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Latinos are driving the U.S. economy thanks to a rise in population, workforce participation, entrepreneurship, and economic contributions.
But progress is hampered by COVID-19, discrimination, and wage disparities.
“There’s no doubt Latinos are slowly being more fully integrated into the US economy. Yet there’s also no doubt there’s a long way to go, especially for first-generation Latino immigrant,” according to Lucy Perez, Bernardo Sichel, Michael Chui, and Ana Paula Calvo of McKinsey & Company, a global management consulting firm.
Let’s explore how Latinos are influencing the economy now and in the future.
Latino Population Growth
Latinos account for over 18.5% of the total U.S. population.
As the Latino population has continued to grow rapidly, it has become the largest racial/ethnic minority in the nation.
“While the Baby Boomers were capturing the public’s attention, in its shadow, the Latino population grew dramatically from 1980 and 2010. Unsung and almost unnoticed, this Latino adult generation gathered the momentum necessary [for economic growth],” according to a 2021 report from the Latino Donor Collaborative.
While states such as Texas, California and Florida have large Latino population numbers, other states saw large increases in the number of new Latino residents between 2010 and 2020.
For example, North Dakota saw a large increase in its Latino population with a 148.1% growth rate from 2010 to 2020.
“The Latino population has been dispersing across the United States for years — a reflection of where the nation’s population is moving and where opportunities are located,” Mark Hugo Lopez, director of race and ethnicity research at the Pew Research Center told NBC News.
Latino Workforce Participation
68.3% of Latinos are in the workforce, a greater percentage than the 63.6% of all Americans who are, according to a 2021 report by New American Economy.
“Given that Hispanics are more likely to be younger and of working age, Hispanics, both U.S.-born and immigrant, have a higher labor force participation rate than the overall U.S. average,” according to the report.
Latinos also make up a significant part of some of the most important U.S. industries.
For U.S.-born Latinos:
- 5% Agriculture, Forestry, Fishing and Hunting
- 5% Construction
- 5% Administrative Support
For immigrant Latinos:
- 3% Agriculture, Forestry, Fishing and Hunting
- 5% Construction
- 5% Administrative Support
“Critically for the U.S. economy, Hispanic Americans continue to fill critical workforce gaps in labor-short industries,” according to New American Economy.
The number of employees at Latino owned businesses (LOBs) has grown 55% since 2007, compared to 8% job growth among White-owned businesses, according to the 2021 State of Latino Entrepreneurship.
Among the roughly 5 million LOBs in the U.S. 9% are employer businesses. This subset of 400,000-450,000 LOBs employs over 2.9 million people.
The report further mentions that the number of Latino-owned employer firms has grown 35% in the last 10 years.
Regarding Latino immigrants, more than 12% of all immigrant workers worked for their own business, making them 30.6% more likely to have their own business than the overall U.S. population, reported New American Economy.
When considering college, the number of Latinos pursuing higher education has also increased over time.
According to the Pew Research Center, the number of Latinos enrolled in college increased from 2010 to 2019, from 2.9 million to 3.6 million.
“About 42% of U.S. Hispanic adults ages 25 and older had at least some college experience in 2019, up from 36% in 2010,” according to the report.
Latino Economic Contributions
Latino households earned more than $1.2 trillion, according to recent data.
“This allowed them to pay $308.5 billion in taxes, including $196.5 billion in federal income taxes, as well as more than $112 billion in state and local taxes,” reported New American Economy.
The 2021 report by Latino Donor Collaborative calculated the total economic output (gross domestic product, or GDP) of Latinos in the United States at $2.7 trillion in 2019. This is up from $2.6 trillion in 2018, $2.1 trillion in 2015, and $1.7 trillion in 2010.
To put it in perspective: If Latinos living in the United States were an independent country, the U.S. Latino GDP would be tied with France for the seventh-largest GDP in the world.
“The Latino GDP is not only an engine of economic growth but also a broad foundation of support for the larger U.S. economy,” the Latino Donor Collaborative reports. “The dramatic economic contribution of Latinos is a phenomenon that impacts every corner of the nation.”
The Impact of the COVID-19 Pandemic
COVID-19 challenged Latino workers and entrepreneurs.
Over 85% of Latino-owned businesses said COVID-19 had immediate negative impacts on their businesses, including product delays and closures, according to a 2020 .
In same survey, 3% of businesses reported a positive effect or increase in business due to products or services most needed in the pandemic.
The year after the pandemic brought a 50% reduction in the share of businesses reporting large negative impacts, according to the 2021 State of Latino Entrepreneurship.
This improvement is partly attributed to the $800 billion in relief aid deployed to small businesses and the vaccine rollout in the early part of 2021 that allowed businesses to operate at a greater in-person capacity.
Latino-owned businesses also saw proactive business pivots and positive results related to business outcomes.
“There’s a real sense of resiliency with Latino businesses that we’re uncovering,” said Marlene Orozco, associate director of SLEI.
The Latino Donor Collaborative agrees.
In its 2020 report, the agency estimated that the Latino work ethic, family values, and entrepreneurial spirit that survived 80 years of wars, civil upheaval, and recessions would help Latinos to power through the pandemic.
“One year later, grounded speculation has become a reality demonstrated in many ways. Latinos in every corner of the United States have risen to the challenge of COVID-19 and are poised to be a driver of recovery in the post-pandemic economy,” the agency reported in 2021.
Latino Wage Gaps, Discrimination, and the Future
Despite much growth, Latinos still face challenges participating in the economy.
A 2021 report from Mckinsey & Company mentions “Latinos are collectively underpaid by $288 billion a year. In a situation of full parity, they could spend an extra $660 billion annually. Latino businesses could generate an additional $2.3 trillion in total revenue each year, and 735,000 new business could be created supporting 6.6 million new jobs.”
The report goes on to say that Latino Americans make just 73 cents for every dollar earned by White Americans.
While Latino wealth has grown and is on an upward trajectory, the report highlights that the median wealth of Latino households in 2019 was about $36,000, just one-fifth of the median $188,200 held by their White peers.
The authors further mention that a lack of accumulated family wealth contributes to the gap in the annual flow of net wealth, with the annual flow of net wealth for Latinos being about $380 billion lower than in a per capita parity scenario with their White peers.
Mckinsey & Company reported that because of the lack ability to accumulate and pass on wealth from generation to generation, Latinos face discrimination when it comes to securing financing to start and scale businesses and essentials such as food and housing.
“Addressing the barriers preventing Latinos from fully participating not only is morally right—and in keeping with the essence of the American dream—but presents an opportunity to make the economy more robust for everyone,” according to the McKinsey & Company authors.
You Can Change Systems to Help Latinos
What does health equity look like in your community?
Enter your county name and get a Salud America! Health Equity Report Card.
The report card is a data dashboard tool that auto-generates Latino-focused and local data with interactive maps and comparative gauges. This can help you visualize and explore inequities in housing, transit, poverty, health care, food, and education.
You will see how your county stacks up in these health equity issues — now including social vulnerability and COVID-19 — compared to your state and the nation.
Then you can share the Report Card with your local leaders to advocate for healthy change!