Mexican immigrants and informal self-employment in Chicago
This research is based on a case study of ethnic entrepreneurship in Little Village, a predominantly Mexican community in Chicago. The study focuses on Mexicans, who have been understudied in the field of ethnic entrepreneurship. Instead of focusing on individuals who operate storefront businesses, this paper addresses informal self-employment, a neglected issue in studies concerning immigrants’ incorporation into the labor market of the host society. By broadening the scope of the study to include not only business owners, but a full range of self-employment activities among Little Village residents, such as street vending, house repairs, and baby-sitting, this study dispels myths about the low propensity for self-employment among Mexicans and reveals the complexity of self-employment as a form of economic activity. This consideration is particularly important for immigrant women, who often supplement family income through informal self-employment. The data also confirm that most self-employment remains marginal. Given the precarious situation of Mexican immigrants in the host labor market, many individuals become informally self-employed when they lose their jobs. Informal self-employment provides incomes for people whose social circumstances (undocumented status or low education) deny them access to paid jobs and supplements incomes of low-wage salaried workers (moonlighters).
Key words: informal economy, self-employment, Mexican immigrants, Chicago
Mexicans form the largest segment of the Hispanic population in the United States, yet they have been neglected in studies of self-employment and ethnic entrepreneurship,1 probably because Mexicans display low rates of self-employment and business ownership when compared with other immigrant groups in official sources of data (e.g., population and economic censuses). According to the 1990 population census, for example, rates of selfemployment for Mexicans in Chicago were 3.7 percent and 2.8 percent for males and females respectively. For Koreans the figures were 31.8 percent for males and 17.4 percent for females.
Caution must be exercised in using official sources for the study of ethnic entrepreneurship and self-employment, especially in the case of immigrant minorities. First, selfemployment figures based on census data are questionable because labor force measures are based on respondents’ main occupation. That is, census data do not cover other types of economic activities, such as part-time and irregular work or informal self-employment, which are relevant for understanding immigrants’ incorporation into the labor market (Staudt 1999; Stepick 1989). If these activities were to be counted, ethnic gaps in rates of self-employment would narrow (Light 1979; Tienda and Raijman 2000).
The economic census undercounts firms engaged in taxevading activities, firms without a business address, and parttime firms with negligible sales. Since minorities own marginal firms to a higher extent than majority groups, counts of minority-owned firms are always underestimated (Light and Bonacich 1988). Therefore, studies based on secondary sources provide only conservative measures of selfemployment and business ownership. Special efforts in data collection are required to capture the complex array of informal economic activities related to labor force participation, especially among minority and immigrant populations (Ferman, Henry, and Hoyman 1987; Morales, Balkin, and Persky 1995). These activities are difficult to detect and investigate since many take place in the underground economy (Castells and Portes 1989; Hart 1970; Henry 1981; Hoyman 1987), but, these informal activities comprise an important part of immigrants’ economic life (Raijman 1996; Stepick 1989; Tienda and Raijman 2000).
Several authors have pointed out the need to bring the informal economy into the wider picture of economic activity in general, and of minorities, women, and immigrants in particular (Gaughan and Ferman 1987; Hart 1970; Henry 1981; Hoyman 1987; Portes, Castells, and Benton 1989; Raijman and Tienda 2000; Tienda and Raijman 2000).2 Informal labor market activity refers to a process of income generation that “is unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated” (Castells and Portes 1989:12). The basic distinction between formal and informal activities does not depend on the character of the final product but on the manner in which it is produced and exchanged. For example, food, clothing, and child-care services are licit commodities but may originate in legally regulated or unregulated production arrangements (Castells and Portes 1989; Portes and SassenKoob 1987; Sassen-Koob 1989; Stepick 1989). Informality may refer to: 1) the status of labor, which may be undeclared in formal reporting schemes or lack access to social benefits to which it is entitled, including payment equivalent to or in excess of the minimum wage; 2) the conditions under which workers are employed-health conditions, safety hazards, or the location of activities that disregard zoning laws; and 3) the form of management of firms, including the adoption of fraudulent practices such as not recording cash transactions (Castells and Portes 1989:13).
