Immigrant Businesses Can Have Wide Economic Impact

For decades, policymakers have debated the best ways to boost bleak inner-city economies. Immigrants and rundown urban neighborhoods are seen by some as a drain on the U.S. economy, according to Harvard Business School professor Michael Porter.

But in his study, Porter found that the 5.5 million immigrants who live in inner cities are key catalysts to economic growth and urban investment.

The immigrants "change the very face of entrepreneurship in inner cities" and "provide a much-needed shot of economic vibrancy to distressed neighborhoods," said Porter, who has advised Congress and the White House.

He looked at 100 inner cities from Oakland to Boston, defining them as "core urban areas that are economically distressed," with a 20% or higher poverty rate.

A large immigrant population is only one important factor, though. In an interview, Porter said that inner cities with resurgent economies have strong local leadership, regulatory climates that welcome businesses and good educational systems to train employees.

Another crucial element: large businesses and employers such as transportation and distribution centers, colleges and universities, movie theaters and concert halls. Those employers link the inner cities to the U.S. and global economies, spurring higher wages and job growth.

"Companies operating in urban communities have a tremendous ripple effect," Porter said.

He spoke in Chicago at a conference of the Initiative for a Competitive Inner City, a non-profit group that encourages companies to invest in inner cities.

According to Porter's findings:

• Job growth in 10 U.S. inner cities with high immigrant populations outpaced job growth in their broader metropolitan statistical areas, or MSAs. The cities: Anaheim, Long Beach, Oakland, San Jose, Calif.; Portland, Ore.; Seattle; Tulsa; St. Petersburg, Fla.; Winston-Salem, N.C.; and Jersey City.

• Inner-city businesses in the 100 largest U.S. cities provide 8.1 million jobs, or 8% of U.S. private employment.

• The average inner city wage has grown 1.8% to $39,300 from 1995 to 2003, outpacing average wage growth of 1.7% in metropolitan statistical areas.

The economic picture isn't all rosy.

While much of the USA was enjoying a huge economic and technology boom from 1995 to 2003, at least 40 of 100 U.S. inner cities lost jobs.

Inner-city jobs grew only 1%, while employment in metropolitan statistical regions soared 3%, according to Porter.