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2010-2011 Essay Contest Standard Economics First Place Essay

Entrepreneuerial Activity

Anthony Gerbi
Little Falls Community High School
Little Falls, Minnesota

America needs help. In the midst of one of the worst recessions this country has faced, job creation is the primary focus of many people. Currently there are more than 13 million Americans without a job, and while the unemployment rate has dropped a few percentage points in the past few months, part of the drop can be attributed to people giving up the search for a job. The government has tried stimulus packages and bailouts, but saving jobs from being cut is not enough. New jobs need to be created, and the best way to create new jobs is to start new businesses. Luckily, there is a group of people up to the task: immigrants. Unluckily, current government policies are making it unnecessarily difficult for entrepreneurial immigrants to relocate to America. It seems nationalism has created the sentiment that Americans are better at business and entrepreneurial activity than the rest of the world. While the United States may have some of the most successful companies on the planet, America is not as entrepreneurial as it once was. Immigrants, on the other hand, are exceedingly opportunistic even in the roughest of economic situations. Although many Americans think immigrants are a problem rather than a solution, the United States government needs to make it easier for entrepreneurial immigrants to become citizens because immigrants create businesses that employ Americans and will help the whole nation increase total employment.

Job creation is a multi-faceted issue but one thing is for certain: new businesses create new jobs. In fact, economist Carl Schramm says, "The data, frequently used in studies by the Kauffman Foundation, show that all net new job creation in America comes from companies less than five years old!" (Forbes). The data have also shown that immigrants are much more inclined to start a business than a native-born citizen. According to the Kauffman Index of entrepreneurial activity (1996-2010), "Immigrants were more than twice as likely to start businesses each month than were the native-born in 2010. The immigrant rate of entrepreneurial activity increased sharply, from 0.51 percent in 2009 to 0.62 percent in 2010, further widening the gap between immigrant and native-born rates. The native-born rate is 0.28 percent." (2). To help the economy and increase the number of jobs, immigrants need to be allowed to create businesses. The process of entrepreneurship is a huge driving force behind the economy. If an immigrant wants to start a business, he or she will first have to spend money on capital. This money will be infused into the economy and have the latent effect of creating jobs not necessarily related to the business being started. For example, an immigrant wants to start a business and he or she decides that a brand new building would be the best for his or her workplace, this would potentially create jobs for construction workers and architects to build this new workspace. Of course a lot of start-up businesses fail, and failures hurt the economy and job market. Carl Schramm says, "Many small new businesses fail, but it takes legions of small failures to equal the losses from a single round of mass head-cutting at a large mature company. The fact is big, established companies tend to cut as many jobs as they create. So the new jobs have to come from somewhere, and where else but from new companies?" (Forbes). Large, established companies employ many more people than start-up businesses, so when a large company tries to cut costs, the job losses can be huge. The goal should be to attract smart and enterprising immigrants to America to create the next great company. After all, Google, Yahoo, Intel, and eBay all had at least one immigrant founder.

So what can the government do about it? Well, even though the data clearly suggests new businesses are a great way to create jobs and immigrants are much more willing and able to create these new businesses, the process of citizenship could be streamlined for entrepreneurs. In the past, immigrants had no choice but to come to America to start their business; but now, countries like China, India, and Brazil are more competitive from an economic standpoint. America needs a trump card that is irresistible to entrepreneurial immigrants. Quality of life is definitely a major selling point, but the problem is that the current immigration processes do not favor any foreigner who is looking to start small and build. The closest thing the United States has to an entrepreneur's visa is the EB-5 Visa. This visa grants citizenship to any eligible foreigner that invests at least $500,000 in an economic unit labeled as a "regional center." This investment also has to create at least 10 jobs. While this immigration policy is a decent start, reform is needed. The United States needs to create an entrepreneur's visa. This visa would grant citizenship to anyone who starts a new business. After three years of successful business activity, the visa would become permanent. If the business fails, the immigrant would be allowed to stay in the country as long as he or she attempts to create another business within a year. These simple reforms would attract new, highly intelligent immigrants. These businesses would not just be simple, small-scale, low-tech operations. Renuka Rayasam says, "About a quarter of the engineering and technology companies started from 1995 through 2005 had at least one immigrant founder, according to a Duke University and University of California-Berkeley study." (U.S. News and World Report).

An entrepreneur's visa would increase the number of immigrants and therefore increase the number of new businesses. New immigration policies are vital to economic growth, and according to a study by the Immigration Policy Center, "Comprehensive immigration reform generates an increase in U.S. GDP of at least 0.84 percent. Summed over 10 years, this amounts to a cumulative $1.5 trillion in additional GDP. It also boosts wages for both native-born and newly legalized immigrant workers." (2). This study took into consideration illegal immigrants, but the message is clear. Immigration policy reforms are necessary and will increase overall gross domestic product, thereby creating economic growth. America needs help, and government can help America by allowing the immigration system to be unhampered by the bureaucracy and politics that currently plague it.

Works Cited

Fairlie, Robert W. Kauffman Index of entrepreneurial activity 1996-2010. N.p.: The Ewing Marion Kauffman Foundation, 2011. 2. Web. 20 Mar. 2011.

Hinojosa-Ojeda, Dr. Raul. Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform. N.p.: The Center for American Progress and the American Immigration Council, 2010. 2. Web. 20 Mar. 2011.

Rayasam, Renuka. "Immigrants: the Unsung Heroes of the U.S. Economy." U.S. News & World Report. N.p., 18 Feb. 2007. Web. 20 Mar. 2011.

Schramm, Carl. "The Messy Path To Creating Jobs." Forbes. N.p., 19 Jan. 2011. Web. 20 Mar. 2011.