If we add all who qualify as having a Hispanic or a Latino origin in the United States, the only country possessing a larger Spanish-speaking population is Mexico. With more than 120 million inhabitants, Mexico roughly doubles the 60-million individuals for whom Spanish is the native tongue who reside in the United States. The United States is a magnet for people around the world. Latinos, like others, hear the true stories of the American economic system from friends and relatives who emigrated here. It is not easy to succeed, but during periods of more rapid expansion, like the one we have been living in these first years of the Trump administration, most find opportunities to progress.
But the higher growth and more stable economy that exists in the United States is only possible thanks to a framework of laws and institutions lacking elsewhere. Latinos have a worse track record when it comes to institution building. More on this below.
How are Hispanics and Latinos doing in the United States? Extremely well. Especially when compared with the incomes and opportunities in their native countries. In the United States they are still behind the average earner. As they are the largest immigration group, there are many newcomers in their group, and they are seldom as productive as those who have been here longer. In 2017, approximately 440,000 Latinos (from Latin America and the Caribbean Latin countries) became U.S. legal residents. That is almost five times the number of those who came from Europe. I have written about immigration before in this column. So I will not address the current debates here, but putting aside the cases of legitimate asylum seekers, my views can be summarized as: “Immigration by invitation not by invasion.”
A recent study about how Latino incomes recovered after the recession released by the Pew Research Center concluded that “longer-tenured immigrants earn more than the typical immigrant, and their rising share gave a sizable boost to the average income of foreign-born Latinos. U.S.-born Latino workers – younger and less educated than U.S.-born workers overall – experienced greater losses in the recession and are left wanting in the economic recovery, despite recent gains.” The above is pure logic, the longer you stay in a place, the better you can learn the needs of customers and employers, the jobs that better adapt to your talents, and acquire the language and other skills necessary for being more productive.
For those who are over 16-years old, and excluding the Latinos in the Armed Forces, the unemployment rate stands at 4.7 %, which is lower than in 90% of all Latin American countries. Only Mexico (3.3%), Guatemala (2.8%), Ecuador (4.6%) and Peru (4.5%) have lower unemployment, but with much higher levels of informal or extra-legal work, and with much lower salaries. The last report of the International Labor Organization, released this past December, shows that the conditions for laborers improved in most Latin American countries, but still not enough to compensate for the attractiveness of coming to the United States.
I estimate that the income per capita of Latinos in the United States is approximately 30% lower than the general population. This still puts them at par with the Spanish-speaking country, Spain, with the higher income per capita (38K per year). As an economy, the GDP produced by Latinos in the United States would be larger than that of Spain, and similar to that of Brazil, which has a population more than three times as large as those of Latinos in the United States.
Economics, however, is not all. In addition to lower incomes and employment opportunities most Latin Americans have to suffer under governments which have very weak rule of law. Central American countries and México rank among the worst. So it is no wonder that most Latinos who want to immigrate here come from those nations. According to the 2019 Index of the World Justice Project the average rule of law score in Central America and México is 48 out 100, which compares with the United States at 71.
Weak rule of law breeds corruption and insecurity in private property, contracts, and investments. In many countries, like Argentina and Venezuela, it also brings monetary instability. All these factors create havoc and prevent the growth of small entrepreneurs. Not to mention the many social ills that result from bad “laws” and poorly enforced laws.
In a recent piece by Diego Sánchez de la Cruz in libremercado.com (Spain), he highlighted the great improvement of “Hispanos” under Trump, and not just among the poor: “from 2011 to 2017, the proportion of families in that group that earned over $200,000 per year doubled.” Not all is rosy, however, in the United States. Part of the fast improvements for Latinos under the Trump economy has to do with the construction sector. Low interest rates and lower taxes have helped this sector and others. But as key administration officials have acknowledged, government spending is still too high. A potential bi-partisan plan in infrastructure, with $2 trillion in play, may give another boost to Latinos in the workplace. It all sounds great until the bills come due.
There are many outstanding economists in the Trump administration, and they have the responsibility of keeping the economy on a sound footing, from which all of us, not only Latinos profit. We have Larry Kudlow at President Trump’s side; Kevin Hassett is Chair of the Council of Economic Advisors; David Malpass at the World Bank; Adam Lerrick as key counselor in the Treasury; Mark Calabria in Housing; and Diana Furchtgott-Roth in Transportation. The list is extensive and hardly exhausted. They all have their differences, but most have a bias towards supply-side economics, which trusts the creative power of free people in a free economy. But good supply siders also know that they need to avoid the trap of deficit spending and top-down government planning and monetary manipulation. If spending is not reduced, there is no alternative but to increase taxes, borrowing (higher interest rates), or printing money. Not good.
A stable growing economy goes hand in hand with the rule of law. They are the magnets that makes the United States if not the best, by far one of the best places for Latinos to call home.
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