Immigrant entrepreneurs are less likely to open businesses in Iowa. And it's partly because of the cold climate
Iowa is significantly less likely to be the home of immigrant entrepreneurs than states with warmer climates. And Iowa State University economics professor John Winters is studying why.
In a working paper with Ph.D. Candidate Jun Yeong Lee, the researchers analyzed data from 2012 to 2019 that showed it’s harder for immigrants to imagine running a successful business long-term in a state with such a cold climate. Winters noted it's different when an individual is considering higher education in Iowa, which is typically limited to a certain number of years, versus a semi-permanent decision to start a business.
They specifically used data from the month of January to capture cold climate numbers, since the month is known to be one of the coldest. Analysis showed a January average temperature of an additional ten degrees Fahrenheit is linked to an increase of the rate of immigrant entrepreneurs by 1.46 percent.
According to the self-employment rates published in the study, Iowa is among the states with the lowest self-employment rates by immigrants in the U.S. Other states with low immigrant self-employment rates include Nebraska, Kansas and other Midwest states.
But, Winters said, that doesn’t mean Iowa should disregard immigrants who want to open their own business in the state.
"It does mean that we kind of have to be especially aware that outsiders are not just going to flock to Iowa that maybe we need to think about some of these challenges, and say, ‘Okay, how can we make the state more attractive to people?’” he said.
Winters said Iowa can attract those potential business owners by offering more incentives like expanding outreach and training programs to reach more immigrants in the state.
“Immigrant entrepreneurs are certainly an important part of the U.S. economy and the entrepreneur ecosystem. And again, you know, they're not equally dispersed across the U.S. and to be quite honest, you know, parts the Midwest, Iowa may never have the level of immigrant entrepreneurship that California has," he explained.
And it's not just immigrants from warmer origin countries that tend to avoid Iowa for its climate, it's also immigrants from colder climates that prefer a warmer atmosphere. Winters found even those who come from Canada, which is much farther north and with a colder average January temperature, prefer to open businesses in places like Florida and southern California.
“I think it’s important to recognize that cold areas, like the Midwest, have some unique challenges to attract outside talent. If they can get people to think of these places as home, they are more likely to stay and may start a business,” Winters said in a university press release.
And, he added, this is important to increasing economic growth in the state. Winters explained the economy is constantly changing, which is why it needs new ideas, innovations and startups to really prospere and take on new challenges. And it's immigrants, he said, that can provide some of that entrepreneurialism that will keep Iowa's economy afloat.