The American Dream: Boosting Latino Economic Power
with Lucy Perez of McKinsey & Company
Latinos are projected to make up 22.4% of the U.S. labor force by 2030, yet are more likely to be employed in low-wage jobs and underrepresented in higher paying jobs.
Lucy Perez, Senior Partner at McKinsey & Company, joins host Liliana Henao Holmes to discuss the economic state of Latinos in the U.S. and opportunities to ensure Latino workers and entrepreneurs reach their full economic potential.
Sep 01, 2022
Henao Holmes: Hispanic workers are more likely to be employed in low-wage jobs, less likely to have non-wage employer benefits, and are significantly underrepresented in higher-paying jobs compared with their share of the U.S. labor force. And these disparities exist for a population that is projected to make up almost a third of the nation's workforce by 2060. Hello, and welcome to "Comcast Newsmakers." I'm Liliana Henao Holmes. You might have heard this before. Hispanics are one of the nation's fastest-growing populations, yet research shows that barriers still exist, preventing this population from reaching their full economic potential. Joining me to talk all about this is Lucy Pérez, senior partner at McKinsey & Company. Lucy is coauthor of the report "The Economic State of Latinos in America: The American Dream Deferred." Lucy, bienvenida, welcome, and thank you for being here with us.
Pérez: Thanks so much for having me, Liliana.
Henao Holmes: Lucy, I understand that this research is personal to you. Your dad is a restaurant owner and an entrepreneur. So what motivated you and your colleagues at McKinsey & Company to do an in-depth study on the state of Latinos and their economic status?
Pérez: Indeed, Liliana, this is very personal because my dad is a Latino entrepreneur, and he's one of so many Latino entrepreneurs. For us at McKinsey, you know, a question that we often get from clients is, "How can we drive growth?" This is a topic that is top of mind, whether you're in the private sector or in the public sector. And we're committed to helping our clients drive sustainable and inclusive growth. In the United States, a conversation about sustainable and inclusive growth needs to account for Latinos, given the centrality of this population to the American economy.
Henao Holmes: Now, Lucy, what were the key findings of this report? And was it something that shocked you, something that you didn't expect that you can share with us?
Pérez: Absolutely. There were many findings in the report, some that we've been talking about for a while. For example, like, there is a big gap between Latinos and non-Latino whites in this country, for example. But part of what was really surprising was the magnitude of the gap, and then hand-in-hand with that, the realization of how big the opportunity is if we get this right. For example, if we look at the average wealth of a Latino family, we're talking about $36,000, which is about a fifth of the average wealth of your white family in the U.S. And while there are many reasons for this, right -- for example, you know, a population that on average has lower-paying jobs, that is sending more of their money abroad to support families, that is not participating as actively in the stock market -- this is a really large gap. If we address this gap, we're talking about an opportunity to add over $2 trillion to the American economy. So getting this right, it's all about having a stronger American economy for all.
Henao Holmes: Lucy, your research has concluded that by 2060, 30% of the U.S. labor force will be Latino. Also, the number of Latino-owned companies has grown over the past five years at more than double the rate of white-owned firms, yet Latinos still don't have access to the same levels of capital. So though a lot of progress has been done, what needs to be done still to empower the economic success of Hispanic workers and entrepreneurs?
Pérez: Absolutely, there has been a lot of progress, but it's very fragile, right? This is a population that we see with very high labor force participation, high degrees of entrepreneurship, but starting from such a low base, right? And so on one hand, when we look at the opportunity, if we close the wage gap, we're talking about a $300 billion opportunity from being able to address that. When we look at entrepreneurs, over 70% of entrepreneurs are relying on their own friends and families for the savings for the capital to infuse and grow their businesses. This makes it really challenging to scale those businesses. So broader access to capital and investment by venture capitalists, by big organizations, too. For example, when looking at the diversity of the suppliers that companies are relying on, these are all opportunities to invest in those Latino entrepreneurs and those Latino workers and create more growth.
Henao Holmes: Now, according to this report, also, what did you guys find that could be something to help break those barriers? I mean, this is just one obstacle for Latinos to grow economically, but investing, saving, access to capital -- what needs to be done to help them?
Pérez: All of the above and more. This is a complex problem, and it requires, you know, public-policy changes, private-sector intervention, and real collaboration, right? Because this is about, how do we create better paths to better jobs for this population, right? Jobs that come with those benefits so that not such a large disproportionate of the income is going towards food, housing, health care, for example, relative to other groups. It is indeed about more access to capital to grow those businesses, to get to scale, to be able to add more than 6 million jobs if we were able to reach parity. It is about helping strengthen financial literacy and resources, right? It is about how we invest in these businesses, whether we are just someone thinking about where we're gonna have dinner tonight or we're a large organization thinking about which supplier to work with for a particular resource that we're looking for.
Henao Holmes: And I can't help but think that information, or lack thereof, is also an obstacle, if someone doesn't know that they can apply for a loan, that they can access capital somewhere else.
Pérez: Exactly, not having the right network or connections, right, to think about where to access capital, where to access insights, how to reach more customers. One of the big findings from the report, as we looked during the pandemic era, e-commerce capabilities were essential for businesses to grow, yet had more than 90% of those Latino-owned firms were lacking e-commerce capabilities. So thinking about all the interdependencies that go around us -- for example, better broadband access -- are some of those examples that can help drive that growth.
Henao Holmes: Finally, Lucy, what are the key suggestions coming out of your report to empower and facilitate the economic success of the Hispanic population in the United States?
Pérez: So a couple of things that can be -- one can take action on to address these gaps that we see for the Latino population. For example, if you're an employer having an understanding of your worker base, right? What may be those gaps to advancement? How are we paying and compensating these workers? Right? Recognizing the opportunities to create better jobs and those paths. How are we hiring? Greater focus on skills versus degrees. That is some of the things that we're seeing our clients do. There's that opportunity around investing, whether you're an organization or an individual. How are you putting capital into the hands of these Latino-owned businesses? And creating those opportunities to grow, to reskill workers, and drive more opportunity.
Henao Holmes: If someone wants more information and maybe access to this report to really get themselves educated on the topic, where can they go?
Pérez: So we would encourage them to go to our website, mckinsey.com, and you'll find our report as well as much more additional information beyond that in this first part of the report there.
Henao Holmes: Lucy Pérez from McKinsey & Company, thank you so much for being here with us today.
Pérez: Thanks so much for having me.
Henao Holmes: And thank you for joining us as well. For more great conversations with leaders in your community and across the nation, visit comcastnewsmakers.com. I'm Liliana Henao Holmes.