Several studies have shown that for those involved in informal activities, significant shares of their income are produced outside the formal labor market. Income derived from informal self-employment is usually supplemental to income stemming from regular wage or salary employment, transfer payments, or private investments and savings (Ferman and Berndt 1981; Hart 1970; Hoyman 1987; Morales 1997a, 1997b; Raijman 1996; Uzzell 1980). This implies that household incomes of a subset of immigrant families may be biased downward in national data sources (Tienda and Raijman 2000).
Certain factors explain the expansion of informal work and participation of minorities in this economic arena. From the demand side, informal production is the strategy imposed by the process of economic restructuration of big firms, which to minimize costs and maximize flexibility shift their production to subcontractors. In so doing they expel workers from the formal economy, thus stimulating the rise of the informal sector. In the context of economic restructuring, the informal sector not only provides employment opportunities but also implies a new form of exploitation: individuals are forced to work without the minimal level of protection offered by the legal system, and political mobilization of workers through unions is restricted (Aponte 1997; Castells and Portes 1989; Gowan 1997).
From the supply side, participation in the informal economy stems from a variety of sources. Individuals respond to the lack of economic opportunities in the formal economy by generating new activities in the informal economy or by joining existing informal enterprises. That is, informal economic activities are a way of surviving in unfriendly economic environments. They serve as an economic cushion during periods of unemployment or they supplement income in a low-wage labor market (Hart 1970; Light and Roach 1996; Morales 1997b; Raijman 1996; Staudt 1999; Stepick 1989; Tienda and Raijman 1996-97, 2000).
Many scholars have already pointed out the existence of mixed economic strategies among low-income groups (Ferman and Benrdt 1981; Hart 1970; Morales 1997b; Tienda and Raijman 2000; Uzzel 1980). According to Hart (1973), the “one man, one job” assumption is risky, especially in lowwage employment. Some studies also challenge conventional approaches to minorities’ and immigrants’ economic activities, suggesting that by assuming only one job arrangement per worker these approaches obscure the role of informality (especially informal self-employment) in making a living (Alden 1981; Gaughan and Ferman 1987; Morales 1997a, 1997b; Raijman 1996; Tienda and Raijman 2000; Uzzell 1980). This consideration is particularly important for immigrant women, who often supplement family income through informal self-employment (Hoyman 1987; Staudt 1999). The fact that informal activities are not captured when conventional labor-force-status items are used suggests that immigrant economic activities are underreported in most national surveys that rely exclusively on these types of measures (Tienda and Raijman 2000).
Switching between the two types of employment status is known as moonlighting (Alden 1981): informal selfemployment or part-time employment provides a supplemental income to the main activity. Moonlighting sometimes implies switching between economic sectors (formal and informal) during the same workday. Much insight about immigrants’ modes of labor market incorporation can be gained by broadening concepts of labor force activity to include multiple-job holding and interface of formal and informal activities (Tienda and Raijman 2000).
Many individuals consider themselves out of the labor market but have other (informal) ways of making money that are not reported as a main activity (Morokvasic 1993; Staudt 1999). In fact, these individuals are only nominally out of the labor force because at the same time they generate income through informal activities. This is the case for housewives, students, and retired and unemployed persons, who have been designated quasi-employed (Tienda and Raijman 2000) to reflect the fact that their labor force participation is invisible (Hoyman 1987; Pahl 1987; Tienda and Raijman 1996-97).
Immigrants are hypothesized to reproduce in the host society forms of economic activity that were common in their countries of origin. These include informal activities, which account for a high proportion of the economies in thirld world countries (Aponte 1997; Castells and Portes 1989; Hondagneu-Sotelo 1997; Staudt 1999). Furthermore, people can be “recruited” into informal self-employment through providing products and services to family, friends, and neighbors in ethnic residential communities (Ferman and Berndt 1981).
Informal self-employment may be the only option available to people whose main income is provided by the government through participation in welfare programs that prohibit recipients from working (Aponte 1997; Gowan 1997). For undocumented migrants informal self-employment may also be the only way to earn money in the receiving society (Aponte 1997).
Informal self-employment provides an outlet for skills or hobbies not utilized in regular employment and provides a way to develop new skills that may encourage a change in future occupation or new career options (Ferman and Berndt 1981; Raijman 1996). In addition, some workers may prefer the flexibility of informal arrangements because they can combine work with domestic activities (for example, women).
