In recent months, controversy has renewed about Latino immigration and the role that these new immigrants play within the national economy. In the past, similar controversies emerged when influxes of European immigrants came to the U.S. in pursuit of the “American Dream” for themselves and their families. Western European, and later Eastern European, immigrants settled into growing communities and flourished as the economy expanded with the Industrial Revolution and in the years following WWII. At the same time, a cycle began with Mexican workers that brought them here when needed to perform low-wage labor and deported them when they were no longer needed. The current controversy has its roots in that cycle as well as in the stagnating economy brought about by free market fundamentalist policies and multilateral trade agreements.
At the turn of this century, Latinos became the largest ethnic minority group in the United States and their numbers are continuing to increase. According to the 2010 Census, there were close to 50.8 million Latinos, representing 16.4 percent of the total US population; by 2015 this number had increased to 54.2 million, representing a net increase of 3.5 million people and accounting for 16.9 percent of the total US population (see Tables 1 and 2). This increase, which is not only due to new immigrants but to natural increase, reflects a 6.9 percent increase in five years and is one of the largest increases among all major population groups. Today, the Latino population is estimated at 58 million, comprising approximately 18 percent of the total population.
Table 1. U.S. Population by Race and Ethnicity in 2010
Table 2. Males and Females in U.S. Population by Race and Ethnicity in 2015
Table 2 shows larger numbers of females than males for all races except for Latinos, although the percentage increase for Latinas was larger than the corresponding increase for Latino males during five years (2010 – 2015). In addition, Latinos have the highest fertility rates and the lowest median age among all racial and ethnic groups, which will allow them to keep increasing at a high rate in years to come, reaching a projected 30 percent of the total US population by 2050 (see Tables 3 and 4).
Table 3. Total Fertility Rate for Population Estimates and Projections, by Race-Latino Origin and Generations: 1965-1970, 2015-2020, and 2060-2065
The rapid and constant growth of the Latino population in the last decades has many implications for the U.S. economy. A larger population, mainly comprised of young people, has a direct impact on the education system from K-12, to technical training, college, and graduate education. More Latinos entering the labor force demands the creation of new jobs in several industrial sectors. Others are starting new businesses, which demand larger sums of money as start-up funds, and banks are looking for these businesses and Latino customers to increase their customer base. In addition, a larger population and new businesses are considerably increasing the spending and purchasing powers of Latinos with a direct impact on the national, state, and local economies.
Table 4. Median Age in Years, by Sex, Race and Ethnicity: 2013
Despite the rapid growth of the Latino population at all levels, they lag behind all other major racial groups in educational attainment. In the last few years Latino educational attainment has improved mainly for females, suggesting there is still much work to do in promoting the benefits of education within the Latino community. Table 5 shows the important progress made by the Latino community at all levels of education during a 15-year period from 2000 to 2015.
Table 5. Educational Attainment by race and Ethnicity, 2000, 2010, and 2015: For Population 25 years and Over (Percentages)
The percentage of Latinos with a high school degree increased by 5.5 percent, while that for Blacks increased by 1.7, and Whites decreased by 2.1 percent and Asians by 0.3 percent. At the Associate degree level the increases were slightly lower, with an increase of 1.7 for Latinos, 2.4 percent for Blacks and 1.9 for Whites, and Asians did not change. Latinos led the increases at the Bachelor’s level with 3.5 percent in the 15-year period, followed by Blacks and Asians with 3.3 percent, and Whites with 2.7 percent. At the Graduate and Professional level, Latinos fell well behind the other groups with only a 0.8 percent increase during the 15-year period; Asians were ahead of all groups with a 4.9 percent increase, followed by Blacks and Whites with 2.7 and 2.2 percent, respectively. Finally, at the Total College level, Asians had the most significant increase with 8.2 percent, trailed by Blacks with 6.0 percent and Whites with 4.9 percent. Latinos had only a 4.3 percent increase during this 15-year period.
Despite the recent low levels of educational attainment among Latinos, their participation in the labor market is significant. Both Latino males and females have high rates of participation in the labor force (See Table 6). In 2014, for example, Latino men had a participation rate 6.3 percentage points higher than Whites, 3.7 points higher than Asians, and 12.5 percentage points higher than Blacks. Latinas have been making important increases in their participation in the labor force; in 2014, their rate (56 percent) was similar to that for White women and Asians, but lower than for Black Women.
