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September 1996, Volume 3, Number 9

Hispanic Unemployment-Immigrant Self-Employment

Historically, the African-American unemployment rate has been about twice the white rate, and the Hispanic unemployment rate has been closer to the white than the African-American rate. But the Hispanic unemployment rate in the 1990s has climbed, and is now closer to the African-American than the white rate.

In July 1996, when the overall unemployment rate was 5.4 percent, the unemployment rate for whites was 4.7 percent, the unemployment rate for Blacks was 10.5 percent, and the unemployment rate for Hispanics was nine percent.

There are several explanations for the rising Hispanic unemployment rate. First, about one-third of the nation's 23 million Hispanics in 1990 lived in California, where the 1990-92 recession was most severe. California also has some of the fastest-growing low-wage industries, many of which experience periodic layoffs. California has 140,000 of the nation's 950,000 garment workers, for example, versus 94,000 in New York City, and some 800,000 individuals are employed sometime each year on California's farms.

A 1994 Census report, "The Hispanic Population in the United States: March 1993," (Series P20-475) reported that 28 percent of employed Hispanic males were in operator, fabricator, and laborer occupations, while 29 percent of non-Hispanic white males were in managerial and professional specialty occupations. Hispanic males in 1992 had median earnings of $20,054, about 63 percent of the $31,765 earned by non- Hispanic white males.

In 1993, there were about six million Hispanic males and four million Hispanic females employed in the US. Of the 10 million Hispanic workers, 6.4 million were of Mexican origin, 1.6 million were of Central and South American origin, 891,000 were of Puerto Rican origin, and 533,000 were of Cuban origin.

Second, Hispanics tend to be less educated than whites and African Americans, making them more likely to lose jobs in recession, and making it harder for them to find new jobs in recovery. A Rand study released in July, 1996 stressed the low educational levels of Mexican immigrants to explain why their median weekly earnings fell between 1970 and 1990 relative to the median earnings of US-born workers.

Third, discrimination against Hispanics may have increased in the wake of Prop. 187 and other anti-immigrant drives.

Many economists note that Hispanics are young and poorly educated, which helps to explain their persistently high unemployment rates. About 80 percent of white adults and 70 percent of African Americans had graduated from at least high school 1990, but only 53 percent of adult Hispanics and 46 percent of Mexican-Americans were high school graduates.

About 60 percent of the nation's Hispanics are of Mexican origin, 12 percent are Puerto Rican, six percent are Central American, and five percent each are from Cuba and South America.

Hispanic unemployment rates may drop as the California economy recovers. California's unemployment rate is still higher than the US rate, but job growth in California in 1996 is once again much faster than US job growth, a result of jobs created by trade, entertainment, and high-technology to replace jobs lost in construction and defense industries.

The revival of job growth and legal and illegal immigration has renewed interest in the interaction of newly-arrived immigrants and settled unskilled workers. Roger Waldinger notes that most 1970s and 1980s research that tried to find negative effects of immigrants on US-born Black workers--depressed wages or displacement-- found no smoking gun link, in part because many African-Americans work for government, for which foreign nationals are not eligible. For example, one-third of the African Americans in the labor force in New York City in 1990 work for the government.

Public sector jobs remain attractive to US-born workers. In Los Angeles in July 1996, some 25,000 persons showed up to apply for 100 entry-level janitorial and laborer jobs offered by the city government, suggesting that those at the bottom of labor market prefer public to private employers. The starting wage for these stable jobs is $18,000 per year, or about $9 per hour, plus health and other benefits.

In the private sector, however, immigrant networks have combined with employer attitudes and expectations to make Hispanic immigrants preferred to US-born unskilled workers.

Mexican immigrants in Los Angeles have proven to be better than unskilled African-Americans in winning jobs at the bottom of the labor market. According to Waldinger, Mexican immigrants were over represented in 53 of 82 manufacturing sectors in 1990. Information about job openings flows long distances over immigrant networks to Mexico rather than within the inner city areas surrounding the factories where the immigrants work.

Furthermore, according to Rand, Mexican immigrants begin their US journey earning lower wages than similar US-born workers, and the gap widens over time. Unlike Asian immigrants, who initially earn less than similar US workers, but catch up and surpass US-born workers within seven to 12 years, Mexican immigrants do not catch up, and sometimes lag further behind comparable US workers the longer they are in the US. For example, the average earnings of immigrants from Mexico and Central America were 25 to 40 percent lower than natives' earnings in 1970, and 50 percent lower in 1990.

Many immigrants begin small businesses. Is immigrant self-employment a sign of immigrant success or failure? Many sociologists regard immigrant self-employment as a sign of success, and some have suggested that concentrating immigrants within particular cities permits "enclave economies" to flourish. Leading economists, on the other hand, argue that "there is no evidence that immigrant entrepreneurs are particularly successful" (Borjas, 1990, 163) despite stories of Korean and Latino grocery stores.

Self-employed immigrants work more hours and earn more than immigrants who work for wages or salaries, but the self employed also tend to have more human and financial capital. For example, among immigrant Korean men in 1979, the self employed earned an average $23,400, while immigrant wage and salary Koreans earned an average $16,600. However, the self employed worked more hours--2,400 versus 2,000--and were more likely to have migrated earlier--70 percent immigrated to the US before 1975, versus 48 percent of the wage and salary workers.

Portes and Zhou used data from the 1980 Census to examine the determinants of earnings for men 25 to 64 in 1979, and found that economists who control for education, experience, and hours worked are correct when they assert that self-employed immigrants do not earn more than similar men with the same qualifications. But Portes and Zhou emphasize that there are more "outliers" among the self employed, meaning that the most successful self-employed immigrants earn far more than average, and that, in some cases, successful self-employed immigrants also become community leaders.

Will education eliminate the Hispanic-White unemployment gap? The Rand study analyzed Census data and data from a US survey of 21,000 15- and 17-year olds, and concluded that most immigrants generally do well in the US educational system. However, Mexican immigrants lagged behind other immigrants. In 1990, only 74 percent of the 15- and 17-year olds living in the US who were born in Mexico were in US schools, versus 95 percent of US born youth and other immigrant youth.

Many Mexican youth stop going to school after the seventh grade, so that, if a Mexican youth arrives in the US at age 15, she may have already been out of school for two years.

Roger Waldinger, "The jobs immigrants take," New York Times, March 11, 1996. R. Drummond Ayres, "California's economy shows signs of regaining glitter," New York Times, December 19, 1995. James Bornemeier, "Study paints positive picture of immigration," Los Angeles Times, December 11, 1995. "Hispanic employment rate lagging behind economy," San Jose Mercury News, November 19, 1995.