3. Immigrants’ self-employment and entrepreneurship activities

Immigrant entrepreneurship has traditionally been associated with economic adversity, where self-employment was used to earn a living due to a lack of opportunities in the job market. There is a body a research that supports this perspective (Barrett, Jones and McEvoy, 1996[1]) and others note that some immigrants pursue self-employment to escape low-wage employment and discrimination at work (OECD, 2011[2]; OECD/European Commission, 2023[3]). The implication is that immigrant-owned businesses serve specific local ethnic markets (e.g. shops providing speciality food products) and have a limited economic impact (Clark and Drinkwater, 2000[4]; Basu and Altinay, 2002[5]; Dalhammar, 2004[6]).

While this perspective remains true for some immigrant entrepreneurs, the picture of immigrant entrepreneurship is changing and becoming more complex. Labour market outcomes of immigrants are at the highest levels since 2001, particularly among immigrant women (OECD, 2023[7]) and the number of immigrant entrepreneurs and business owners has nearly doubled over the past decade in the European Union (EU). This is largely explained by an increase in international migration flows over this period. Moreover, the economic impact of immigrant-owned businesses appears to be increasing in many countries. For example, recent research in Sweden shows that immigrant-owned firms, and especially those owned by non-European immigrants, are more likely to employ others and have more employees than native-owned firms (Neuman, 2021[8]). Further, recent German evidence suggests that immigrant founders are more likely to have high growth ambitions relative to those born in Germany (75% vs. 55%) and that 60% of German unicorns have at least one immigrant founder (Startup Verband, 2023[9]). These studies are consistent with a recent study in the United States that found that immigrant entrepreneurs are more likely than native-born entrepreneurs to be pursuing economic opportunities and create more opportunities for all entrepreneurs (Box 3.1). Please see (OECD/European Commission, 2021[10]) for further discussion on the different types of immigrant entrepreneurs.

Public support for immigrant entrepreneurs has traditionally been limited in scale and scope. In most EU Member States and OECD countries, support – when it existed – was typically comprised of training and mentoring schemes operated largely by non-government actors. There are certainly examples of effective schemes, but most are not able to meet demand. Overall, support for immigrant entrepreneurs in the EU is less available than for other target groups (e.g. women, youth) and offers vary substantially in quality due to a scarcity of resources (Figure 3.1). The most significant gap in the support system is in the areas of access to finance, where microfinance is an important tool in most EU Member States. While microfinance can support many profiles of immigrant entrepreneurs, it is less likely to effectively support those with innovative business ideas.

Governments can also do more to harness the job creation potential of skilled immigrant entrepreneurs. The new EU Blue Card came into force in 2023 and is an example of policy efforts to facilitate entrepreneurship among highly skilled immigrants. It aims to help EU Member States attract and retain highly skilled workers, and it is now possible for recipients to use self-employment as a complementary activity to beneficiaries’ main employment activity (Box 3.2). Moreover, there has been a rise in the introduction of start-up and talent visas over the past decade in EU Member States and OECD countries, which aim to attract immigrants with in-demand skills and experiences (OECD, 2023[7]; OECD/European Commission, 2021[10]). Among EU Member States, there also appears to be an increase in the use of specialised instruments to support high-potential immigrant entrepreneurs, including dedicated incubation and acceleration programmes. Examples include the new Migrant Accelerator programme (TMA, 2023[13]) launched to support the German Federal Start-up Strategy (Die Start-up-Strategie der Bundesregierung) (BMWK, 2022[14]). This initiative ran its first cohort in June-August 2023, offering workshops and individual mentoring with a diverse group of mentors that reflects the diversity of targeted entrepreneurs. This approach serves as a model for other immigrant entrepreneurship initiatives because it is managed by people from the targeted communities and the vast majority of front-line workers also come from targeted communities. This model helps to ensure that the support offer is relevant and attractive to potential participants.

