Building a thriving Main Street: Charting success for Michigan’s immigrant entrepreneurs

Immigrants have long contributed to the economic vitality of the state, bringing new energy, ideas and jobs to Michigan. As workers, they help sustain Michigan’s labor force, increase consumer spending, and help fund public schools and services through tax contributions. As entrepreneurs, immigrants supply jobs, revitalize investment in areas that have declined and provide needed services to community members. In an era of migration, Michigan must commit to being a welcoming state that delivers opportunity to all Michiganders, regardless of where they were born. This brief examines the many ways immigrants contribute to Michigan’s economy and highlights steps that policymakers can take to reduce barriers to success for immigrant entrepreneurs and workers. The report will primarily focus on immigrant Main Street business owners. Main Street businesses are those businesses that are small-scale, less capital intensive and more locally oriented.¹ They tend to fall into three broad sectors: retail, accommodation and food services, and neighborhood services.²

Some of the many ways immigrants contribute to the Great Lakes state include:

• Immigrants strengthen and sustain Michigan’s labor force. Continued immigration to Michigan has helped sustain population growth, and helps power Michigan’s economy by growing the number of available workers. Over the last 15 years, for example, Michigan’s immigrant population increased 24.5%, while the native-born population declined 1.5% during the same period.³ Cities like Detroit heavily depend on immigrants to sustain the working-age population. Between 2000 and 2015, Detroit lost more than 141,000 residents and would have lost 220,000 more residents without the arrival of immigrants.⁴
• Immigrants play an outsized role as business owners and entrepreneurs. According to the Kauffman Entrepreneurial Index, immigrants are almost twice as likely as U.S.-born individuals to become entrepreneurs.⁵ In Michigan, while immigrants represent 7% of the labor force overall, they represent 12% of business owners and 20% of Main Street business owners (See Figure 1).⁶
• Immigrant business owners strengthen our economy and revitalize neighborhoods. Though immigrants make up only 6% of Michigan’s population, immigrant business owners generated $1.3 billion in earnings ($336 million among immigrant Main Street business owners). Immigrant business owners are helping to power Michigan’s economy and are bringing jobs and resources to neighborhoods across the state. In total, immigrant business owners generated 12% of total business earnings in Michigan.⁷

Still, immigrant entrepreneurs continue to face barriers to business startup and success. Keys to strengthening outcomes include:

• Facilitating access to financing.
• Leveraging federal funds to support small business development.⁸
• Providing business planning and management.
• Supporting immigrant and U.S.-born business owners while easing racial tensions.
• Providing access to official documentation.

Main Street Businesses: A Driver for Michigan’s Economy

Main Street businesses help Michigan’s economy grow. They increase consumer spending, supply jobs, revive investment in areas that have declined and provide needed services to community members (See Table 1). Despite their important role in the economy, Main Street businesses tend to have thin profit margins. When it comes to annual earnings among owners, immigration status makes a difference. Immigrant Main Street business owners earn less than nonimmigrant Main Street business owners. Their median annual earnings were $36,094 compared to $40,033 among U.S.-born Main Street business owners.⁹ Immigrant Main Street business owners also tend to earn less than both immigrant and nonimmigrant workers in the civilian labor force, who earn $45,037 and $43,000 respectively.

Despite this gap, immigrants continue to play a critical role in the growth of the Main Street business community, accounting for 20% of all Main Street business owners, despite making up only 7% of Michigan’s labor force. Detroit is one of 31 metro areas across the country in which immigrants make up all growth in Main Street business ownership. Recognizing this, business leaders in Detroit launched an initiative called ProsperUS Detroit in 2012. ProsperUS is a micro-entrepreneurship initiative designed to empower and equip low- and moderate-income, immigrant and minority entrepreneurs. The initiative has helped foster growth in the immigrant business community in Detroit since its founding.¹⁰

Building a Thriving Business: Race and Gender Matter

For many, entrepreneurship can create a path to economic security and prosperity. Sadly, opportunities for business creation and success still tend to fall along racial and gender lines. The following section explores the barriers that racial and gender minorities continue to face in the business community, and how systemic barriers and racism can affect the potential for wealth creation among these entrepreneurs. There is much work left to do to ensure that everyone can have access to opportunities in business ownership.