Stepick (1989) further differentiates the isolated and integrated sectors within the informal economy, capturing the degree of integration of economic activities into the formal sector. The isolated informal sector remains marginal to the formal economy and includes child-care activities, home and auto-repair services, and mobile food stands that are confined to the ethnic economy. The integrated sector refers to those activities in which workers are indirectly connected to a large firm through a chain of intermediaries. In this sector some part of what appears to be self-employment proves to be disguised wage labor in the form of commission selling or dependent selling. These nominally self-employed or disguised workers are “stripped of the legal benefits of employment while maintained in `de facto’ conditions of dependence” (Cross 1997:38).
Portes and Sassen-Koob (1987) summarize four of the more common forms of such linkages between the formal and informal economy. 1) The informal marketing chain is used by industries to eliminate costs involved in maintaining a permanent sales staff. What appears to be a disorganized mass of street vendors and merchants is “actually being well coordinated by a group of middlemen dependent on formal firms” (Portes 1994a, 1994b). 2) The input supply chain provides raw materials for industries. Marginal workers serve as informal suppliers of inputs to local buyers who, in turn, sell the product to the central wholesaler, the final link to the formal industry (Fortuna and Prates 1989; Gowan 1997). 3) Informal subcontracting is common in construction or repair services. Informal subcontracting allows formal firms in construction and repair services to maintain a relatively small regular labor force. Work is assigned to principal contractors who in turn mobilize informal networks (informal subcontractors and laborers) to supply the specific service (Stepick 1989). 4) Subcontracting in manufacturing (sweatshops) relies on individuals who are defined as industrial outworkers and who are under the illusion of selfemployment (being nominally self-employed). Actually they work for large firms (Fortuna and Prates 1989; Portes 1994b; Sassen-Koob 1989).
This paper examines informal self-employment among Mexican immigrants in Chicago. Most research on selfemployment and ethnic enterprise has focused on those who are still in business and “visible” because they own and/or operate storefronts. This narrow definition of self-employment neglects a variety of informal economic activities, such as street vending, house repairs, and babysitting, which constitute a notable proportion of the household economies of immigrant families and which, under some circumstances, result in formal business ownership (Oliveira and Roberts 1994; Raijman 1996; Raijman and Tienda 2000).
By including a full range of self-employment activities, this study dispels myths about the low propensity for selfemployment among Mexicans and reveals the complexity of self-employment as a form of economic activity. This consideration is particularly important for immigrant women, who often supplement family income through informal selfemployment. Given the precarious situation of Mexican immigrants in the host labor market, informal self-employment augments incomes of low-wage salaried workers and provides an income for people whose undocumented status or low education deny them access to paid jobs.
The Setting: Little Village
Located in Chicago, Little Village is one of the largest Mexican communities in the Midwest. As late as 1970, Hispanics constituted only 30 percent of the community’s population. During the next 20 years, however, Hispanics became the predominant ethnic group. By 1990 they accounted for 82 percent of all residents (Raijman 1996).
As in Los Angeles, Miami, and New York, the process of residential succession, which caused a process of business succession as well, created conditions in which an ethnic business sector could develop (Padilla 1993; Waldinger 1989; Waldinger et al. 1990). Residential concentration of a Latino population generated the critical mass of ethnic consumers needed to support ethnic businesses. Despite the process of industrial relocation to nonmetropolitan areas, Little Village developed as a vital retail center. Today, merchants and leaders in the community proudly talk about West 26th Street being the second most successful commercial strip in Chicago (after Michigan Avenue downtown). Besides formal store fronts, street vendors (Mexican fruit sellers and Arab cassette vendors) complement the unique social fabric of business life in the community.
The ethnic character of the community is clearly evident-over three-fourths of the population is Mexican-born (Raijman 1996; Tienda and Raijman 2000). Guanajuato, Jalisco, and Michoacan are the main states of origin for Little Village residents, and along with Distrito Federal, Durango, and Guerrero, they account for 70 percent of the Mexican immigrant population in the community. Little Village residents are not recent newcomers. The average length of residence in the United States is 14 years, of which 11 were spent in the current neighborhood. Although average U.S. tenure is relatively high, English proficiency is relatively low. More than half of immigrant men and two-thirds of women reported they were not proficient in writing or speaking English. Respondents in the total working-age population averaged 34 years of age.