Table 6. Civilian Labor Force Participation Rate by Race, Gender, and Ethnicity, 16 years and older
Table 7 presents the real median household income by race and ethnicity for 2000 and 2015. In general, median household incomes were flat during this period with minor variations for each of the racial groups and Latinos. Latinos’ median household income declined by $446 during the 15-year period, representing about a 1.0 percent decrease; Whites saw their median household income decline by $3,018 or 4.81 percent, and Blacks experienced a decline equal to $4,238 or 10.4 percent. Asians were the only group with an increase in their median household income, $4,985, which represents a 7.2 percent increase during the 15-year period, reflecting a 0.48 percent annual increase.
Table 7. Real Median Household Income, by Race and Ethnicity; 2000 and 2015
Another important issue to consider is the persistent income gap between the top earners and the lowest earners. Asians were the top earners in 2015, with the median income of Whites approximately 80% that of Asians, the median income of Latinos 61% that for Asians, and the median income of Blacks 49% that for Asians. When considering these gaps with respect to the median income of Whites, Latinos make approximately 76%, while Blacks make 61%. Finally, the median income of Blacks is approximately 81% that of Latinos. The gap between White and Latino incomes has declined in the last 15 years due to the decline in Whites’ income, while income for Latinos remained relatively flat, but the gap between White and Black incomes increased during this period.
Table 8 shows that the three industry areas with the largest concentrations of Latino workers (Construction, Agriculture, and Leisure and Hospitality) yield the lowest median weekly earnings and the three occupations with the lowest percentage of Latino workers (Financial Activities, Education and Health Services, and Information) yield the highest. In addition, large numbers of Latinas work as maids and in housekeeping occupations, which pay on average $441 per week, one of the lowest among all occupations. These low earnings are one of the reasons for high poverty rates among Latinos.
Table 8. Median Weekly Earnings of Full-time Wages and Salary Workers by Detailed Occupation in 2016
One of the basic characteristics of the Latino community is the relatively larger number of persons that live in their households, which include immediate and extended family members (grandparents, uncles, and other close relatives). In addition, Latino families tend to have more children (3 or more), differing from White families which have on average no more than 2 children per family. According to Table 9, Latinos had the largest number of persons per household among all racial and ethnic groups in 2014. There were 1.15 more Latinos than Whites, 0.86 more than Blacks, and 0.47 more than Asians per household. The average number of persons living in a Latino household (4.22), and their lower household incomes are related to their higher rates of poverty. Latino households often have several earners who contribute to the general expenses and these multiple contributions to household expenses ameliorate the financial hardships.
Table 9. Average Number of Persons per Household by Race and Ethnicity, 2000 and 2014
Poverty rates have increased in the country during the 15-year period and are presented in Table 10. For the population in general this increase was equal to 2.4 percent. Only Whites and Latinos had minor declines of 0.5 percent, while Asians and Blacks had increases of 0.9 and 1.5 percent respectively. The increase in poverty rates at the national level could be explained in part by the deep economic recession the country experienced from 2007 to 2009. During this period and in the years that followed there was a sharp surge in unemployment due to a huge reduction of economic activities.
Table 10. Poverty Rates by Race and Ethnicity; 2000 and 2015
In 2010 the unemployment rate in the U.S. reached 9.6 percent; disaggregated by race and ethnicity the unemployment rate for Blacks was 16.0 percent, for Latinos 12.5 percent, Whites 8.7 percent and for Asians 7.5 percent. The sectors in which Latinos are mostly likely to be found (Construction, Agriculture, and Leisure and Hospitality) tend to have the highest levels of economic contraction and are among the first to lay off their workers during an economic recession.
Table 11 shows that the poverty rate for families rose from 8.7 percent in 2000 to 10.4 in 2015, reflecting a net increase of 1.7 percent. During the same period, Blacks had an increase of 2.9 percent, Whites 1.3 percent, Latinos 1.2 percent, and Asians 0.3 percent. The poverty rate for married couples was considerably lower, reaching 6.4 percent in 2015, 4.0 percent less than for families in general. Latino married couples had the highest poverty rate among all groups with 1 in 6.8 families (14.6 percent) in poverty, followed by Black married couples with 8.8 percent, and a net increase of 2.5 percent during the 15-year period. White and Asian married couples had lower increases in their poverty rates with 0.8 and 1.0 percent, respectively. White married couples had the lowest poverty rate in 2015, equal to 4.0 percent.
