Burundi to France, hear their journeys and recognize their impact. But does this bear out in the data? Do the numbers show that immigrant business owners from high tech to main streets really grow the economy for everyone? But Professor Benjamin. F Jones, former economic adviser in the U.S Treasury and the White House and now professor of entrepreneurship and strategy at the Kellogg School of Management at Northwestern University, not only do the data show that immigrants are far more likely to start a business in the U.S, they’re innovating at a higher rate, and we are all benefiting from it. His research shows how greatly determined immigrants are a boon for the U.S. Whether they’re opening local restaurants or starting revolutionary multinationals, immigrants of all kinds capitalize on entrepreneurial ecosystem and spirit in the U.S and have real impact. Not only is this the case today, but according to him looking at the data, he shows how immigrants have been doing this for as long as they’ve been coming here as you’ll learn in this week’s episode of JobMakers. Benjamin Jones, Gund family professor of entrepreneurship and professor of strategy at the Kellogg School of Management at Northwestern University. Thank you for joining us on the JobMakers podcast! How are you?
Benjamin Jones: Very well, my pleasure to join Denzil.
Denzil Mohammed: So, tell us, what is the real narrative when it comes to the U.S economy, jobs and immigration? Are immigrants, as the name of this podcast suggests, job makers?
Benjamin Jones: It turns out. Yeah, absolutely. The usual narrative is that immigrants come to your country, people come to your community, and they take jobs and that is a very common view, and it’s actually quite reasonable view when you first think about it, because of course, people do come to your community and they do find work. So where do those jobs come from! But if you dig a little deeper, you realize that when immigrants come to your community, they may not just take jobs; they might also create jobs. They might be job makers and one way they can do that is simply because when someone, called an immigrant or no, but when new people come to your community, they also demand more services. They need places to live, they need food. And so, there’s going to be an increase in demand for construction workers and plumbers. And there’s going to be an increase in demand for restaurant workers and grocery store clerks and medical professionals, all these things. But much more directly, and perhaps much more importantly, immigrants also create jobs directly because they create companies, and these companies create lots of new jobs.
Denzil Mohammed: So simplistically, you just said it. People coming into a community. You would think that the addition of a person means a job is taken away. So simplistically, the average Joe, might think that adding immigrants to a society and economy means the labor pool worsens, but the economy is complex. Explain to us as simply as you can how immigrants affect job opportunities and wages for the U.S. born from your research?
Benjamin Jones: Right. So, the traditional narrative is acting as if immigrants only do one thing, they are only new workers, that’s all they do. They come in and compete for existing jobs, and people often have this idea that there’s a fixed number of jobs. Where do jobs come from? There’s just a fixed number of jobs, and if you add more people into that labor market, it’s just going to make it harder on everyone as workers because they’re all competing for this limited number of jobs. But when you think about it and you say the economy is complex, it’s complex in a very natural and good way, which is that there isn’t a fixed number of jobs. Where do jobs come from? Well, they come from people starting companies and not just taking jobs but opening vacancies and employing people and they come … why do we have jobs anyway, well, because people want stuff. They come from the fact we need things. So, I need to see a dentist so we have dentists. I need a lawyer. I go to a restaurant, etc., etc., etc. So, when you scale up the population in a place, you don’t just create unemployment. You scale all the population in a place, you just sort of more or less have it like it was before but with more people. One way to think about this is if you were in Canada, which has around 1/10 the population of the U.S., you might say they look south of the border, and they say, oh my gosh! How do they employ all those people! Well, because the number of jobs will naturally scale with the population. Because we’re all going to demand more services, so we need more plumbers and moreover people are going to start companies. And in fact, when you start thinking about it, adding the population in or out to a place, it’s really going to just scale it up or down. What gets really interesting is when you think about job creation. Who’s creating the jobs? Who are the entrepreneurs? And are these good jobs? And where are good jobs coming from?
Denzil Mohammed: Who is creating these jobs? We like to say on this podcast that the act of migrating is itself an entrepreneurial act. You leave everything you know behind; you take a risk; you hope for the best journey into the unknown, and as a result they tend to be inherently entrepreneurial. This is what we’re saying based on what we know on this podcast. Is that reflected in the data?