Consistent with national statistics about the educational attainment of Mexican immigrants, Little Village’s working-age adults averaged 8.5 years of formal schooling, and only 20 percent completed high school or its equivalent. Eighty-five percent of all men and around 60 percent of all working women were employed in bluecollar jobs. Similar shares of men and women (13 to 14 percent) claimed retail jobs, but only men found work in construction and landscaping. Women from Little Village were more likely than men to hold jobs located in the community; men were much more likely to work in the suburbs of Chicago.
This survey investigated informal business activities, which are usually neglected by secondary sources (such as population or economic censuses). We conducted a household survey to identify self-employment or business ownership in its different forms: 1) current business owners or persons whose main activity was self-employment, including people who had their businesses outside the community or managed their business from their homes; and 2) individuals currently self-employed as a secondary activity, including moonlighters and the quasi-employed. The last categories are virtually ignored in studies of ethnic enterprise because they are difficult to detect using conventional survey instruments.
The survey was conducted during the summer and fall of 1994. It is based on a random clustered sample of households in Little Village, and the response rate was 73 percent. We instructed bilingual interviewers to interview a primary adult in the household. The household instrument obtained basic demographic and socioeconomic information for all individuals living in the sampled dwellings. Special effort was made to detect all forms of income generation and economic activity for all household members.’ Because respondents were queried about their employment status, including self-employment, business owners (past and present) could be identified through the household survey.
We identified 85 household members who were involved in informal self-employment activities and obtained permission to interview 35 of them regarding their economic activities. Because the latter would not be identified through any formal canvassing of establishments, our approach enabled us to detect entrepreneurial activities in their incipient stages. We queried all self-employed persons about reasons for becoming self-employed, employment activity before the current business, inputs for start-up, problems and financial barriers, suppliers, social networks, organizational participation, and current financial status. To initiate the interviews, respondents were asked to narrate their business career in general and their current business in particular. This question generated very rich data about pathways to self-employment activities. We did not specifically ask or insist on getting information regarding illicit activity.
Previously, I suggested that one of the reasons for underestimation of self-employment rates of Mexicans is that part of the economic activities takes place in the informal economy. Below, the limits of conventional approaches for portraying immigrants’ economic activities are shown, more specifically rates of self-employment.
Self-Employment and Labor Force Participation
The upper panel of Table 1 presents a modified employment status distribution of Little Village residents that takes into account the prevalence of multiple job holding (moonlighting) and includes those who reported being out of the labor market but were working in informal activities (quasi-employed). As expected, single job holder remains the modal category for both men and women in the labor market. Multiple job holding (moonlighting) is more prevalent among men. Only 3 percent of women who held salaried jobs also reported some self-employment activity, reflecting domestic obligations that compete for their time. Quasi-employed women comprised about 12 percent of all adult women in Little Village, however, suggesting that informal activities were possibly shared with domestic commitments.
Rates of self-employment dramatically changed when multiple economic activities were taken into account, especially for women. Their rate almost quadrupled, confirming the earlier hypothesis that rates of self-employment based only on main activity are underestimated. Figures in Table 1 may to be considered a conservative estimate, given the assumption that people tend not to disclose informal sources of income.
Self-Employment in Little Village
Self-employment in Little Village assumes many forms. An important distinction must be made between individuals who were self-employed in their main activity and those who were self-employed as a secondary activity. Table 2 presents the type of self-employment activities in Little Village classified by whether they are considered main or secondary activity.
Like other immigrant groups (e.g., Haitians in Miami), a high percentage of Little Village self-employment activities are informal and are not conducted from storefronts. Informal economic activities are segregated by gender, with men evincing more skilled and profitable activities. As expected, women are concentrated in personal service (mainly child care) and sales (food and clothing), whereas males display a wider occupational spectrum (construction, repair services, gardening, crafts, entertainment, and sales).
Self-Employment as a Main Activity
Business owners with a storefront comprised approximately 15 percent of all respondents who reported selfemployment as a main activity, and about one-third of established business owners got their start in the informal economy. Approximately one-third of male respondents self-employed in their main activity were subcontractors or worked in franchise-like activities (Table 2). For example, Isauro (26), a Mexican immigrant who arrived from Durango in 1991, sold food and light drinks at different factories along a defined route in Aurora. He was married to Rosa (26), who worked as a cashier in a store in Little Village. Isauro was only nominally self-employed because he depended on the supplier company for everything, his truck rental, supplies, and marketing route. The company provided him with credit to start “his business.”
