Academic journal article Canadian Review of Sociology

Economic Benefits of Self-Employment for Canadian Immigrants

Academic journal article Canadian Review of Sociology

Economic Benefits of Self-Employment for Canadian Immigrants

Article excerpt

THE ECONOMIC VIABILITY OF self-employment for ethno-racial minorities has been an area of scholarly debate for some time. However, previous research has been inconclusive. Some studies have pointed to self-employment as a route of social mobility and economic advancement for disadvantaged minority immigrants (see Ley 2006; Light 1972). This view, variously known as the "pull hypothesis," class mobility, and/or ethnic enclave theses, suggests that immigrants would benefit more from self-employment than from wage and salary employment because (a) self-employment is generally more beneficial, (b) ethnic resources help immigrants become self-employed successfully, and (c) discriminatory barriers blocking mobility opportunities of immigrant and minorities in the wage and salary market are either absent or are less prevalent in the self- employment market. An alternative argument known as "push hypothesis" and/or blocked mobility thesis suggests that immigrants and minorities experience discriminatory or other barriers in wage and salary employment forcing them to enter self-employment as a last resort (see Phizacklea and Ram 1996; van Tubergen 2005). This view suggests that self-employment has little or negative effect on earning when compared to those working as paid employees. They suggest that the idea that self-employment results in higher earnings is a "myth."

In this paper, I argue that the economic benefits of self-employment vary depending on its referent point: self-employment compared to wage and salary employment, minority immigrants compared to White immigrants, and depending on industry of employment. As such I will evaluate the economic benefits of self-employment based on (a) the ethno-racial origins of immigrants, some of whom have been more successful in self-employment than others, and (b) the economic sector of self-employment to which new immigrants gravitate. I use the 2006 Census and evaluate the self-employment earnings of 12 ethno-racial origins in Canada, taking into account industrial sectors, indicators of human capital, and a host of other control variables.

REVIEW OF THE LITERATURE

Early research, mainly in the United States, emphasized the economic benefits of self-employment. The class mobility thesis argued that self- employment is a means of upward mobility (Ley 2006; Sanders and Nee 1996). This thesis is also known as the "pull hypothesis," because immigrants and minorities are "pulled" into self-employment in an ethnic enclave where they are able to avoid disadvantages experienced in the general labor market. An ethnic economy is a unified system in which common ethnic origin, resources, language, cultural values, and internal solidarity helps the success of minority businesses. Ethnic enclaves also shield minority immigrants from the dominant group's competitive advantage and discriminatory potential. In addition, they can tap into niche ethnic-based opportunities and thus negotiate the terms of economic participation from a position of greater strength. Therefore, the class mobility and/or enclave thesis suggests that those who enter self-employment will succeed if they are able to activate ethnic resources, notably finance and labor, accessing ethnic markets, and utilizing cultural values and organizational capacities (Camarota 2000; Ley 2006; Light 1972, 1984; Light and Karageorgis 1994; Menzies et al. 2003; Portes and Back 1985; Waldinger, 1986; Wilson and Martin 1982; Wilson and Portes 1980). In Canada, Li (1994, 1997) showed that self-employment has a positive effect for both immigrants and non- immigrants. Using 1986 and 1991 Canadian Census data, he showed that most self-employed Canadians, including visible minorities, have higher net earnings after controlling for some of the relevant characteristics.

The alternative model known as the blocked mobility or "push hypothesis," suggests that immigrants are pushed into self-employment when they experience discrimination in the dominant labor market, lack knowledge of official languages or have low training (see Blalock 1967; Light 1979; Loewen 1971; van Tubergen 2005). …

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