America’s Industrial Cities Can Benefit from the Start-Up Visa
What could offer dynamic possibilities for not only immigrant entrepreneurs, but also the communities that host newly formed companies? The start-up visa! Immigrant entrepreneurs bring much desired STEM talent to American cities, while at the same time playing a critical role in urban renewal by hiring local residents, contributing to the tax base, and attracting ancillary businesses.
The start-up visa has especially strong potential for America’s so-called “rust belt cities.” While the term “rust belt city” may lead a reader towards envisioning a city facing hardship, it can also highlight its rich history, innovative spirit, and collective resiliency. These cities paved the way for America’s industrial revolution in the twentieth century. Cities like Cleveland, Detroit, Pittsburgh, and St. Louis served as the country’s trailblazers for technological and cultural change. Their economic prowess, dynamic cultures, and fortitude can be attributed in no small part to immigrants who had an unyielding drive to build a prosperous life for their families. Current immigrants share the same drive and work ethic to succeed. Across the Great Lakes region, immigrants own one out of five ‘main street’ businesses, such as laundries, gas stations, and restaurants. Nationally, they represent 30 percent of entrepreneurs engaged in small business growth.
In particular, immigrants have co-authored Detroit’s comeback story. Detroit was uniquely affected by the economic downturn of the Great Recession of 2008-09 as the region was highly dependent on the automotive industry. During those difficult economic times, immigrants played an instrumental role in bringing businesses to the region and they continue to be a key factor in the city’s ongoing resurgence. Between 2012 and 2017, the total population of Detroit’s Wayne County decreased by 2.2 percent while the county’s immigrant population jumped by 24 percent. Without such significant immigrant migration, Wayne County’s population loss would have been approximately 4 percent. A study conducted by the Partnership for a New American Economy reveals that immigrants living in Detroit created or preserved 1,768 manufacturing jobs in 2014 that would have likely disappeared or been transferred to other locations. While holding $489.8 million in spending power, these individuals also paid $92.4 million in federal taxes and $53.7 million in local and state taxes in 2014. More recently, in 2019, immigrants in Detroit paid $5.3 billion in taxes and carry a spending power of $13.6 billion. A Detroit immigrant resident was 37.8 percent more likely to become an entrepreneur than a U.S.-born resident. Moreover, immigrants are continuing to fuel the growth of communities. Hamtramck, a small city that is geographically surrounded by Detroit, had been losing residents since the 1950s. However, the city experienced a 27 percent increase in its population during the past decade. Reynolds Farley, a University of Michigan professor who studies population trends, has concluded that immigrants have been playing a significant role in rejuvenating the city and attracting more businesses.
Cities such as Detroit would further accelerate their revitalization if the start-up visa were approved by Congress. Start-up companies are important actors in urban development. Research shows that private-sector job growth is more present in areas that have a higher number of start-ups. These companies have generated more than three million new jobs since 2020. Also, over 50 percent of American start-ups worth $1 billion or more were founded by at least one immigrant. These 50 companies have a collective value of $248 billion and each company creates an average of 1,200 jobs, with the majority of these jobs being in the U.S.
Cities want to attract immigrant entrepreneurs but, unfortunately, our immigration laws do not provide an immigrant option for start-up entrepreneurs. Aside from the H-1B visa, the E-2 treaty traders/treaty investors visas and EB-5 investor visa program are options as well, but both require a substantial amount of money. Another is the rarely used International Entrepreneur Rule (more on that below). Such hurdles can be avoided if Congress approves a specific visa type (often referred to as a “start-up visa”) that allows an immigrant entrepreneur to travel to the U.S. and then quickly begin forming a company without requiring a substantial amount of money up-front. Countries such as Canada, Australia, and Singapore offer their own versions of start-up visas and many immigrant entrepreneurs have taken advantage of them. Canada’s start-up visa program is attractive because there is no net worth or minimum investment requirement. After three years of permanent residence, an entrepreneur can become eligible for Canadian citizenship. This feature provides an entrepreneur and his or her family with the assurance that they can set down roots in Canada.
Moreover, city planners and dynamic non-profits such as Global Detroit and the St. Louis Mosaic Project, have created innovative ways to equip immigrant entrepreneurs with the tools to establish themselves. The start-up visa would further facilitate their initiatives. By marketing their respective city’s attributes while providing resources for start-ups, rust belt cities would be able to attract a greater number of immigrant entrepreneurs. In turn, these cities can increase innovation, further diversify their economies, and create job opportunities.
Last year, Congress moved towards developing such opportunities when the U.S. House of Representatives passed a provision to create a start-up visa. However, the U.S. Senate removed immigration provisions that were passed by the House. In the meantime, immigrants can avail themselves of the U.S. International Entrepreneur Rule (IER) program. While the program has its advantages, its benefits are only available for existing startups. Under the program, a startup may qualify if it offers a significant public benefit, has demonstrated potential for rapid growth, was launched in the past five years, has received considerable capital from established U.S. investors, and has received development awards or grants from the U.S. government. Also, the immigrant entrepreneur must have a substantial ownership interest and have a central, active role in the startup. It is important to note, however, that the benefit can be terminated by the Department of Homeland Security at any time. The IER program also does not provide a way for the immigrant entrepreneur to obtain permanent residency. The start-up visa option may be more enticing to an entrepreneur who wishes to establish long-term roots in the U.S. Plus, the criteria for the start-up visa can be less stringent in comparison to the IER program. For example, a start-up visa would not require a substantial capital investment or government issued grants or development awards.
If the start-up visa becomes a reality for immigrant entrepreneurs, rust belt cities can accelerate the renewal of their economies. Thanks to city planning and innovative non-profits, our ‘rust belt’ cities have already authored an incredible comeback story. Immigrant entrepreneurs, supported by start-up visas, can complement their efforts.