Isauro’s job illustrates how self-employment at times assumed a form of wage employment. Isauro’s monthly income from this activity amounted to $1,100. He had no access to fringe benefits or any type of insurance from the contracting firm. Subcontracting the sale of its products to individuals like Isauro permitted larger firms to reduce operation costs by limiting investment in labor or wages and evade contributions to National Insurance funds mandated by law. In this way, the company reduced risks at times when sales were slow. Isauro’s subcontracting relationship with the firm was “above board,” but, as with many street vendors, probably many of his cash transactions with customers remained undeclared. Nominally self-employed individuals like Isauro exist in a vague area between informal and formal activities.
In general, most self-employment involved informal activities at home (women in personal services like child care), on the streets (as vendors), or in home-based businesses (such as construction and repair-services for men). Street vending was a routine activity in Little Village. Fruit vendors, corn vendors, and ice cream vendors were a common sight all year around.
Julia, a Mexican immigrant who had arrived in Chicago 16 years before, came with her husband, Juan, who had been a successful salaried mechanic in Distrito Federal before migrating to the United States. Juan, who reported himself as unemployed at the time of the survey, worked repaired cars in the street on an informal basis. Julia, who completed only two years of formal schooling, operated a taco trailer with the help of three of their six children, who also helped Juan with car repair. The family received disability income for twins, aged 30. Another son, Ricardo, had recently opened a silkscreen shop behind the family’s house. He started the business with financial help with a loan from his parents, which Ricardo was supposed to pay whenever he was able.
The livelihood of Julia and her family came primarily from informal self-employment. The combined household income from both informal businesses (car repair and taco trailer) averaged $600 per month, which was supplemented by $900 in disability income. While informal selfemployment did not offer this family a middle-class lifestyle, it did provide them a way to make a living away from the welfare rolls.
Self-Employment as a Secondary Activity
As a secondary occupation, self-employment was exclusively an informal activity. No secondary self-employment occurred in storefronts, and most such jobs were casual or part-time. Among women, personal services, such as child care, house cleaning, and laundry services, were most common, but so too were in-home crafts and street vending (Table 2).
Baby-sitting was one of the most common forms of selfemployment among women, especially those with children, who saw this type of work as a default option. Because earnings were low and public facilities were scarce, there was great demand for informal day care, and Mexican housewives combined baby-sitting with their domestic duties to earn extra family income.
Housecleaning, cooking, and craft work constituted another form of informal self-employment for women. These activities were combined with the regular household work of women, who defined themselves as housewives in their main activity (quasi-employed). Celia (37), a separated Mexican American woman, lived with her two daughters (18 and 11 years old) and her mother, Josefina (63), who received a monthly payment of $620 from Social Security. Two years before the survey, Celia was hospitalized with pneumonia. She was fired from her job, and from then on she depended on means-tested transfer income ($500 from Aid to Families with Dependent Children and food stamps) for the family subsistence. To supplement her income, Celia started to clean houses in the neighborhood on a part-time basis, earning approximately $280 per month, which covered her rent.
Food preparation is another income-generating activity women can conduct at home while taking care of their children. Monica (26), who arrived in the United States 14 years ago, was a single mother of a two-year-old son, for whom she received $622 per month in child support. She earned $775 per month as a part-time (25 hours per week) waitress in a local restaurant. To supplement her income, Monica sold food she cooked at home and made flags for the national festivities. Monica earned $400 per month from her part-time activities, which covered her rent and food.
Aida (27) did craft work at home. She arrived from Puerto Rico in 1968 and had lived in the neighborhood since 1979. Aida was married to Osvaldo (35), a Mexican immigrant with whom she had five (U.S.-born) children. Osvaldo was unemployed at the time of the survey, but did some casual work on a temporary basis. The family received public assistance and food stamps ($450 per month). Aida earned $500 per month from craft work.