Race and Ethnicity

A long history of racial and ethnic discrimination in public and private institutions is still visible today. From discriminatory lending practices to bank closures to underinvestment in infrastructure in communities of color, entrepreneurs of color continue to face disadvantages that hinder business creation. Among immigrant entrepreneurs in Michigan, White entrepreneurs make up the largest racial demographic group of business owners (See Table 2). Important to note is that Arab American and Chaldean American immigrants are often considered “White” in census data even though their lived experiences are unlike those of other White entrepreneurs and U.S.-born residents. Asian immigrant entrepreneurs, as the second largest racial group, make up almost a third (31%) of the share of both Main Street business owners and other business owners. Black and Hispanic or Latinx immigrant entrepreneurs make up the smallest share of immigrant Main Street business owners in Michigan. These disparities speak to the challenges that people of color continue to face in entrepreneurship in Michigan.

Table 3 depicts the top countries of birth for immigrant business owners in Michigan. Iraqi immigrants make up the largest share of immigrant business owners (16%), followed by Indian immigrants (12%) and Lebanese immigrants and Korean immigrants, who both make up 6% of all immigrant business owners.

Gender

Systemic barriers to equal pay and equal treatment have long existed for women in the labor force. Today, most women are still not paid the same for performing the same jobs as men. Michigan women are paid 74 cents for every dollar paid to men, accounting for an annual wage gap of $12,993.¹¹ The gap is even larger for women of color. African American women are paid 64 cents, Latinx women are paid 57 cents and Asian women are paid 96 cents for every dollar paid to White men.¹² In regards to business ownership, Figure 2 shows that immigrant women make up a significant share of both business owners and Main Street business owners—30% and 38% respectively. When compared to U.S.-born women, immigrant women make up a slightly larger share of business owners than U.S.-born women, but a smaller share of Main Street business owners, than U.S.-born women.

Business Value is Often Contingent on Race and Gender

Among those who are able to open a business, business value measured in annual revenue, can reveal the extent of profitability of the business and the potential for wealth creation. Unfortunately, research shows that business value falls along racial and gender lines. In Michigan, White-owned businesses are valued 3.7 times as high as businesses owned by people of color.¹³ This disparity exists across gender as well. Male-owned businesses in Michigan are valued 4.2 times as high as businesses owned by women.¹⁴ What this means is that it’s harder for entrepreneurs of color and women to use their business as a mechanism for building wealth and achieving economic security compared to their White and male counterparts.

Spotlight on Immigrant Entrepreneurs in Michigan

Mediterranean Island International Foods
Grand Rapids, MI
Owner: Farouq Karadsheh

Farouq Karadsheh, born in Jordan, migrated to the United States with his family in 1972. A couple of years after moving to Chicago, Illinois, he and his siblings decided to move to the Great Lakes state, landing in Holland, Michigan. At the time, Farouq remembers a small, but growing immigrant population in the area. Indeed, it was because of the flourish of foreign-born neighbors over the years that Farouq and his brother saw a need for an international grocer. What started out in a small location with only one employee (a butcher), has now become the sprawling Mediterranean Island International Foods in Grand Rapids. Today, Farouq’s business employs 25 workers and offers products from 25 different countries. Farouq recalls that bank loans were key to helping the grocery store get off the ground, as were personal savings. Farouq, like many immigrant small business owners, wasn’t aware of any public resources or training programs for small businesses when he started out. That didn’t stop him from achieving his dream of building a store where everyone can feel at home. Local organizations helping to resettle refugee families often bring recently arrived community members to the store where they can feel at ease. Farouq says that the store is a place where immigrants can find social support. He hopes his business can continue to be a safe and comfortable space for all community members in Grand Rapids.

