A Sitcom About the Endangered Path to the Middle Class

(Bloomberg Opinion) -- Television shows often have more economics in them than you might think. One example is the Canadian sitcom "Kim’s Convenience," which depicts the charming misadventures of a Korean immigrant couple in Toronto and their native-born children. Where so much of the media focuses on the parts of the economy that are going wrong, "Kim’s Convenience" tells an uplifting story of modest, hard-won prosperity.

The show has rightfully been heralded for its depiction of the immigrant experience, and in this sense it is certainly realistic -- for the U.S. as well as Canada. The protagonists, Mr. and Mrs. Kim, arrive in Canada without language skills, business connections or educational credentials, so they do what many immigrants do -- they start a small business. A 2012 study by the Fiscal Policy Institute, a think tank, found that in 2010, 18 percent of small businesses in the U.S. were started by immigrants, even though immigrants made up only 13 percent of the population. In retail, immigrants started 22 percent of small businesses.

For the Kims, as for many real-life immigrants, small business is a gateway to upward mobility. The Kims’ daughter is attending photography school, while their son -- despite a youthful brush with the law -- is slowly working his way up through the corporate hierarchy of a car-rental company. These are not the dramatic success stories that often feature in pro-immigration op-eds -- the Kim children aren’t founding billion-dollar startups or patenting breakthrough inventions or getting tenure at Harvard. Instead, the image is of humble, slow middle-class advancement.

And that depiction is realistic. There is broad agreement that children of immigrants tend to have substantially higher incomes than their parents, and to make up ground relative to children of native-born parents. Children of skilled immigrants tend to earn more than natives, while children of low-skilled immigrants tend to earn less, but in both cases, mobility from the first to the second generation is the norm. The second generation also tends to be better-educated, with higher homeownership rates and lower poverty rates than their parents. This has led many to conclude that the American dream is still alive for those who move in from other countries.

But the economic significance of "Kim’s Convenience" goes well beyond the immigrant experience. By showing the connection between small business and upward mobility, it highlights a type of success story that is crucial to the health of the American (and Canadian) middle class -- and one that is in great danger.

Fewer Americans are starting business these days:

Some of that comes from a decline in high-tech, high-growth startups, but most of it -- especially in the 1980s and 1990s -- came from a drop in small-business formation. One key reason has been the replacement of small business with big business. In retail, for example, the most significant change has been the spread of chain stores. In a 2009 paper, economists Ronald Jarmin, Shawn Klimek and Javier Miranda wrote:

In 1948, single location retail firms accounted for 70.4 percent of retail sales…By 1997, this share had fallen further to 39 percent.

In other words, more Walmart branches mean fewer stores of the type featured in "Kim’s Convenience."  Of course, there’s a deep economic reason for the shift -- chain stores tend to be more productive, and more long-lived, than the mom-and-pop shops of old. Chains have access to nationwide or global supply chains, mass marketing and brand recognition, and all the other advantages that huge corporations can confer.

But in exchange for this productivity, something important may have been lost. In an economy dominated by big corporations, capital ownership is concentrated among the investors, instead of dispersed among a broad class of small business owners. When even enterprising people who are willing to take risks are forced to become corporate employees rather than striking out on their own, they lose the independence that small business confers. They are also forced to rely more on business connections, job skills and educational credentials -- advantages that tend to be concentrated among the children of the well-off.

In other words, the decline of small business may deliver higher productivity at the cost of greater dependence, higher inequality and reduced economic mobility.

It also may be destroying one of the core constituencies opposing the spread of socialism. Small business owners vote overwhelmingly Republican in the U.S. -- fewer small businesspeople means fewer capital owners, which means fewer people who have a stake in preserving the system of privately owned capital.

How can this trend be reversed? Thanks to the rise of e-commerce, it seems likely that many mom-and-pop businesses of the future will not be brick-and-mortar retail stores like the one in "Kim’s Convenience." But government support for small business -- and for new business owners -- don’t have to favor one type of business over another. Tax breaks are one way to put the government’s thumb on the scale for small businesses. Another is the so-called economic gardening approach, in which local and state governments partner with nonprofits to help entrepreneurs start businesses. A third option might be to increase support for franchise businesses, which offer many of the scale benefits of big corporations while preserving some elements of individual ownership.

Upward mobility and business ownership are key elements of any healthy, thriving capitalist society. "Kim’s Convenience" shows how immigration invigorates a society, but it also shows the enduring importance of small business. Policy makers would do well to watch the show and contemplate its vision of the good society.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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