Multi-American | How immigrants are redefining 'American' in Southern California

How immigrants will help reshape the future wealth of Los Angeles

Photo by moooster/Flickr (Creative Commons)

Over the next several decades, what will be the color of money in Los Angeles? A new report from the California Community Foundation points to what some might find an unexpected driver of wealth in the region: entrepreneurial immigrants.

Along with entrepreneurship, immigration is expected to be one of the two most likely factors shaping the creation of wealth in the region in the coming 50 years, according to the report. An excerpt:

Los Angeles’ entrepreneurial community is diverse, with more women- and minority-owned businesses than any other county in the nation, according to the Federal Reserve.

There is a strong connection between entrepreneurial activity and immigration. Immigrants were, for example, more than twice as likely in 2010 to start businesses each month than were native-born U.S. residents.

Titled "The Future of Philanthropy in Los Angeles: A Wealth of Opportunity," the report presents a picture of the wealth that is due to change hands in the next five decades as older residents die off, some of whom will leave money to nonprofits. According to the report, Los Angeles County is poised to experience unprecedented growth in its wealth - and thus, potential philanthropy - between now and 2060. It is also expected to have far and away the most money changing hands between generations during this time, more than in any other U.S. city.

This is partly due to a large degree of entrepreneurship in Los Angeles, which ranked last year as having the higest level of entrepreneurship among the 15th largest cities in the nation.

What do immigrants have to do with it? A bit more from the report:

According to the transfer of wealth in L.A. County study by RUPRI, Los Angeles will likely continue to experience two types of major international immigration. The first is entry level workers. Typically, these households require two or three generations before there is a significant accumulation of assets.

The second type is the immigration of higher net worth and higher educated households. Because L.A. is a gateway and safe harbor for dislocated persons and families, it will likely see high levels of immigration from this second group. Like retirees moving to warmer climates, these households come into the community with significant wealth, thereby establishing a quicker opportunity for giving back.

Between first-generation immigrants and their entrepreneurial offspring (some of whom take over family businesses, as we'll be discussing in a panel at KPCC next week), it adds up to a good amount of entrepreneurial activity. According to the Kauffman Index of Entrepreneurial Activity, a national study that contains data on the growth of immigrant entrepreneurship, the percentage of new entrepreneurs who are immigrants more than doubled between 1996 and 2010, making up close to a third (29 percent) of all new entrepreneurs. The study also notes that the entrepreneurship rate among immigrants is more than double that of native-born Americans.

Earlier this week, I caught up with Christopher Compton of CCF, who helped put together the wealth report. He cited the Kauffman Index, applying it to L.A. and the data in the new report.

"While this is national data, it’s important to note that they found Los Angeles to have the highest entrepreneurial activity among the 15 largest metropolitan areas in the U.S.," Compton wrote in an email.

"L.A.-based entrepreneurs like Fred Chang (NewEgg), Darioush Khaledi (K.V. Mart) or Do Won & Jin Sook Chang (Forever 21) are perfect examples of the growing wealth of immigrant entrepreneurs in L.A. County," he said. "All three companies are listed on the L.A. Business Journal’s 2011 list of the fastest growing privately held companies in Los Angeles, and all three are run by committed entrepreneurs who are also committed philanthropists."

Another interesting finding in the CCF report: Although the region's estimated per-household net worth remains highest on the Westside, the net worth of regions like the San Gabriel and San Fernando valleys is higher, with the San Fernando Valley ranking first in total current net worth, the San Gabriel Valley second. It's unclear how much is due to affluent foreign-born residents and their descendants, but there are several pockets of immigrant affluence in these regions.

As is the case in Los Angeles, though, pockets of wealth are often found right alongside low-income communities. One of the challenges for non-profits who serve these communities, and who hope to reach out to immigrants who have become affluent, is how the money is spent: Some middle-class immigrants, for example, send money abroad to help their hometowns. Others help support poorer relatives here and abroad.

But previous research has indicated that many do give back to their communities in the U.S. Two years ago, University of Southern California sociologist Jody Agius Vallejo studied civic involvement among the Mexican and Mexican American middle class. From that report:

One response to the unwelcome reception they receive as they move into middle-class business institutions is to create civic organizations that revolve around a minority middle-class identity.

The stated goals of these civic organizations are to promote the mobility of coethnics by instituting the professional resources the ethnic community has traditionally lacked such as business education, financial literacy and networking opportunities.

The entire California Community Foundation report can be downloaded here.