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The ethnic enclave is a sub-economy that offers protected access to labor and markets, informal sources of credit, and business information for immigrant businesses and workers. It presents a route for economic and social mobility by promoting positive returns on human capital for immigrants in the labor market. Ethnic enclaves of Latin American and Asian immigrants are proliferating in contemporary gateway cities such as New York, Miami, Houston, and Los Angeles. There are costs as well as benefits that accrue to immigrants working in ethnic enclaves.
Pathbreaking research in the early 1980s on the concept of the enclave economy initially made a contrast between the Cuban enclave and the black economy of Miami. The Cuban-owned firms of the Miami area were found to comprise a dynamic sub-economy of construction, manufacturing, retail and wholesale trade, and banking firms that recirculated and multiplied income through inter-industry and consumption linkages. The economy of black neighborhoods, by contrast, was impoverished and capital-scarce, with income constantly leaking out of the community into factories and chain stores owned by whites and large corporations.
Investment capital is commonly raised in ethnic enclaves through kinship networks and rotating credit associations. These ethnic enclaves offer a protected sector for immigrants newly arrived without English language skills, good education, or official papers. The dynamism of the ethnic enclave economy is based in large part upon the multiplier effect, by which export earnings are spent and recirculated among co-ethnic enterprises throughout the remainder of the protected sector.
Research has also determined social costs of ethnic enclaves, chiefly that immigrant employers profited from their ability to exploit co-ethnic workers in a ”sweatshop” sector under poor working conditions and poor labor rights. Positive returns for men were to some degree derived from negative returns to women as subordinate workers.
- Logan, J. R., Alba, R. D., & McNulty, T. L. (1994) Ethnic economies in metropolitan regions: Miami and beyond. Social Forces 72 (3): 691-724.