I started out when I baptized my son. It is customary to give out souvenirs to your guests. So, I went to see how much they cost, and it turned out that the prices were very exaggerated. It was then that I got the idea of making them myself. It was less expensive, and people liked it a lot. I got orders from people. It started out as a hobby, a way to pass the time…. I get ideas from books. Basically, it’s not much different from what you find at department stores. Only it’s cheaper..I get orders for baby showers, weddings. People like it because it is inexpensive…. It is different! Very unique things…. What can I tell you? When I had no kids I very much liked the idea of having my own store. But as years went by, and many did, and with my health being not so great…. Let’s just say being out of the house would be a little complicated now. That’s why my dream changed. But, yeah, it’s still in here.
Informal self-employment for men largely involved construction and repair services, but also included entertainment, street vending, gardening, and miscellaneous activities. Informal activities complemented regular jobs and were often similar to those activities performed in salaried jobs. This is the case of Martin (31), who arrived in Chicago in 1984. At the time of the survey, he worked for a construction company and did informal self-employed work on weekends. The following is a verbatim report from the interviewer:
Martin and a friend, who works at the same company as he does, decided to work for themselves in addition to working for the company. His friend suggested the idea to begin this because if it went well they would continue on their own. He learned everything related to construction in that company, which was a road construction company. They already had some of the tools that they needed and they bought the ones that they didn’t have little by little. His clients are acquaintances or people who have been referred to them. The kind of work they do are sidewalks, drains, and grills for patios. Generally, they charge little, if a company charges $5,000 they charge $2,0002,500.
Sometimes, informal economic activities that supplemented wage employment were not related to the primary job but to respondent’s budding business. Ramiro, 27 at the time of the survey, was born in the United States to Mexican immigrants. He lives with his father and grandmother. He finished college and worked in the public sector, earning a monthly salary of $1,917. Besides his regular job, Ramiro sold used cars. He parked the cars at the discount mall in the neighborhood.
I got started when I was in the university and I wanted to make more money. I began to purchase cars, repair them, and sell them. Little by little I started learning about the business. Now I sell as much as one or two cars per week, sometimes more. My profits are no less than 30 percent. Sometimes I sell cars that people ask me to sell, and I also sell cars that I buy and repair. On those cars my profit is 100 percent, to reimburse me for my time and work. This business does not require licensing, since it does not occupy private property. The problems I run into are with the police. If the cars are not parked right we get tickets, so we have to act with precaution. Sometimes our radios get stolen, or even the cars themselves, so we have to stay alert. Ramiro refused to tell us about the profits from his informal activity. But an estimated eight cars sold per month (based on his reports), with a profit of 30 percent, would make a good income for him and his family and probably allow him to start a formal used car business in the future.
Self-employment in Little Village mostly involved isolated informal activities that depended on the ethnic community. Nevertheless, we identified some self-employed activities that were indirectly connected to a large firm through a chain of intermediaries (integrated sector). For example, among women, integrated informal retail marketing involved clothing or cosmetics sales at home or door-to-door. For example, Ana (56) had been selling clothes from her home since 1983. Doing business at home provided her a modest income supplement ($2,400 per year) while she took care of her duties as housewife. Her supplier was a well-known clothing store that advertised on the Latin TV channels in Chicago.
A second type of linkage between the informal and the formal economy is the case of collectors of trash and junk, which serve as raw materials for industries. Ruben (28) had a salaried job in landscaping. During the winter, however, Ruben was unemployed and received unemployment compensation. He decided to start collecting trash. He “needs the money because they eat at his house and they have to pay their winter bills, too.” The profits from junk collection were $2,000 in the year prior to the survey, 15 percent of the family’s annual income of about $13,500. By combining his landscaping job, unemployment compensation, and trash collection, Ruben could support his family without collecting public assistance.
Ruben got started in junk collection through his brother Eulalio, who was unemployed at the time. They used Eulalio’s car to move material. He kept $15 of the daily profits as a payment for transportation costs, and profits were divided equally between the brothers. When Eulalio secured a job in a factory, he left junk collection activities, so Ruben continued on his own. By that time he had bought his own van.
Ruben sold the scrap iron he collected to a local buyer, who resold it to wholesalers or formal industries that use iron as a raw material. Even though trash collection represented a survival strategy for Ruben, he was a subcontractor in the input supply chain of raw materials to formal industries, a disguised form of wage labor (Castells and Portes 1989).
