Latinos Are Underpaid by $288 Billion a Year, Creating a Massive Wage Gap

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A wage gap between Latino and white workers is a large factor in preventing economic mobility for Latinos, according to a new study by McKinsey & Co.

The gap is particularly large for Latino immigrants, who are paid far less in the same job categories as other workers.

“The median wage for foreign-born Hispanics is $31,700 compared to $38,848 for those born in the U.S. For non-Latino white workers, the number goes up to $52,942,” according to NBC Latino.

With low wages and fewer opportunities for fields that offer career growth, Latinos are at a disadvantage and are more likely to struggle to meet basic needs like housing, food, healthcare, and more. This, in turn, heightens their risk for disease and poor health outcomes.

Let’s learn how low wages and other barriers are preventing Latinos from accessing wealth opportunities, the implications of low economic mobility for Latinos, and how we can address the wealth gap.

About the McKinsey Study on Economic Mobility

The McKinsey report studied the challenges that Latino workers, business owners, consumers, and investors face.

Researchers Lucy Pérez, Bernardo Sichel, Michael Chui, and Ana Paula Calvo analyzed data from the US Census Bureau and US Bureau of Labor Statistics over 2015-2019 and surveyed over 4,000 people.

They found that Latinos are widely underpaid for their labor compared to their white counterparts.

“Our research finds Latinos are collectively underpaid by $288 billion a year,” according to the McKinsey report. “The $288 billion annual gap in income compared with non-Latino White workers not only represents lost economic opportunity but has significant implications for Latinos’ ability to start businesses, build wealth, and fully participate as consumers.”

A main reason for the Latino wage gap is a lack of representation in higher-paying occupations.

“The study found that 50 percent of the aggregated Latino wage gap can be accounted for by Hispanics’ lower representation and pay in 4 percent of occupations, including management, teaching, STEM and professions like law, medicine, sales and accounting,” according to NBC Latino.

Additionally, factors like discrimination and the COVID-19 pandemic have greatly affected how Latinos are treated in the workplace.

These have all led to less wealth and fewer opportunities for Latinos to succeed economically.

Implications of a Latino Wage Gap

Latinos spend most of their income on housing, health care, banking, broadband, food and consumer goods, according to the study.

With an increasing wage gap, Latinos have less money than white people and are forced to prioritize basic needs.

Unfortunately, many Latinos struggle with meeting those basic needs, which leads to worse health and life outcomes.

“Latino families are more likely to live in poverty than white families. Child poverty rates are more than twice as high for Latino children than White children (23.7% vs 8.9%),” according to a Salud America! research review.

If the wage gap continues to increase, inequity between different groups will grow and Latinos will have less access to the wealth and opportunities compared to their white counterparts.

“Lower incomes, a lack of financial inclusion, and demands such as supporting family in the U.S. and abroad, impede the ability of many Latino families to accumulate wealth that would provide financial security,” according to the McKinsey report.

However, some progress in recent years shows that the gap may soon be narrowing, particularly as the Latino population in the U.S. becomes younger.

“As more of the Latino population is US-born—the younger age profile of Latinos also contributes to higher birth rates—its percentage of the country’s workforce rises, and the economic gap with non-Latino White Americans will likely narrow,” according to the McKinsey report.

More progress can be made to narrow the wage gap through policy and reform.

How Can We Decrease the Wage Gap & Advocate for Latino Economic Equity?

Latinos deserve the same wages and opportunities for success as other groups.

Historic exclusion from wealth and discrimination have led to lower wages and less wealth.

By creating more opportunities and pathways to success, we can support economic equity for Latinos, so that they can have financial security and not have to worry about the worse health outcomes associated with poverty.

Researchers from McKinsey recommended several policies to improve outcomes for Latino workers:

• Improve “essential” jobs in which Latino workers are disproportionately over-
  represented
• Create pathways from lower-paying occupations
• Unblock pipelines into higher-paying professions
• Support Latino recruiting, hiring, retention and advancement by employers

What opportunities do Latinos have in your area?

You can find out how equitable education is for Latino students in your area, as education is a large factor in future opportunities for success.

Download a Health Equity Report Card from Salud America! at UT Health San Antonio.

With the report card, you can find maps and data visualizations on rates of adults with no high school diploma, data on preschool enrollment, and the rate of high school graduation as well as dropouts.

You can then email your Health Equity Report Card to school and community leaders, share on social, and build the case to address education issues in at-risk areas!

Get your Health Equity Report Card!