Explaining Chinese Restaurants, Korean Dry Cleaning, and Indian Motels

A combination of social networks, skills, and circumstance can lead to ethnic groups clustering around a single industry.

Robert Galbraith / Reuters

In the U.S. one might notice a curious concentration when it comes to jobs—certain ethnicities dominate certain industries. Greek immigrants are more likely to run restaurants than immigrants from other countries, and Koreans more likely to run dry-cleaning shops. Yemeni immigrants are 75 times more likely than immigrants of other ethnicities to own grocery stores, and Gujarati-speaking Indians are 108 times more likely to run motels.

Specialization among ethnic minorities, immigrant or not, isn’t new: It’s happened with Jewish merchants during Medieval times and with the Chinese in the laundry industry in 1920s California. Why does it happen so often? A recent report from the National Bureau of Economic Research attempts to explain this phenomenon.

William R. Kerr and Martin Mandorff, the paper’s authors, found that the social insulation of immigrant communities plays a big role in creating business pipelines into industries where previous generations have already found success. The trend is most common among groups that have tight-knit networks and in industries that lend themselves to self-employment. A variable that decreases the likelihood of ethnic concentration is when an job requires extensive licensing, certification, or education within the U.S, since many immigrants will have difficulty getting those bonafides.

The authors find that the way that immigrants socialize is especially relevant to the heavy concentration of immigrant-owned businesses in very specific industries. Immigrants often cluster, both geographically and socially, with those who are similar to them. Many arrive and stay with family or friends, and still others choose to move to a community with familiar customs and language. Staying within the same communities—and marrying within them—is most common among groups that are small and less assimilated.

This proximity can have important ramifications when it comes to how and where these groups find employment. Socializing—everything from religious to recreational activities—involves hanging out with people from a similar country or region. This can result in a transfer of jobs and skills to new immigrants that make them more likely to continue working in a certain industry, be it driving a taxi or cooking in a restaurant.

And the effects of that can multiply when played off the predisposition toward entrepreneurship that exists among specific immigrant groups. For instance, 45 percent of Korean men are self-employed compared to 15 percent of the male immigrant population overall. This tendency toward self-employment means that not only are owners are willing and able to hire fellow immigrants for their businesses, but also that there’s the ability to create an intergenerational trajectory, where owners are able to pass their business down to their children and grandchildren, continuing the job-clustering effect.

These same social connections can provide a sort of informal mentorship. In their research, the economists found that in 17 out of 25 case studies of immigrant groups, the industries where ethnic groups displayed the greatest concentration of entrepreneurship were also the industries where they displayed the greatest concentration of overall employment. That’s because the clustering around specific industries isn’t just helpful for finding work—it’s helpful for learning how to buy and run your own business as well. The relationships forged in these tight knit communities are especially helpful for existing and aspiring entrepreneurs, who can pick up important tips on starting and maintaining a business from those in the community who have navigated challenges like taxes, startup capital, and inspections. And when it comes to self employment, such advice and support is critical, and may give some groups a huge advantage.

The precise reasons behind why certain groups choose certain industries can be a bit more difficult to explain. But it may have to do with a confluence of factors, including skills that may be widespread in their country, and the policies in place during the time of immigration, and bias. For instance, the prevalence of Chinese immigrants as restauranteurs has a lot to do with the laws and requirements in place around the turn of the century. In the wake of the Chinese Exclusion Act, admission to the U.S. became much easier if applying for a visa as a merchant, particularly as a restaurant owner. That’s because some feared that an influx of Chinese workers in more traditional fields, like mining, would threaten the jobs of American men. But they felt perfectly fine allowing these immigrants to work less desirable jobs, like cooking. In order to get businesses up and running, entire communities would pool money, becoming partners, and creating a heavy concentration of restaurateurs within the immigrant community. Similar difficulties, loopholes, and solutions persist when it comes to immigrants today, and those can greatly shape the labor choices that groups make in order to survive, and thrive,  in America.