A third example of integrated informal activities is the case of subcontracting in repair services. Alejandro (28) arrived in Chicago in 1984. He was married to Alicia (28), and their five children consumed her time fully. Alejandro fixed broken glass in cars, and 80 percent of his time he works as a subcontractor for one company. Usually Alejandro worked at home, using his garage. He reported paying no income taxes, which precluded access to loans or other financial services. His annual income amounted to $15,000.
The above examples exemplify how Mexicans in Little Village are involved in self-employment activities in general and in informal self-employment activities in particular. Immigrant communities are a fertile arena for the pursuit of informal activities, which result from the survival strategies of people forging a livelihood in unfriendly contexts of reception (Sassen-Koob 1989; Stepick 1989). Even though wage or salary labor was the main form of employment in Little Village, the need to supplement insufficient levels of income compelled a significant number of persons into independent income-earning activities. In the absence of paid employment, household members adopt alternative options that include setting up informal businesses, whether full-time, part-time, or casual. The economic activities of Aida, Monica, Ramiro, and many other immigrants would have been invisible to conventional approaches to labor force participation. The latter underestimate not only labor force participation but also the “real” rates of self-employment, especially among women.
Research on ethnic entrepreneurship has suggested that Mexican immigrants in the U.S. represent a wage-labor pool destined for blue collar and service jobs, not for business ownership (Portes and Bach 1985; Portes and Manning 1986). Our findings, based on the household survey in Little Village, challenge these assertions. The pervalence of entrepreneurial activity in the community was reflected not only in the number of businesses but also in the number of individuals involved in informal self-employment. Failure to account for the variety and complexity of economic activities pursued by Mexicans in the informal economy is one reason for underestimating their rate of self-employment. Conventional measures of labor force participation need to be revised to account for unconventional forms of work (Ferman and Berndt 1981; Tienda and Raijman 2000).
The data also confirm that most self-employment still remains marginal or isolated and serves almost exclusively the community’s Mexican immigrant clientele. Given the precarious situation of immigrants in the host labor market, many individuals take up full-time informal self-employment when they lose their jobs. In that way, informal self-employment provides income for people whose social circumstances (undocumented status or low education) bar them from paid jobs. It also improves incomes of low-wage salaried workers.
Little Village families with members participating in the informal economy face economic uncertainty, and income from informal sources can make the difference between poverty and economic self-sufficiency. Tienda and Raijman (2000) have shown that families involved in informal market activities in Little Village are more likely to receive means-tested income. This implies that in the absence of income generated by informal activities, rates of participation in means-tested programs might be even higher, as would be the aggregate public outlays for these programs. Future studies should consider how to capture informal activities, and the income they generate, when portraying family income packaging strategies.
Informal self-employment can be a conduit to formal self-employment in the small-business sector (Oliveira and Roberts 1994; Raijman 1996). Indeed, informal economic activities allow an enterprising immigrant to experiment and explore the viability of a particular type of business. By testing the market, possibly accumulating capital or learning about its availability, and acquiring rudimentary skills in a particular line of work, informal self-employment can lead to successful business formation. The informal sector, by acting as a training ground, may create a critical mass of would-be entrepreneurs, and bonds of solidarity that could further encourage formal business ownership (Raijman and Tienda 2000; Stepick 1989).
1For exceptions see Alvarez (1990), Hansen and Cardenas (1988), Raijman and Tienda (2000), Tienda and Raijman (2000), and Villar (1994).
2Not all participants in the informal economy are poor; however, low-income and middle/upper-income people use the informal economy to meet different needs: survival for the former and “stretching a dollar” for the latter (Gaughan and Ferman 1987).
3Income and financial data are difficult to obtain. Therefore, we took several measures to decrease the rate of item nonresponse in our battery of income and financial questions. For example, for household income we used the nesting strategy adopted by several national surveys, which has been successful in reducing item nonresponse for income data. At various stages in data collection, income and expenditure data were summed to determine their internal consistency. For example.
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Rebeca Raijman is a lecturer in the Department of Sociology and Anthropology at the University of Haifa, Israel. Her research was supported by grants from the MacArthur Foundation and the Rockefeller Foundation to the Center for the Study of Urban Inequality at the University of Chicago (Marta Tienda, Richard Taub, and Robert Townsend, principal investigators). I gratefully acknowledge Assaf Dar for his valuable comments and the institutional support from the University of Haifa.
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