Migrants' inclination in Germany to launch a business is above-average, according to a new study. But due to below-average job prospects and language barriers, a higher percentage of them strike out out of necessity, rather than opportunity, compared to lifelong residents.
Around the world, people with a migrant background tend to have a greater entrepreneurial spirit than locals, and migrants in Germany are no exception. A new study by German government-owned development bank KfW has found that people with a migrant background launch businesses more often than lifelong German residents.
Between 2013 and 2017, according to the study, one in five founders (21 percent) in Germany either had foreign roots or a foreign nationality. Given their population share of 18 percent, this means migrants’ risk the leap into self-employment particularly often.
"In our society, we have learned that having your own job is better than working for other people," Ginan Sayed Ali, a migrant from Syria who owns a mobile phone shop in Osnabrück, told InfoMigrants. The 32-year-old thinks self-employment leads to "more freedom and more money."
Migrants' higher entrepreneurial spirit is not the only reason for their above-average self-employment rate, however. Poorer employment opportunities compared to the rest of the population is also a major driver, resulting in many so-called 'necessity startups.'
Among migrants, the share of 'opportunity entrepreneurs' — those who strike out who are hoping to capitalize on a business opportunity — is higher (47 percent) than those who take up self-employment out of necessity (38 percent) or lack of better income alternatives. However, the 38 percent share of businesses started out of necessity among migrants was still higher than the general average of 31 percent in Germany.
Lack of job qualifications and language barriers
The high percentage of 'necessity entrepreneurs' among migrants is connected to formal job qualifications and language skills required by the German labor market. Job prospects in Germany depend to a large degree on (formal) vocational training, where migrants are at a disadvantage: 46 percent of migrants between the ages of 18 to 64 either don't have any training qualification or one Germany doesn't recognize. Among the entire working population, that figure is only 22 percent.
When approached by InfoMigrants, a spokesperson of the Federal Ministry of Education and Research said it received roughly 67,000 applications for recognition of federally regulated occupations between 2015 and 2017, up from some 44,000 between 2012 and 2014. From 2015 to 2017, 67 percent of applications were fully recognized, close to three percent were rejected and 30 percent were partially recognized, which can require compensatory measures. Among people from the eight 'main countries of origin' of asylum seekers in Germany, the numbers were slightly worse: 55.5 percent of the 7,404 applications from the eight 'main countries of origin' (Syria, Iran, Iraq, Afghanistan, Eritrea, Somalia, Nigeria and Pakistan) were fully recognized; 2.5 percent were rejected and 42 percent were partially recognized, Germany's Federal Institute for Vocational Education and Training (BIBB) told InfoMigrants upon request.
However, the number of applications by people from the eight 'main countries of origin' has almost trippled since 2015, which is reason for optimism given that the people whose application for recognition were approved made €1,000 per month before tax more than before, according to the Federal Ministry of Education and Research.
Aside from job qualifications, command of the German language is another determining factor of employment opportunities. Case in point: The tendency to strike out out of necessity — rather than opportunity — is especially pronounced among those migrants speaking a language other than German in their homes. More often than not, those families only came to Germany recently.
While almost all jobs require some knowledge of German, more complex conversations on the job are also often conducted in German. Little is known about migrants' German skills, according to KfW, although its aforementioned study shows that two-thirds of migrants between the ages of 18 and 64 live in households where German is the main language.
In the study, KfW chief economist Jörg Zeuner said reducing language barriers for those who don't speak German as the main language requires time and support by means of language courses: It can take up to ten years before German becomes the dominant language in those households consisting exclusively of foreign-born people who have moved to Germany relatively recently.
Other EU countries, similar story
Regardless of their actual current labor situation, 38 percent of migrants in Germany prefer self-employment over dependent employment — a preference the KfW study attributes to a "greater risk appetite" and "more entrepreneurial role models" in migrants' home countries.
Elsewhere in Europe, migrants' desire to strike out is also more pronounced than among the lifelong resident population. In Norway, for instance, 21 percent of business founders in 2015 were migrants, the same number as in Germany — except that migrants account for only 13.8 percent of the population in Norway, not 18 like in Germany, which makes them even more entrepreneurial.
In Sweden, one in four businesses have founders with a migrant background. That number is even higher among young people. And according to the OECD, a migrant is ten percent more likely to run a business than a non-migrant.And in the UK, those born overseas are three times more likely to start companies than people born in Britain, a 2015 Global Entrepreneurship Monitor (GEM) survey showed. In total, 15.4 percent of migrant adults launched companies, compared to just 5.3 percent of lifelong UK residents.