Chez Olga
Grand Rapids, MI
Owner: Olga Benoit

When Olga Benoit moved to Michigan from Haiti in 1993, she never imagined she would open a restaurant. She just knew that food made people happy. It wasn’t until she started sharing her Caribbean dishes with friends and coworkers that the demand started to pour in. What began as a small catering business transformed into a successful restaurant that has become a staple in the Grand Rapids community. Olga’s dreams took a little longer to reach due to challenges she faced in raising enough startup capital to open her restaurant. Olga leaned on personal savings and support from family to raise the funds over several years. After her story caught the attention of a local news outlet, strangers began to send in donations to help her dream come true. She was finally able to open the doors of Chez Olga in July 2010. After being a part of the business community for several years, Olga feels that the city has not stepped up to form relationships with her and many immigrant Main Street businesses in the area. She shares that there is still a need for guidance and financial support for aspiring immigrant business owners.

Meeting the Challenge: Helping Immigrants Overcome Barriers to Business Ownership and Success

It’s clear that a thriving community of immigrant entrepreneurs is a win for all Michiganders. Paving the path to successful business ownership, therefore, is the key to ensuring positive outcomes among these entrepreneurs. To do this, policymakers and local business communities alike must step up to reduce the barriers they face which include, limited access to financing; unfamiliarity with American financial systems; absence of official documentation (i.e., personal identification card); discrimination in financial institutions and business networks based on race, gender or nativity; and lack of training in business ownership and management.

Policy changes are needed to help entrepreneurs further strengthen the state economy. Here are some ways policymakers can support immigrant entrepreneurs in Michigan:

• Facilitating access to financing. For many entrepreneurs, raising capital is one of the most common barriers to successfully opening and operating a business. Immigrants, in particular, may not be familiar with American financial institutions and lending practices. Research shows that immigrants tend to rely more on personal or family savings as a source of start-up capital than U.S.-born entrepreneurs.¹⁵ Ensuring that immigrants have guidance on diverse sources of business capital can help entrepreneurs create new businesses or sustain existing ones. Community Development Fund Institutions (CDFI) are a valuable resource in many Michigan communities. These institutions often provide access to loans for micro and small businesses, banking services, as well as business management training. Creating CDFIs in more communities across Michigan can strengthen outcomes among immigrants, people of color and those of modest means.¹⁶
• Providing business planning and management. Language barriers and cultural differences can slow the process of integration into mainstream business communities and institutions for immigrant entrepreneurs. Providing culturally competent business training and services can go a long way in integrating immigrant entrepreneurs into American business networks and practices.
• Leveraging federal funds to support low-income immigrant entrepreneurs.¹⁷ The Community Development Block Grant (CDBG) is a federal program that supports local and state community development initiatives. The Michigan Economic Development Corporation (MEDC) is the agency that administers CDBG programs in Michigan. MEDC can take steps to ensure that immigrants have access to federally funded programs. This can include outreach to immigrant entrepreneurs and developing materials in languages other than English. CDBG grants could also be used to develop programs modelled after ProsperUS Detroit to diversify and grow local business communities across the state.
• Supporting immigrant and U.S.-born business owners while easing racial tensions. Business competition that gets caught up in racial prejudice and hostility can hinder the development of healthy and welcoming business communities across the state. Developing “welcoming city” initiatives that address the needs of both U.S.-born and immigrant entrepreneurs and residents can help ease racial tensions as demographics continue to change. Welcoming Michigan is one existing initiative that currently partners with 19 localities across the state.¹⁸
• Providing access to official documentation. As workers and entrepreneurs, immigrants depend on official documentation like a state driver’s license to travel, open a bank account, apply for loans and lease spaces for business, among others. Making driver’s licenses and state ID’s available for all workers regardless of citizenship is a crucial step in achieving full participation in the economy.

