Abstract
This chapter lays bare the intricacies of the concept of legal capital. Our evidence indicates that the timing of entrepreneurship after legalizing immigration status affects business outcomes. We suggest that net of business duration and time living in the US, the experience of operating firms in the formal economy develops business acumen and expands business networks in a way that confers small advantages on those entrepreneurs who capitalize earlier on their legal status. We submit that like other subtypes of cultural capital, legal capital refers to the cultural knowledge about the formal economy that accumulates under the auspices of legal status. We demonstrate that this knowledge—and its attendant licenses—pays more dividends to businesspeople who deploy it earlier in the course of their working lives.
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- 1.
For a broad discussion of the transformative effects of legalizing one’s immigration status, see Celia Menjívar and Sarah M. Lakhani (2016).
- 2.
Estimates of the wage penalty for being unauthorized range between 14% and 24% (Kossoudji and Cobb-Clark 2002).
- 3.
- 4.
See Waldinger et al. (1990) on the importance of both national and local government policies on leasing laws, loan programs, permits, incubator policy, and the like (p. 31).
- 5.
One such program offered by Los Angeles’ municipal government is called “Great Streets Great Businesses.” This program seeks to offer easier access to loans and assistance with retail lease negotiation.
- 6.
When a California law, Assembly Bill (AB) 60, went into effect in January of 2015, it made it possible for the Department of Motor Vehicles to issue California Driver’s Licenses to undocumented drivers.
- 7.
Although undocumented people find illegal ways to circumvent the problem of not having a valid Social Security number for work, they have fewer options for obtaining credit. A few years after the Patriot Act passed, some undocumented people were able to use the US government’s Income Tax Identification Number (ITIN) to open bank accounts. The ITIN number is issued to people who do not have a Social Security Number but who can pay taxes. As of 2005, an increasing number of banks accepted ITIN numbers for bank accounts, and roughly 18 financial institutions accepted them for mortgage loans (see Bergsman 2005; Gallagher 2005: 3). While the extent to which ITIN numbers were used for the more high-risk business loans is unknown, we do know that the respondents in our sample tended not to borrow from financial institutions. Similarly, in the early 2000s, Bank of America, Citibank, Washington Mutual and Wells Fargo also accepted the matrícular consular identification card issued by the Mexican government to open bank accounts (O’Neil 2003; Gallagher 2005). However, fewer than 40% of bank branches in California accepted the alternative identification cards issued by the Mexican government. As of 2005 in Los Angeles, there were only “2.3 banks that accept the Consular Cards as identification per 10,000 Mexican ancestry population” (Gallagher 2005: 4). To repeat, our respondents did not generally rely on formal banking institutions for their start-up capital.
- 8.
According to Gallagher, as of 2005, the vast majority of undocumented Mexicans had no ties to formal financial institutions and only 25% of all Mexican immigrants (irrespective of legal status) had bank accounts.
- 9.
For example, the “New Business Tax Holiday” exempts small businesses from paying taxes to the City of Los Angeles for the first two-years of operation. This program, however, requires showing the City of Los Angeles official tax returns.
- 10.
To give one brief example about just how daunting banking institutions can appear to some people, a small study conducted in Scotland captured the intimidation that a shopkeeper from a working-class background felt about banking institutions in her native Scotland, where she was a citizen who functioned without any language barriers. The authors interviewed the shopkeeper, Sadie, who reported that she “had little idea about formal finances and this had prevented her from approaching the bank to borrow additional capital” (Anderson and Miller 2003: 26). If Sadie, who had operated more than one small shop and who had purchased eight Rolls Royces for her wedding service business, found it intimidating to approach a bank, we suggest that immigrants find it at least as hard.
- 11.
We do not analyze the extent to which being undocumented is a disadvantage in business since we had too few cases (n = 8) in our sample of people who were still undocumented at the time of the survey. A preliminary percentage distribution shows that those who are undocumented hire fewer employees but our results were not statistically significant because there are too few observations of people with undocumented status at the time of the survey.
- 12.
We did not ask our respondents about the specific legal criteria according to which they were able to legalize their immigration status. There are several pathways, but the two most common for Mexicans are through family reunification or through their employers (see Jasso 2011 for a summary). Some immigrants can obtain conditional green cards if they invest a large sum of money in the US economy or by starting a business. Given that the median capital invested by our respondents was much lower than the threshold required for what are called conditional green cards, we doubt that our respondents legalized through this mechanism.
- 13.
Becoming an LPR is a lengthy process that starts at the submission of a green card application. The average processing time for men who seek to legalize (or adjust) their immigration status is just over seven years; for women it is just shy of six years (5.95) (Jasso 2011). According to Jasso (2011), lost documents extend the waiting period, and Mexicans are more likely than are most other immigrants to suffer the setbacks of documents lost by the INS/USCIS (or both the state and the INS/USCIS) (2011: 1305). Fortunately, immigrants waiting for the government’s approval of their green card applications (to become an LPR) can legally work in the US for one year if they successfully apply for a “temporary work permit.” The fact that these work permits are renewable could explain why some of our respondents said that they started their businesses shortly before obtaining their official green cards (and achieved LPR status).
- 14.
Six years struck us as a long time to consider launching a business after legalization given that at least half of all new businesses go out of business within their first five years of operation. After the first five years, the survival rates of young businesses flatten out and do so irrespective of business sector. See https://www.sba.gov/sites/default/files/Business-Survival.pdf
- 15.
On strategic occupations that build entrepreneurial skills, see Waldinger et al. (1990: 45).
- 16.
We ran a Poisson regression for the reasons discussed in Chap. 3.
- 17.
To state this differently, we suspect that the legal capital results for women would be statistically significant with a larger sample because the women in our sample were considerably more likely than men to be late strikers.
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Trevizo, D., Lopez, M. (2018). From “Illegal” to Neighborhood Shopkeeper: How Legal Capital Affects Business Performance. In: Neighborhood Poverty and Segregation in the (Re-)Production of Disadvantage. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-73715-7_6
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