Russia’s unprovoked war of aggression against Ukraine resulted in a historic mass outflow of people fleeing the conflict. Starting in February 2022, more than 150 000 people fled Ukraine per day for several weeks. By end-March 2023, 4.7 million Ukrainians had registered for temporary protection schemes in the EU. Unlike the refugee flows in the EU in 2014-17, Ukrainian refugees are, on average, more educated and the flows include more women and children (OECD, 2022[16]). Governments have responded quickly. The Council of the European Union enacted, for the first time, the Temporary Protection Directive to provide a set of harmonised rights for beneficiaries in EU Member States and many non-EU OECD countries also took measures to facilitate the entry and stay of Ukrainian people fleeing the war (OECD, 2022[17]).

Governments are using a range of measures to facilitate the entry of Ukrainian refugees into the labour market and entrepreneurship policy has a role to play. Refugees face specific barriers to integrating into labour markets due to the nature of their migration, including traumatic experiences in many cases. These challenges include difficulties mastering a new language, a lack of networks to facilitate personal and professional opportunities, and a lack of documentation which can hinder credential recognition and access to the financial system (OECD, 2022[16]). Self-employment and entrepreneurship can open up additional opportunities to work, but here again refugees face specific challenges stemming from their individual context (e.g. language and cultural barriers, skills gaps, limited access to finance and premises) as well as factors in their host environment (e.g. legal uncertainty, discrimination) (OECD, 2019[18]). There are examples of successful entrepreneurship schemes for refugees, often when programmes combine multiple types of support and offer personalised assistance. Another key success factor is the use of tailored delivery methods, including the use of specialised staff that can speak the relevant languages and are knowledgeable about the local entrepreneurship support system as well as the challenges faced by refugees.

Many countries have either directly introduced measures to support Ukrainian refugees in entrepreneurship or support organisations that deliver entrepreneurship programmes. Many examples are contained in the Country Profiles in Part III of this report. The examples include business incubators such as Garage48 in Estonia, which runs a regular programme called Empowering Women Estonia for female refugees from Ukraine in partnership with the Estonia Refugee Council (Garage48, 2023[19]). There are also many other foundations and social enterprises offering entrepreneurship training for Ukrainian refugees in Estonia (OECD, 2023[12]). Other examples include bilingual entrepreneurship training programmes offered by Local Enterprise Offices in Ireland. In Fingal (Ireland), a programme called Start Your Own Business was delivered to 80 Ukrainian refugees in 2023 (Fingal County Council, 2023[20]). Other countries such as Poland have adjusted some of the laws to allow Ukrainian refugees to start certain types of businesses. In Poland, the laws regulating business creation were adjusted in March 2022 to allow Ukrainian refugees to start certain types of businesses including self-employment and limited partnerships (Poland, 2022[21]).

Immigrants from non-EU countries are slightly less likely than non-immigrants to be self-employed in the EU. About 13% of immigrants in the EU were self-employed in 2022 relative to about 15% of non-immigrants (Figure 3.2). The share of immigrants who are self-employed is 11% higher among those born in another EU Member States compared to those born outside of the EU. While the overall self-employment rate among immigrants has been relatively stable over the last decade, there has been a divergence in the self-employment rate between immigrants from EU Member States and those from non-EU Member States in recent years. Between 2019 and 2022, the self-employment rate among immigrants from other EU Member States has increased by 8% relative to a 2% decrease in the self-employment rate of immigrants from non-EU Member States.

Self-employment rates for immigrants were higher than non-immigrants in 11 EU Member States in 2022 (Figure 3.3). Self-employment rates for immigrants from non-EU Member States were highest in the Czech Republic (23%), Croatia (19%) and Hungary (18%), while self-employment rates for immigrants from other EU Member States were highest in Greece (23%), Spain (19%) and Croatia (17%). Conversely, immigrants were least likely to be self-employed in Sweden, Luxembourg and Germany, where about 7% of immigrants born outside of the EU were self-employed in 2022. However, these proportions were only slightly less than the self-employment rate of non-immigrants. The variations in self-employment rates among immigrants reflect variations in labour market conditions, framework conditions in place to support entrepreneurship and self-employment, wage-earner immigrant flows and the level of support for immigrants.