Table 11. Persons in Poverty by Race and Ethnicity by Type of Families
The poverty rates for households headed by a single female are 4.4 times higher than those for married couples and are the highest among all types of households (28.2 percent). For Latino female-headed households the poverty rate was 37.1 percent, with 1 in 2.7 households in poverty; for Black households the ratio is 1 in 2.8, for Whites 1 in 4.4 and, finally, for Asians, who had the lowest rate (15.5 percent), the ratio is 1 in 6.5 households in poverty.
A study by Robison and Siles (1999) shows a high correlation between households headed by a single female and high teen pregnancy rates, high school dropout rates, high crime rates, and lower labor force participation rates. The study also found that this type of household contributes to income inequality in the country since on average they have incomes that are equal to a third of what married couples earn annually. In 2014 these figures were $81,025 for married couples and $26,673 for female-headed households.
In the last few years the Latino community has been making important economic and financial strides to increase their wealth and influence within the U.S. economy. According to the summary report of the conference Increasing Wealth in the Latino Community organized by the Tomás Rivera Policy Institute, there is a growing middle-class of Latinos comprised of either foreign-born persons who have been in the U.S. many years, or are first- and second-generation native-born. These persons started businesses and are the new entrepreneurial class. Their businesses form the foundation of family and community stability. The report argues that:
Near the far end of this economic continuum are those considered to be affluent Latinos. Research shows that this is yet another fast-growing group, comprised of Latino households earning more than $100,000 per year. […] Finally, there are Latinos who can be considered truly wealthy with a net worth in the millions. This group is primarily self-made.[…] They are manufacturers and large-scale construction contractors, own chains of Hispanic-related grocery stores or have significant real estate holdings in the U.S. and possibly in their home country. As a group, they are typically an equal mix of first- and second-generation Latinos. They also are well-organized, with a business plan to guide how the business will evolve in the next several years. And although they are open to receiving business advice, their cultural loyalty carries a tendency to seek it from other Latinos or people they know (Tomás Rivera Policy Institute, 2007, pp. 11).
According to Table 12, Latinos in 2013 had a total spending power of more than $600 billion, 9.7 percent of the total spending power of the U.S. population, denoting a daily spending power (disposable income) of $1.66 billion. Recent Latino immigrants had $287.6 billion of spending power during the same year with a daily amount of $788 million.
Table 12. National Estimates for the Spending Power of Latino Households, 2013
A study by Rebecca Riffkin and Frank Newport from GALLUP shows that “Hispanic adults in the U.S. in 2014 reported spending more money on a daily basis, on average, than is typical for the U.S. adult population” (see Tables 13 and 14).
Table 13. Average Daily Spending by Race and Ethnicity, 2014
According to Table 14, Latinos spend on average $96 on a daily basis, 6.7 percent more than the average daily spending of $90 for the entire U.S. population. Compared to the spending amount of $87 for Blacks, which is the lowest among all racial and ethnic groups, Latinos spend 10.3 percent more on a daily basis. A more detailed analysis by the same authors shows daily spending differences when considering having children under 18 years old. Table 14 shows that Latinos have the largest percentage of families with children under 18, with 1 in 2 families falling in this category, 51.5 percent more than families for all adults in the U.S and 72.4 percent more than White families with children under 18, the lowest percentage among all racial groups.
Table 14. Average Daily Consumer Spending Affected by Having Children under 18 Years Old
Among families with no children under 18 years of ages, Latino families have one of the lowest averages of daily spending ($76), 3.9 percent lower than all U.S. adults ($79), and 7.9 percent lower than Asians ($82), who have the highest average daily spending. When considering families with children under 18, the average daily spending of Latinos jumps to $116 and is the second highest among all racial and ethnic groups. The daily spending for Latino families is 4.5 percent higher than for U.S. families and 7.4 percent higher than Whites’ average daily spending, which is the lowest among all groups. Latino families trail Asian families by only 2.6 percent ($119) in their daily spending. All these figures show the significant spending power that Latino families, including recent immigrants, have at the national level with a direct impact on the economic well-being of the country.