Endnotes

1. Dyssegaard Kallick, D. (2015). Bringing Vitality to Main Street: How Immigrant Small Businesses Help Local Economies Grow. Fiscal Policy Institute (FPI), At Americas Society/Council of the Americas. Retrieved from http://fiscalpolicy.org/wp-content/uploads/2015/01/Bringing-Vitality-to-Main-Street.pdf.
2. Dyssegaard Kallick, D. (2015). Bringing Vitality to Main Street: How Immigrant Small Businesses Help Local Economies Grow. Fiscal Policy Institute (FPI), At Americas Society/Council of the Americas. Retrieved from http://fiscalpolicy.org/wp-content/uploads/2015/01/Bringing-Vitality-to-Main-Street.pdf.
3. Austin, J. Kolluri, A., & Tobocman, S. (2017). Michigan: We are All Migrants Here. Retrieved from http://www.globaldetroit.com/wp-content/uploads/2017/07/Michigan-We-Are-All-Migrants-Here_2017.pdf.
4. Austin, J. Kolluri, A., & Tobocman, S. (2017). Michigan: We are All Migrants Here. Retrieved from http://www.globaldetroit.com/wp-content/uploads/2017/07/Michigan-We-Are-All-Migrants-Here_2017.pdf.
5. Fairlie, R., Morelix, A., & Tareque, I. (2017). 2017 The Kauffman Index Startup Activity National Trends. Retrieved from https://www.kauffman.org/kauffman-index/reporting/startup-activity.
6. Fiscal Policy Institute (FPI) analysis of 2016 American Community Survey (ACS), 5-year estimates.
7. Fiscal Policy Institute (FPI) analysis of 2016 American Community Survey (ACS), 5-year estimates.
8. Prosperity Now. “Microbusiness Support.” Retrieved from http://scorecard.prosperitynow.org/data-by-issue#jobs/policy/microbusiness-support.
9. Fiscal Policy Institute (FPI) analysis of 2016 American Community Survey (ACS), 5-year estimates.
10. ProsperUS Detroit. “Who We Are.” Retrieved from http://www.prosperusdetroit.org/who-we-are/.
11. National Partnership for Women and Families. (2017). “Michigan Women and the Wage Gap.” Retrieved from http://www.nationalpartnership.org/research-library/workplace-fairness/fair-pay/4-2017-mi-wage-gap.pdf.
12. National Partnership for Women and Families, “Michigan Women and the Wage Gap,” April 2017. http://www.nationalpartnership.org/research-library/workplace-fairness/fair-pay/4-2017-mi-wage-gap.pdf.
13. Prosperity Now. “Business Value by Race.” Retrieved from http://scorecard.prosperitynow.org/data-by-issue#jobs/outcome/business-value-by-race.
14. Prosperity Now. “Business Value by Gender.” Retrieved from http://scorecard.prosperitynow.org/data-by-issue#jobs/outcome/business-value-by-gender.
15. Wainter, A. (2015). Harnessing Immigrant Small Entrepreneurship for Economic Growth. Bread of the World. Briefing Paper No. 27. Retrieved from http://www.bread.org/sites/default/files/downloads/briefing-paper-27_0.pdf.
16. Theodos, B., Fazili, S., & Seidman, E. (2016). Scaling Impact for Community Development Financial Institutions. Urban Institute. Retrieved from https://www.urban.org/research/publication/scaling-impact-community-development-financial-institutions.
17. Prosperity Now. “Microbusiness Support.” Retrieved from http://scorecard.prosperitynow.org/data-by-issue#jobs/policy/microbusiness-support.
18. Welcoming Michigan. “The Welcoming Michigan Story.” Retrieved from http://welcomingmichigan.org/.

[types field=’download-link’ target=’_blank’][/types]