Immigrants are about as active as the overall population in self-employment, but a gap emerges when compared to the “most entrepreneurial population group core-age males (30-49 years old) (see Reader’s Guide for further discussion). Across the EU, there would be an additional 1.3 million self-employed immigrants if they were as active in self-employment as 30-49 year old men. This accounts for about 5% of the actual number of self-employed immigrants in 2022 (Figure 3.4). This gap is as high as 13% in Greece, but there are eight EU Member States where immigrants were as active as core age males (30-49 years old) in self-employment in 2022: Bulgaria, Croatia, the Czech Republic, Hungary, Luxembourg, Portugal, Romania and the Slovak Republic. Therefore, there are no “missing” immigrant entrepreneurs in these countries because the share of immigrants in self-employment could be viewed as an over-representation.

The gender gap among the self-employed can also be seen among those who are immigrants, regardless of where they were born. While self-employment rates for immigrants have remained stable over the last decade, the convergence in self-employment rates between immigrants and non-immigrants has been greater for women than men, particularly for immigrants born in another EU Member State (Figure 3.5). These shares converged in 2021 and became nearly the same in 2022 (about 11%). The proportion of immigrant women who are self-employed decreases among women born in a non-EU Member State – about 9%. However, gender gaps among the self-employed were smaller among immigrants relative non-immigrants. The smallest gender gap was among immigrants from non-EU countries, which was nearly 6 percentage points (p.p.) in 2022, while the gender gap among self-employed immigrants born in another EU Member State was slightly higher at 7 p.p. Non-immigrants had the largest gender gap at nearly 8 p.p. in 2022. However, both the gender gaps among the self-employed born in a non-EU country and non-immigrants decreased by nearly 2 p.p. over the decade. Data cannot be presented at the country level due to small sample sizes, and there are still many knowledge gaps about entrepreneurship activities by women entrepreneurs. The EU is working to address this gap through the “ATHENA” project, which analyses the needs of migrant women entrepreneurs in Belgium, Germany, Greece, Lithuania, Italy and Spain (Box 3.3).

The share of immigrants who are self-employed in the EU is 28% higher in 2022 than in 2013. In 2022, there were almost 26 million self-employed people in the EU, of which nearly three million were immigrants (11%). This was comprised of 2 million people born outside of the EU and 985 500 people born in another EU Member State. The share of immigrants among the self-employed in the EU has steadily increased over the last decade (Figure 3.6). This increase was slightly greater among those born in other EU Member States (increase by 76%) relative to those born outside of the EU (increase by 71%).

At least one-in-five self-employed workers were born in another country in 7 EU Member States. While the proportion of self-employed people who were born in another country varies substantially across EU Member States, the proportion of self-employed people who were born outside of the EU account for the majority of the self-employed immigrants in all but one EU Member State (Figure 3.7). Nearly two-thirds of the self-employed in Luxembourg are immigrants with the large majority being those who were born in another EU Member State (51%). Other countries with high shares of immigrants among the self-employed include Malta (34%) and Cyprus (30%) – about one-fifth of whom were born in a non-EU country. The countries with the lowest shares of self-employed immigrants are Hungary, Greece (5% each) and the Czech Republic (7%).

The share of self-employed immigrants who employ others has remained relatively constant over the last decade. About 30% of self-employed immigrants in the EU employed at least one employee in 2022, which was about the same proportion as non-immigrants (Figure 3.8). Among self-employed immigrants, those who were born in a non-EU country were slightly more likely to employ others than those born in another EU Member State in 2022 (30% vs. 28%). This was on par with their non-immigrant counterparts, of whom 29% had at least one employee in 2022.