Another important contribution of Latinos to national and state economies is the amount of taxes they pay on an annual basis. UnidosUS, formerly the National Council of La Raza, reports that: “In 2013, Latino households paid almost $124 billion in federal taxes, including individual and corporate income taxes, payroll taxes, and excise taxes, and almost $67 billion in state and local taxes” (2015: para. 5). Further, “Tax contributions from Latino households also play a critical role in funding Social Security and Medicare. In 2013, Latino households contributed about $98 billion to Social Security and $23 billion to Medicare through payroll taxes” (para. 5).
Furthermore, the Institute on Taxation and Economic Policy provides data that confirm, “Collectively, undocumented immigrants in the United States pay an estimated total of $11.74 billion in state and local taxes a year. This includes more than $7 billion in sales and excise taxes, $3.6 billion in property taxes, and $1.1 billion in personal income taxes” (Gee, et al., 2017: 3). The total annual contribution of Latino households, including recent immigrants, to national and local economies through taxes and their payments to Social Security and Medicare is estimated at just under $340 billion. As stated above, Latinos have the largest number of persons under 18 years old, so Latino youth could become key supporters of the Social Security and Medicare programs in the near future.
Another key economic variable that shows the importance of Latino households within the national economy is their purchasing power. Several studies estimate that in 2015 the purchasing power of Latino households was $1.5 trillion, and this year it is expected to reach $1.7 trillion.
According to Table 15, the purchasing power of Latino consumers has increased by $1.49 trillion since 1990, representing a 709.5 percent increase in 27 years, with a 26.3 percent yearly increase. Since 2010 the purchasing power of Latinos increased by $700 billion, a 70 percent increase with a yearly increase of 10 percent.
Table 15. Purchasing Power of Latino Consumers in the United States from 1990 to 2017
At the national level, the purchasing power of American consumers in 2017 reached $11.7 trillion. Latino consumers’ purchasing power of $1.7 trillion thus represents 14.5 percent of the national purchasing power. This figure is generally in line with the size of the Latino population as a percentage of the total U.S. population (16.9% currently).
Finally, it is important to consider the role that Latino-owned businesses play in the national economy. According to the U.S. Hispanic Chamber of Commerce there are currently more than 4.2 million Latino-owned businesses in the country. These businesses support over 4.0 million jobs. Since 2012 the number of Latino-owned businesses has grown by 900,000, representing a net increase of 27.3 percent in 5 years.
According to the economic census of 2012, the three sectors with the largest numbers of Latino-owned businesses are Other services (except Public Administration) with 550,000, Administrative and Support services with 520,000, and Construction with 480,000 businesses. The three sectors with the lowest numbers of Latino-owned businesses are Manufacturing with 40,000, Educational Services with 50,000, and Finance and Insurance with 55,000.
The Other Service and Construction sectors are also characterized by their relatively high number of Latino workers, which suggests that Latino business owners hire Latino workers. On the other hand, the sectors with the lowest numbers of Latino-owned businesses, Manufacturing, Educational Services, and Finance and Insurance require specialized knowledge to operate, high start-up costs, advanced levels of education, and highly qualified workers.
A report from Geoscape shows that the revenue of Latino-owned businesses increased by 88.3 percent from 2007 to 2015, reaching a projected $661 billion in 2015, and if the growth rate remains the same, the projected figure for 2017 could reach $787 billion. A high percentage of this revenue is used to support the daily operations of these firms and most of the generated profits are reinvested to allow the firms to keep growing.
Latino-owned businesses were the fastest growing among minority-owned businesses between 2007 and 2012, according to the Census Bureau’s latest economic and businesses survey (see Table 16). They grew by 46.3 percent during this period, followed by Native Hawaiian & Pacific Islander, African American, Asian, and American Indian-owned businesses. It is expected that this trend will continue when the results of the current (2017) businesses survey are published.
Table 16. Minority Business Growth, 2007-2012
The Economics and Statistics Administration report, Deep Dive into Hispanic Ownership, indicates that, “While men owned over 56 percent of Hispanic businesses in 2012, women drove the growth in this category. Between 2007 and 2012, the number of female Hispanic-owned businesses grew by an incredible 87 percent, from 800,000 to 1.5 million firms” (2016, para. 2).
In summary, Latino-owned businesses are growing in numbers at a fast rate; they are creating thousands of jobs, and the annual revenue that they generate is rapidly approaching $1.0 trillion. These figures show the significant role that Latino-owned businesses play within national and state economies and, what is more important, the impact of these businesses will continue growing in the coming years.