Benjamin Jones: It’s absolutely reflected in the data in the sense that immigrants to the United States are absolutely, exceptionally entrepreneurial and to put it in simple terms, an immigrant to the United States is 80 percent more likely to start a business than a native-born American. They’re just very much more entrepreneurial on average than the average person born in the U.S., and as you’re pointing out, a very natural explanation for this is because who are immigrants? Well, they’re people who wherever they were decided to take the bold, risky, dramatic action that changed their live, they think for the better like, crossing an ocean, walking across the desert, coming up through Panama over the Darién Gap, or whatever else they had to do, these are people who work hard, are looking for a better life, and they’re bold. That’s exactly the kind of traits you would think describe entrepreneurs. People who start new businesses. They try the bold thing, looking for a better way of doing things, a better life for themselves, and that’s only one interpretation of why immigrants are more entrepreneurial. But it’s very natural one. We’re selecting our entrepreneurial oriented people. And sure, enough than they get here, they’re far more entrepreneurial than the average person who was born in the United States.
Denzil Mohammed: You use the language there that the immigrant inclusion field tries to avoid. This crossing a desert, the crossing into Panama and into the forest. But that sounds threatening, it sounds bad, it sounds evil, but the language that you’re using to ascribe to these people is much different. Could you just talk about that a little bit?
Benjamin Jones: Well, I think what we’re seeing are people who have enormous fortitude, that they’re dreamers, they’re gritty, they’re tough. I mean, these are the kind of people who are going to drive your economy. If I were hiring somebody, I’d want someone who’s committed, tough, willing to try new things. These are the kind of activities, I mean, so many Americans come from the history of immigration, right? And the American identity is very much based in looking for liberty and looking for better opportunity and economic opportunity as well as political opportunity or political freedom. I think, the narrative even within the U.S. of going west in American history is very much about going to the frontier in early American history and celebrating this kind of entrepreneurial spirit and this independence and this ability to make your own fate, and these are people who I think are the kinds of people who are going to do great things. And so, it’s perhaps not surprising that they start so many companies. If you look at immigrants in America, it’s not just that they start all these companies and many of these companies are incredibly successful companies. But they are also very innovative. If you look at immigrant entrepreneurs, their companies are much more likely, for example, to have a patent. Immigrants are much more likely to be pushing the frontiers of technology and science in the United States and those kind of benefits in addition to the job creation, they have this kind of search for novelty, this kind of boldness, this newness, that of course, opens new doors for so many, not just for themselves. I mean, the beauty of someone who is that risk taker, innovator, entrepreneur is that they’re in the job market, they’re creating jobs for other people, and they’re bringing new ideas into the environment, into the economy and they’re propelling the overall standard of living in the economy in a meaningful way.
Denzil Mohammed: You know one of the things I was getting at with that question is for the people in the U.S who say, well, my ancestors did it this way or whatever. Same qualities that you just ascribed to the people coming to the U.S. today, whether it’s by land or sea, by visa or not, are the same kind of qualities that drove the ancestors of many people who live in the U.S to come to the U.S, where this was from Sicily or from Ireland or from Germany, from Poland, people who just had nothing to lose and had just this determination to come here. So, the qualities are just extremely similar, just maybe the countries of origin might be a little bit different and this sort of brings you to my next question. Because we’re talking about entrepreneurship as it is happening in the U.S. today, but this is not a new phenomenon. The qualities that brought immigrants here century ago or two centuries ago led them to found businesses way back then. So, Corsair, Budweiser, TJ Maxx, Nordstrom, Levi’s jeans, all the way up to PayPal and eBay today. This has always been the case with the U.S., is that correct?
