Hispanic American Incomes Are Rising Faster Than Anybody Else’s

(Bloomberg Opinion) -- The U.S. has no shortage of bad news, but there are still a few bright spots to be found. One is the steady economic progress enjoyed by Hispanic Americans over the past two decades. Though much remains to be done, Hispanics are coming closer to enjoying an American dream long denied to them. 

From 2014 through 2019, as the U.S. economy expanded and incomes rose, Hispanic Americans logged faster income growth than any of the country's other main racial groups:

Of course, that growth was from a relatively low base; the absolute size of the income gap between Whites and Hispanics shrank by only about $2,700 during the boom and still stands at almost $20,000 for median households. But rapid income growth is boosting more Hispanics into the middle class, raising living standards and creating a widespread feeling of upward mobility. 

Part of this surely has to do with the end of mass immigration from Latin America. Since 2007, what was once a flood of immigrants from Mexico has slowed to a trickle. Immigrants tend to make less money than their native-born children, as they lack social connections and often speak limited English. This is especially true of undocumented immigrants, who tend to have low educational attainment. And undocumented immigration has fallen far faster than other types. The end of mass migration from Mexico will thus make Hispanic average incomes rise as the upward mobility of the second generation shines through in the statistics.

But Hispanic progress isn't just a function of averages. In 2018, economists Raj Chetty, Nathaniel Hendren, Maggie Jones and Sonya Porter evaluated the intergenerational mobility of U.S. racial groups and concluded: “Hispanic Americans are moving up significantly in the income distribution across generations … and may close most of the gap between their incomes and those of whites.”

Other reports have found similar results. In particular, economic gaps between Mexican and White Americans, which had stubbornly persisted for generations, are finally closing. 

Why? One reason is that Hispanic kids are also getting much more education. In 2012, Hispanic college enrollment rates surpassed those of Whites. In the year 2000, more than 30% of Hispanics dropped out of high school; by 2016 it was only 10%. Like many recent immigrant groups, Hispanics have been using education as a ladder into the middle class.

Another possible reason is geographic mobility. Hispanic immigrants have tended to cluster in the Southwest of the U.S., close to the Mexican border. But in recent years, they have increasingly diffused across the country; Chicago, for example, is now about one-third Hispanic. Research shows leaving traditional economic enclaves tends to help people move up in American society, perhaps because doing so lets people make a broader range of social connections and expand their personal horizons.

So Hispanic immigrants appear to be following the path of past U.S. immigrant groups — working hard, getting an education, moving around the country and seeing their incomes rise from generation to generation. But huge challenges remain. One obvious task is to reduce the racial discrimination many Hispanics still face. Inflammatory rhetoric such as President Donald Trump's seems likely to exacerbate that problem.

Another challenge is building Hispanic wealth. Although income gaps between Hispanics and Whites are narrowing, wealth gaps remain substantial. As of 2016, White households in the lower and middle income groups each had about 3 times as much wealth as their Hispanic counterparts, and the gap has not been closing. Add income disparities, and the picture becomes even starker — in 2016, the median Hispanic family had a net worth of only $20,720, less than one-eighth that of Whites. 

Homeownership, the traditional vehicle of wealth-building for the U.S. middle class, has something to do with this. White American households continue to be far more likely to own their own houses:

If Hispanic incomes keep catching up, then this situation will change over time. But it will take many decades. A national program to assist first-time homebuyers, combined with a huge program of homebuilding — similar to what the WW2 generation got with the G.I. Bill and the creation of the suburbs — is the logical way for the government to help Hispanic Americans build wealth. 

But despite these challenges, Hispanic Americans have been moving up the economic ladder. Their steady climb shows the American dream, while perhaps less powerful than it used to be, is not yet dead. That's something to celebrate.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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