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July 27, 1998

Study dispels myth that immigrants displace black-owned businesses

Robert Fairlie

By Jennifer McNulty

A new study coauthored by UCSC economist Robert W. Fairlie has found no statistical evidence that immigrants displace black-owned businesses in the United States.

The study, by Fairlie and Bruce D. Meyer of Northwestern University, appears as a chapter in the new book Help or Hindrance? The Economic Implications of Immigration for African Americans (New York: Russell Sage Foundation, 1998).

A comprehensive investigation of the effects of immigration on African Americans, the book looks at several areas to see if blacks are "losing out" to immigrants in the American labor market. It concludes that although immigration does not appear to have affected the employment rate of blacks, it has contributed slightly to the widening gap between the annual earnings of black and white males. (Read study in PDF format).

Fairlie and Meyer used 1980 and 1990 Census data from 94 of the country's largest metropolitan areas to see if black self-employment levels are lower in areas with high immigrant populations. They found no evidence of a net loss of existing black-owned businesses.

It is possible, noted Fairlie, that in some areas or within some industries, displacement could be occurring, but the study revealed no evidence of such a trend at the national level. The findings are based on a detailed economic analysis that controlled for factors such as the unemployment rate in each area, whether a city had a black mayor, changes in population, average income levels, and the racial composition of each area.

The results are significant on several fronts. Blacks historically have had extremely low rates of self-employment in this country (approximately 3 percent of all employed blacks, compared to 8.6 percent of employed whites). The reasons for it remain unclear, but it's an important phenomenon to understand because business ownership has traditionally been a path out of poverty for disadvantaged groups. Moreover, the low rate of business ownership among blacks has contributed to racial tensions in urban areas throughout the United States, perhaps most acutely between blacks and Korean immigrants.

But anecdotal evidence of immigrants "crowding out" blacks appears to be inaccurate, said Fairlie, who has spent years investigating the differences in self-employment rates among ethnic and racial groups in the United States. "We cannot blame immigrants for the low rates of black business ownership," he said, adding that researchers are continuing to look for a viable explanation.

Fairlie and Meyer also looked at changes in the rates of black self-employment and immigration between 1980 and 1990 and found that rates of black business ownership were increasing. The findings were consistent even in areas like Los Angeles and San Francisco, which experienced some of the highest influxes of immigrants.

"Immigrants are much more likely to own their own businesses, so the thinking has been that a large inflow of immigrants might put substantial pressure on black-owned businesses," said Fairlie. "But we found no evidence of that."

Even when Fairlie and Meyer looked only at Asian immigrants, who are commonly thought to be in direct competition with many black business owners, there was no statistical evidence of displacement.

Although previous studies have looked at the impact of immigrants on the employment of native-born Americans, they have overlooked the large and growing segment of the labor force that is self-employed. This study fills that gap. "The impact of immigrants on employment patterns affects public and political support for U.S. immigration policies," noted Fairlie.

According to the Census, the number of immigrants increased from 5.7 million to 9.7 million between 1980 and 1990, a figure that should encompass both legal and undocumented immigrants. Nationally, the number of black-owned businesses went up from 200,000 to 315,000 during the same period, while the number of immigrant-owned businesses doubled, increasing from 480,000 to 960,000.

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