United States Small Business Administration
Office of Advocacy
RS 169
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Purpose

The Office of Advocacy has long been interested in illuminating differences in the way small and large firms operate in the U.S. economy. In addition, research into the special contributions that small firms make to the economy has been a high priority on Advocacy's research agenda.

This study examines the frequency with which recent immigrants (those living in the United States for less than 12 years), earlier immigrants (those living in the United States for 12 or more years), and native-born individuals are employed in small firms (less than 500 employees), as opposed to large firms.

Specifically, the study addresses the following questions: to what extent do new immigrants initially employed by small firms switch to large firms after accumulating job experience and knowledge of the English language; and, is the tendency to switch employment from small to large firms greater for immigrants than for native-born individuals of the same race, age, and gender, and with the same amount of education.

Scope and Methodology

Data for this study come from two sources, the Decennial Populations Census, Public Use Microdata Samples (PUMS) for 1990 and 1980, and the Current Population Survey (CPS) Annual Demographic File for 1994. Each of the data sets has advantages and limitations.

The advantage of the PUMS is large sample size. For each decennial census, the PUMS files contain information on approximately 15 million persons, including their proficiency in speaking English. The major limitation of the PUMS is that it does not directly indicate the size of the firm in which each person is employed; it does, however, indicate the industry.

The main advantage of the CPS is that it identifies the employment size of the firm where each individual is employed.

Its disadvantage is small sample size -- 150,000 persons.

Both the PUMS and CPS contain place-of-birth information. In this study, a person is classified as an immigrant if he or she was born outside the United States or in Puerto Rico or other outlying areas. "Native-born" refers to individuals born in the United States or born abroad to at least one American parent.

Well-recognized techniques of statistical estimation and analysis were used to investigate the two data sets.

Highlights

• Recent immigrants are more likely to be employed in small firms than earlier immigrants, and earlier immigrants are more likely to be employed in small firms than native-born persons.
• Unskilled workers are more likely to be employed in small firms than other workers; new immigrant workers tend to be less skilled than other immigrants or the native-born.
• Even among persons with the same amount of skill, recent immigrants are more likely to be employed in small firms than earlier immigrants and the native-born.
• When such factors as age, gender, race and student status are accounted for, the likelihood of being employed in a small firm remains higher for recent immigrants than for earlier immigrants and the native-born.
• The movement of immigrants out of small firms into other size firms takes place gradually; immigrants do not take their very first jobs in small firms and then switch to large firms after only a couple of years of assimilation. A similar percentage of immigrants switch after two years, after 10 years, and after 20 years.
• Even after many years in the United States, immigrants are more likely to be employed in small firms than are native-born persons.
• The likelihood of being employed in a small firm is directly related to an immigrant's ability to speak English and is therefore dependent on their country of origin. Those who immigrate from non-English-speaking countries are more likely to be employed in small firms than those from English-speaking countries.
• The inverse relationship between time living in the United States and likelihood of being employed in a small firm is stronger for some ethnic/racial groups than for others. It is weakest for non-Hispanic whites and all persons of European ancestry. It is strongest for Asians other than those from China, Japan, or Korea, and for Hispanics other than those from Cuba and Mexico.
• The likelihood of being employed in a small firm is about equal for immigrants (of the same ethnic group) who have been in the United States the same number of years although arriving at different times.

Conclusion

The study shows that recent immigrants are more frequently employed in small firms than earlier immigrants and native-born individuals. The patterns suggest that new immigrants find their first jobs in small firms and after gaining a knowledge of English move to larger firms. The overall findings demonstrate a contribution that small firms make to the process of assimilating new immigrants. Given the size and growth of the immigrant population in the United States, this contribution is important in the overall performance of the U.S. economy.

Ordering Information

The complete report is available from:

National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)

Order Number: PB96 168851

Cost: A05/$21.50; A01/$10.00 Microf.


*Last Modified 6-11-01