For many years anti-immigrant sentiments have been mounting, with Latinos being one of the major targets of American hostility. Some people view Latinos as a heavy load that the American government has to sustain, and believe that the vast majority are undocumented, use public services without contributing their fair share, and do not pay any taxes or contribute to national social programs.
This article discusses the important contributions that Latinos make to the nation’s social and economic fabric. We started by showing the rapid growth of the Latino population during the last decades, fueled in part by an influx of undocumented immigrants, but this flow has leveled in the last few years, making domestic Latinos and their relatively larger families the main source for the population growth.
Although Latinos, both males and females, participate in the labor force at high rates, due to their low educational attainment (one of the lowest among all race and ethnic groups), they mainly work for sectors that pay on average the lowest weekly wages. Since Latinos have the largest number of persons per family, these two figures--low wages, large families—in part help explain their higher poverty rates compared to Whites.
For many years, the community has been working to overcome these negative figures. Some progress has been made in reducing the educational gap with other racial groups, and an increasing percentage of Latinos with high educational attainment, especially women, are already working for sectors that pay very good weekly salaries and benefits.
At the same time, Latinos have become key players within the U.S. economy, with their spending and purchasing powers continually increasing in recent years. Further, Latinos have become the subpopulation group with the highest daily spending. Latinos, including recent immigrants, contribute to the U.S. economy by paying large amounts of federal and state taxes and make significant contributions to the Social Security and Medicare programs. Since the number of Latinos under 18 years of age is the largest among all the other racial/ethnic groups, young Latinos will become key contributors to these social programs.
In addition, for many years Latino entrepreneurs, mainly females, have been creating new businesses at a very fast pace. Recent numbers show that currently there are over 4.2 million Latino-owned businesses in the country, which supported over 4.0 million jobs and generated an estimated revenue in 2017 close to $800 billion.
In summary, the Latino community has been gaining social and economic influence at the national level. They increasingly become key contributors to the nation’s economy, diversity and social fabric. In recent months, political leaders and segments of the population, especially in states where there are voices that are trying to undermine the advancement made by Latinos, have challenged this progress. This article shows that the vast majority of Latinos are supporters of national and state economies and their influence within the country is increasing every day.
1To quantify the spending power of Latinos, the study by the Partnership for a New American Economy looks at Latinos’ annual income and subtracts the taxes they pay at the federal, state, and local levels.
2Hispanics’ Daily Spending Well Above U.S. Average
3Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase. Spending power is the degree to which people have money to buy products and services: The growth in employment and wages gives consumers some spending power to absorb the higher cost of energy.
4Source: Trading Economics: U.S. Bureau of Economic Analysis.
5Hispanic Businesses & Entrepreneurs Drive Growth in the New Economy, 3rd Annual Report 2015.
Economics & Statistics Administration (2016). Deep dive into Hispanic Business Ownership. U.S Department of Commerce. Washington, DC: Diagne, A.F. Retrieved from http://www.esa.doc.gov/economic-briefings/deep-dive-hispanic-business-ownership
Geoscape (2015). Hispanic businesses & entrepreneurs drive growth in the new economy: 3rd annual report 2015. Miami, FL.
Gee, L.C., Gardner, M., Hill, M.E., & Wiehe, M. (2017). Undocumented Immigrants’ State & Local Tax Contributions. Washington, DC: Institute on Taxation and Economic Policy. Retrieved from https://itep.org/undocumented-immigrants-state-local-tax-contributions-2/
Riffkin, R. and Newport, F. (2014). Hispanics’ daily spending well above U.S. average. GALLUP News. Retrieved from http://news.gallup.com/poll/180002/hispanics-daily-spending-above-average.aspx
Robinson, L.J. and Siles, M.E. (1999). Social capital and household income distributions in the United States: 1980, 1990. The Journal of Socio-Economics, 28(1), 43-93.
The Tomás Rivera Policy Institute (2007). Increasing wealth in the Latino community: A TRPI conference summary report. Los Angeles, CA: Grossman, L.P.
UnidosUS (2015, April 5). The Economic Impact of Latino Workers: A by-the-numbers Breakdown for Tax Day. Retrieved from http://blog.unidosus.org/2015/04/15/the-economic-impact-of-latino-workers-a-by-the-numbers-breakdown-for-tax-day/.