Benjamin Jones: Well, I can tell you what we know in the data so, first historically one way to look at that is, we can look at the Fortune 500 companies now, some of them of course are relatively new like at Google, but many of them of course have older roots like some of those you mentioned and, if you look at who founded the Fortune 500 companies, you see that they’re, just in the U.S., they’re disproportionately, the founders are disproportionately immigrant. So, you do see that same pattern if you look using kind of representative surveys of businesses in the U.S. back to the 1970s or so, you also see that immigrants are overrepresented as founders, and then some of the facts that I’ve already been alluding to in our conversation are coming from a study of every single business in the United States where we have government data tracking every establishment in United States, that was over a decade from around 2007 to 2017. So, we can say that it is true historically they think that we can measure it with things like the Fortune 500. It’s true kind of in the late 20th century, and it’s true today. So, it does seem to be a very general pattern. And I think you speculate exactly why I think again, goes to the point that what one natural explanation is that we’re just selecting on people coming into this country who are looking for a new and better way of doing things in their own lives. That’s why they came and so not surprisingly they have these entrepreneurial traits.
Denzil Mohammed: So, we’re talking about Fortune 500 companies, and I mentioned that several of them, but immigrants found all sorts of businesses across the spectrum, and you sort of mentioned that earlier. They need services, they go to restaurants, but they also found some of these services and nail salons, grocery stores, transportation companies, hospitality, they open hotels. Can you just sort of describe the spectrum of businesses that you found that immigrants start?
Benjamin Jones: Yes, it’s a great question. It’s actually a really important question because when I talk about the job creation effects of immigrants as entrepreneurs, and I say that immigrants are 80 percent more likely to start businesses than native-born Americans. They still might not start that many jobs if like most immigrant businesses were very small. They didn’t really have that many employees. So, it actually really depends on what the distribution of businesses are to understand the overall employment effects of immigrants in creating jobs in the U.S. economy. So, if you look at it based on size, absolutely there’s lots of immigrants who start restaurants and small single establishment companies and retail or whatever else. But as you look at any employment size, so whether it’s one employee, 10 employees, 100, a thousand, 10s of thousands of employees, you see that immigrants are overrepresented in every single size. So basically, they’re more entrepreneurial in general and they produce kind of more forms of all sizes. So that’s why in the end, it’s because they’re just kind of a systematic upward shift in entrepreneur propensity and you get the Googles or you get Tesla, kind of in top end employers. And then you get lots and lots of small businesses and medium0sized businesses. You get to kind of a little bit of everything and that ultimately adds up into an enormous number of jobs that they create through these businesses and that’s how actually at the end, remarkably, the number of jobs created in businesses founded by immigrants, that number of jobs is greater than the number of immigrants in the U.S economy. So, in a sense that’s on net. They do take jobs and they also create jobs, but on net immigrants create more jobs than they take on net. In short, immigrants create jobs.
Denzil Mohammed: You mentioned earlier that immigrant companies are more likely to have patents, and so I want to take it to something that you said a few years ago. At the start of the pandemic, you argued that like in the early 1940s, when innovators were marshalled to create inventions, really from the atomic bomb to penicillin. And that quote, ‘’The country again needs this sort of bold innovation policy in order to fight the coronavirus,’’ endquote. Needless to say, two companies who have immigrant founders, Pfizer and Moderna, were on the forefront of creating the first vaccines. So, in your view, based on your research, what role do immigrants play in innovation generally, but especially in times of crises?
Benjamin Jones: Well, in my research but also a number of other people’s research, it’s well known that immigrants are more likely to be in STEM jobs and careers. So if you look at PhD’s or undergraduate degrees or master’s degrees in the U.S., you see a lot of immigrants who are migrating towards engineering and computer science and biomedicine and these things.
Denzil Mohammed: And just immigrants actually sustaining, international students are actually sustaining many STEM programs across the U.S., you know?