Self-employed immigrants were more likely than non-immigrants to employ others in over half of EU Member States in 2022. Considering self-employed immigrants born outside of the EU, the highest shares of self-employed immigrant employers were in Croatia (50%), Germany (48%) and Austria (48%) (Figure 3.9). Moreover, at least one-third of self-employed immigrants are employers in nine EU Member States. Among self-employed immigrants who were born in another EU Member State, the proportion with employees ranged from about 17% in the Czech Republic to 38% in Greece.

The gender gap among immigrant employers has been constant. Among self-employed women born in a non-EU country, the share of those who employed others was constant at about 25% prior to COVID-19. This share dropped slightly to 23% and recovered to 25% by 2022 (Figure 3.10). This proportion was below the share of self-employed immigrant men born outside of the EU. Prior to COVID-19, about 32% employed others. Although the proportion dropped during COVID-19, it climbed back to 33% in 2022. A similar pattern is observed among self-employed immigrants from other EU countries, although both men and women are less likely to have employees.

The share of self-employed immigrants by sector largely follows the share of non-immigrants. However, some differences can be observed for those born outside of the EU. For example, the self-employment rate for this group is slightly lower in Professional, scientific activities (23%), Construction (19%) and Administrative, support services (8%) relative to those born in another EU Member State and for those born in the reporting country in 2022 (Figure 3.11). However, immigrants born outside of the EU had higher self-employment rates in Other service activities relative to those born in another EU Member State (26% vs. 24%), yet both rates remained below the share of non-immigrants in the sector (30%). On the other hand, immigrants born outside of the EU were more likely to be self-employed in Wholesale, food services (18%), Transportation and storage (11%) and Education (9%) compared to those born in another EU Member State and for those born in the reporting country. Similarly, among those born in another EU Member State, the self-employment rate was slightly higher in Construction than those born in the reporting country (26% vs. 25%).

Similarly, occupations of self-employed immigrants are largely consistent with those of non-immigrants. In the EU, the self-employed workers are most likely working in service and sales or as professionals (Figure 3.12). Self-employed immigrants are more likely to be working in service and sales (25% for those born outside of the EU and 16% of those born in another EU Member State) compared to non-immigrants (15%). This is also true for self-employed immigrants with employees (25% for those born outside of the EU and 17% of those born in another EU Member State vs. 16% of non-immigrants). Self-employed immigrants from another EU Member State are also more likely to be working as Professionals than non-immigrants (29% vs. 25%). However, self-employed immigrants who were working as Professionals in 2022 were less likely to have employees than non-immigrants.

Business creation is an important pathway into work for many immigrants since many face challenges entering the labour market, particularly those with low skill levels. However, many of these businesses operate in highly competitive sectors and have little growth potential. Governments could consider doing more to improve the sustainability of these businesses by attracting more self-employed immigrants into support schemes and increasing the scale of support offered when demand is sufficient.

One of the most significant trends in inclusive entrepreneurship has been the growth – both absolute and relative – of immigrant entrepreneurship. There is also a growing recognition of the contributions made to innovation and job creation by immigrant entrepreneurs, yet policy has been slow to adjust to the changing context. This calls for greater investments to supporting high-potential immigrant entrepreneurs, including greater use of outreach and incentives to attract them. To expand and strengthen support for high potential immigrant entrepreneurs, governments could consider:

  • Increasing the scale of immigrant entrepreneurship support to keep pace with the relative and absolute growth in immigrant entrepreneurship;

  • Using financial supports for immigrant entrepreneurs to steer them away from sectors with oversupply; and

  • Expanding the use of entrepreneurship schemes for refugees when the targeted population has skills, experience and motivation for entrepreneurship.

Examples of recent policy action to support immigrants entrepreneurs are contained in the country profiles in Part III of this report.

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