News Column

Hispanic Labor Market Gap Continues

October 2005, HISPANIC BUSINESS Magazine

Andrea Lehman


Based on data from the first half of 2005, the U.S. labor market shows an unemployment rate remarkably close to the 5.2 percent forecasted by both the Congressional Budget Office and the Federal Reserve Bank's "Survey of Professional Forecasters."

It is, however, a different labor market for Hispanics.

Unemployment rates for Hispanics are approximately a point higher than those for the population as a whole. A closer look at this demographic shows that unemployment rates for Hispanic women are slightly higher than those for Hispanic men approximately a point higher while unemployment rates for Hispanic youths (ages 16 to 19) are considerably higher than for adults of both genders.

The difference in unemployment rates between Hispanics and the overall U.S. population is not surprising in light of the gap in educational attainment and English-language skills faced by many Hispanic workers. A higher rate of unemployment among youths, a group mostly still in school and with less education and experience, is also expected.

More surprising is the higher rate among Hispanic women, since on average they have more education than Hispanic men. Higher fertility rates and family responsibilities may keep Hispanic women less attached to the labor market.

There are two factors to consider. One is who gets hired. The other is what kinds of jobs they obtain.

Analysis of survey data collected by HispanTelligence for Hispanic Business Magazine's September 2005 story on the "Top 40 Companies for Hispanics" indicates that the U.S. workplace has a long way to go before it attains representation equal to population. The top companies' reports on the Hispanic percentage of their total work force ranged from 3.2 percent to 31.0 percent. The firms with the highest percentages were in the service industry, and the firms with the lowest percentages were in technical fields.

This suggests that in those cases where Hispanic representation in a work force exceeds percent of the population it is via lower wage service jobs.

As for Hispanic representation in management positions, only 5.0 percent of the listed companies reported a percentage that exceeds (and only slightly) the national Hispanic population proportion of approximately 14 percent.

None of the companies reported a percentage of Hispanic officers equal to the population representation. In fact, the average figure was 3.8 percent.

What will help Hispanics find employment in well-paying and high-level jobs?

As the economy grows, labor market prospects improve for everyone. The primary measure of U.S. economic growth, real Gross Domestic Product (GDP), grew by 3.8 percent in the first quarter of 2005, at the upper end of forecasts.

However, second quarter growth, estimated at 3.4 percent, is slightly below forecast. Also, the economic impact of Hurricane Katrina is expected to reduce GDP growth by up to 1 percent for the rest of the year.

Real GDP growth is still only part of the story. GDP measures the amount of goods and services being produced over a given time period. But the issue isn't just how much is being purchased it's also what is being purchased, and by whom.

Some of the earlier GDP growth was driven by increases in government expenditure on national defense.

While this profits the defense industry and increases demand for personnel in the military (an employer that has no shortfall in minority representation), it does not address the issues of equity in distribution or economic opportunity that affect Hispanics disproportionately. Government spending on public education or domestic infrastructure would be more helpful in that regard.

However, without offsetting increases in government revenue, increased government spending contributes to the government deficit. In August, the Congressional Budget Office did revise its estimate of the federal government deficit for 2005, putting it at $34 billion less than expected.

The President's 2006 budget forecasts an even smaller deficit, though it does not include any additional funds for military operations in Iraq or Social Security program changes, both of which promise to be extremely expensive propositions.

In light of the much-needed hurricane relief efforts (estimated at $150 billion), these deficit reductions may no longer be possible.

As the government continues running deficits, thereby increasing the total debt, the amount of money spent to service the interest bill on the debt also increases, taking away billions of dollars that could otherwise be spent on goods and services. For example, the estimated 2005 interest bill on the total debt is $352 billion.

Running the economy in the red also puts upward pressure on interest rates. Higher rates are needed to provide a rate of return sufficient to entice investors to purchase the government bonds that finance the deficits.

However, with long-term interest rates staying mysteriously low amidst numerous short-term rate hikes, with parts of the country desperately in need of economic reconstruction, and with Alan Greenspan's departure as the Federal Reserve Chair looming on the horizon, future interest rate changes are increasingly unpredictable.


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