The US Latino Community is the Economic Engine America Needs
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The US Latino Community is the Economic Engine America Needs

Photo by:   Marina Cigarini
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By Marina Cigarini - McKinsey & Company
Managing Partner


Great news for Latinos in the US: Their population is a fast-growing one and  a key engine of growth for the US economy. By 2050, they will represent one in four US citizens – by 2060, one out of three workers. This information is provided by our report The economic state of Latinos in America: The American dream deferred, the first of its kind in the US published by McKinsey & Company.

Furthermore, the Latino labor force participation rate is significantly higher than the non-Latino white labor force, and their wealth has grown two times faster than non- Latino white wealth. However, and despite this demonstration that Latinos are in constant pursuit of the American Dream, economic parity remains below expectations and with many challenges ahead.

This is mainly because they generally receive less money for the same jobs than their  white counterparts: US-born Latinos receive salaries of approximately $38,848 annually, well below the $52,942 received by a white employee. In addition, non-US-born Latinos are paid even less, with an annual salary of approximately $31,700.

The Main Challenge is Equity

Latinos’ total annual wages could be $288 billion higher if they were paid equally, and if their representation in well-paying jobs matched their labor force participation. As an example: 50 percent of the wage gap between Latinos and whites exists in occupations important to the development of a society, such as academia, senior management positions, professions requiring graduate degrees, and jobs linked to science, technology, engineering and mathematics (STEM).

Also, in a scenario of parity between the Latino and white communities, the salaries of Latino employees could be 35 percent higher, which would result in more than 1.1 million more Latinos in the middle class.

Entrepreneurship is a Latino Thing

Such challenging scenarios have not slowed their initiative: Latinos are fantastically strong-willed entrepreneurs and the number of Latino-owned businesses is growing at a faster rate (12 percent in the last five years) than the number of white-owned businesses (5.3 percent in the same time frame), especially in construction and food service businesses.

However, they face parity challenges in growing and scaling their businesses. Latino- owned businesses are less likely to be approved for funds requested and more likely to rely on personal sources of funding, making them vulnerable to personal financial risk.

Closing this disparity in revenue representation and performance per business could enable $2.3 trillion in additional revenue annually and create 735,000 new Latino- owned businesses that could support 6.6 million jobs. It’s a nice fish to catch.

It’s Time to Close the Wealth Gap and Generate Patrimony

Although Latinos are becoming wealthier, the median wealth of Latino households ($36,000) is only one-fifth that of white households ($188,200) and they are less likely to receive inherited wealth. When it does happen, it is three times less than that of whites.

This is primarily due to certain factors that prevent closing the gap: low-paying jobs, lack of financial inclusion, the need to support people abroad —many families are limited in their savings by providing financial support to family members abroad, since three in 10 send remittances outside the U.S.— as well as helping family back home: 72% of Latino millennials provide financial support at home, compared to 53% of white millennials.

Five Ways to Help America's Economic Engine

Having said all that, here are five pathways that would help the U.S. Latino community advance and enable a more equitable economy in the country.

  1. Compensate essential Latino employees equitably.
  2. Improve the skills of Latino employees in higher paying occupations.
  3. Increase access to capital for Latino business owners.
  4. Close representation gaps in the most attractive sectors.
  5. Accelerate financial inclusion to drive wealth creation for Latinos.

In this way, the U.S. economy will be less unequal, more equitable to the Latino community, and they will be seen for what they are: one of the main drivers of U.S. economic stability.

Photo by:   Marina Cigarini

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