Benjamin Jones: That’s right, and that’s an interesting question as to why, you know, of course there are many people born in the U.S who also go into those careers and do incredibly great work, just like there are many people in the U.S. to start great companies, but it is interesting that for whatever reason, as a proportion of the respective population size, the U.S.-born people are less likely to gravitate to those more technical, scientific subjects, and that immigrants are more likely to do that, but for whatever reason, that’s true. We end up with a large part of our technical, innovative scientific workforce being not in the United States, not being born in the United States, but yet of course, contributing to this growth engine and to an economist, what actually drives, improved health generally, obviously the COVID vaccine in your example, but just generally any kind of improved health technologies or medical devices, pharmaceuticals, vaccines or just innovation more broadly, inventions, patents throughout the economy, you’re actually just going to see that immigrants are overrepresented once again in producing these advances in science and technology. So, they really are essential to economic growth in the U.S, they’re essential to keeping the U.S. as a leading economy in the world. And of course, you can spell this in many other ways, obviously national security for example. It’s important to be ahead of your competitors and technology and of course the immigrants are driving our scientific technological advances in the U.S, they’re actually an essential part of keeping the U.S. ahead as we are entering a world that is increasingly fraught with conflict in very sad and troubling ways. I think the idea that you’re being ahead in security and defense technology is a whole another reason that this is important. So, when you start thinking about the productivity slowdown that’s been going on in the U.S., we’ve had a challenge in this century with sort of not growing as fast as we’d like in terms of output per worker, and that means not the same kind of wage growth and productivity growth in our workforce in general. This is a time to be pushing in general on science and innovation and doing the kinds of things and entrepreneurship, the things that really drive our increasing productivity, and so that’s all the more reasons that an immigration policy that recognizes how critical immigrants are as an input to that growth engine that we seek those policies that embrace immigration and its power in that direction.
Denzil Mohammed: What is your message when it comes to dealing with immigration policy in the U.S.? Like how do you talk to people and frame the narrative that is not only accurate and based on evidence, but can probably shift the needle a little bit?
Benjamin Jones: Well, to crystallize it, I think that the debate in immigration policy in the U.S is often set up as being between sort of our humanitarian ideals, kind of recognizing the desire for liberty and new opportunity and immigrants that Americans sort of want themselves and sort of kind of, it’s a humanitarian thing to let immigrants into the country in the same way foreign aid might be humanitarian, and then it’s sort of pitted against in the conversation, this economic or perceived economic burdens that letting in immigrants into the economy is going to create economic costs. So, it’s kind of our humanitarian ideals versus these perceived economic costs. And the message I think it really comes when you stare at the data and the research, is these economic costs that’s the mirage immigrants fundamentally are good for the economy? And they are not just really good in some average sense, they’re really good for job creation because of course the main economics here you hear, are immigrants are going to take our jobs, but when you realize that actually immigrants are net job creators in your community, in your country, then this whole debate between sort of our humanitarian instincts and the economic burdens is misplaced. It’s actually backwards. I really hope that people will begin to recognize that immigration is a really powerful input to our economic success, that they make us richer, not poorer, and they can help solve a lot of challenges and keep maintaining the United States role as a leading economy in the world with a strong national defense and these benefits are extraordinarily important. And when we restrain immigration, we’re actually hurting our economic interests, not helping them. So, I think I would like to see the immigration policy debate move towards something that’s more consistent with the evidence. Yes, you have to have the policy should be how do you onboard immigrants, what rate can you absorb immigrants? What are you onboarding them to give them the best chance of success? Policies where you can come here as a refugee, but you’re not allowed to work, that’s not helping the economy. We need to follow the law. I appreciate the aspects of the innovation policy debate that we should pass laws and we should maintain the rule of law, but we should pass policies and laws that are recognizing the amazing benefits of immigration and make the most of it, as opposed to arguing kind of on the false premise that immigrants are bad for the economy.
Denzil Mohammed: Gund family professor of entrepreneurship and professor of strategy at the Kellogg School of Management at Northwestern University, Benjamin Jones. Thank you so much for making the time to talk with us on the JobMakers podcast!
Benjamin Jones: Thanks for this great dialogue.
Denzil Mohammed: JobMakers is a weekly podcast about immigrant entrepreneurship and contribution produced by Pioneer Institute, and think tank in Boston, and The Immigrant Learning Center in northern Massachusetts, anot-for-profit that gives immigrants a voice. Thank you for joining us for this week’s discussion into how immigrants to the U.S actually do create businesses, generate jobs, and innovate at higher-than-average rates. If you know an outstanding immigrant entrepreneur we should talk to, email Denzil, that’s D-E-N-Z-I-L at jobmakerspodcast.org. I am Denzil Mohammed, see you next time for another episode of JobMakers.