Trends in Poverty and Inequality among Hispanics

Abstract

Since the 1970s, the poverty rate has remained largely unchanged among Hispanics but has declined among non-Hispanic whites and blacks, particularly before the onset of the recent recession. The influx of large numbers of immigrants partially explains why poverty rates have not fallen over time among Hispanics> ; In 2009, Hispanics were more than twice as likely to be poor than non-Hispanic whites. Lower average English ability, low levels of educational attainment, part-time employment, the youthfulness of Hispanic household heads, and the 2007–09 recession are important factors that have pushed up the Hispanic poverty rate relative to non-Hispanic whites. In addition, income inequality is greater among Hispanics than among non- Hispanic whites, although lower than among non-Hispanic blacks. Income inequality is lower among foreign-born Hispanics than among Hispanic natives.

Full text

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TRENDS IN POVERTY AND INEQUALITY AMONG
HISPANICS
PIA ORRENIUS AND MADELINE ZAVODNY
RESEARCH DEPARTMENT
WORKING PAPER 1109
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Federal Reserve Bank of Dallas

Trends in Poverty and Inequality among Hispanics*
Pia Orrenius
Federal Reserve Bank of Dallas and IZA
2200 N. Pearl Street
Dallas, TX 75201
Pia.Orrenius@dal.frb.org
Madeline Zavodny
Agnes Scott College and IZA
141 E. College Ave.
Decatur, GA 30030
mzavodny@agnesscott.edu
June 2011
Abstract: Since the 1970s, the poverty rate has remained largely unchanged among Hispanics but
has declined among non-Hispanic whites and blacks, particularly before the onset of the recent
recession. The influx of large numbers of immigrants partially explains why poverty rates have
not fallen over time among Hispanics. In 2009, Hispanics were more than twice as likely to be
poor than non-Hispanic whites. Lower average English ability, low levels of educational
attainment, part-time employment, the youthfulness of Hispanic household heads, and the 2007-
2009 recession are important factors that have pushed up the Hispanic poverty rate relative to
non-Hispanic whites. In addition, income inequality is greater among Hispanics than among non-
Hispanic whites, although lower than among non-Hispanic blacks. Income inequality is lower
among foreign-born Hispanics than among Hispanic natives.
Key Words: Hispanics, Latinos, poverty, inequality
JEL Classification: J15, J61
* Jingsi Zu and Linda Bi provided excellent research assistance. The opinions expressed herein are those of the
authors and do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve
System. Article is forthcoming in The Economics of Inequality, Poverty, and Discrimination in the 21st Century.
ABC-CLIO. Edited by Robert S.Rycroft. Forthcoming Praeger 2012. All rights reserved. Reproduced with
permission of ABC-CLIO, LLC, Santa Barbara, CA.

1
Hispanics are a rapidly growing group in the United States and tend to be quite poor. In 2009,
one in four Hispanics was poor. The proportion of black non-Hispanics who were poor was
almost identical, but fewer than one in ten white non-Hispanics were poor. Income inequality
was higher among Hispanics than among non-Hispanic whites. Understanding why poverty and
income inequality are so high among Hispanics is important since they are now the largest
minority group in the United States.1
In 2010, 50.3 million people in the United States, or 16.3 percent of the population,
considered themselves to be Hispanic. The Hispanic population grew 43 percent between 2000
and 2010, and it is projected to triple in size and account for almost three out of every ten people
in the country by 2050 (Passel and Cohn 2008). This population growth will come from future
flows of Latin American immigrants, births to those immigrants once they reach the United
States, and births to Hispanics already present in the country.
Immigrants currently play a leading role in the Hispanic population. Almost two-fifths of
Hispanics are foreign born, and another 36 percent were born in the United States but have at
least one foreign-born parent.2 Projections suggest that the native born will comprise a growing
share of the Hispanic population over time. In the United States, Hispanic births have outpaced
immigration from Latin America since 2000, a trend that is expected to continue (Passel and
Cohn 2008).
Who is considered Hispanic is an interesting question. Hispanic is considered an ethnicity
in the United States, and Hispanics can be of any race (white, black, Asian, etc.). The United
1 For excellent broader discussions about Latinos, see, for example, Tienda and Mitchell (2006) and Suárez-Orozco
and Páez (2009).
2 Authors’ calculations based on March 2010 Current Population Survey data from King et al. (2010).

2
States has asked about Hispanic ethnicity in major surveys since the decennial census in 1970.
Most research on Hispanics uses survey data that includes self-reported Hispanic ethnicity.3
Selectivity in who identifies themselves as Hispanic is problematic when examining
poverty and inequality. If the likelihood that people identify themselves as Hispanic is related to
their income, studies of Hispanics may misreport outcomes related to income. Indeed, research
suggests that Hispanics with higher education and earnings are less likely to self-identify as
Hispanic (Duncan and Trejo 2009, 2011). In addition, Hispanics with high earnings and more
education are more likely to marry a non-Hispanic, which further reduces the likelihood their
children will identify as Hispanic (Duncan and Trejo 2009, 2011). Such selectivity in self-
identification causes average income to be understated and the poverty rate to be overstated
among Hispanics. However, researchers have little choice except to use a self-reported measure
of ethnicity when studying Hispanics, particularly the native born. With this cautionary note in
mind, we proceed to an examination of poverty and inequality among Hispanics. We first outline
trends in poverty and income inequality among Hispanics and then turn to a discussion of the key
factors underlying those trends.
Trends in Poverty
Table 1 reports poverty rates by race, ethnicity and national origin using data from the 1970-
2000 decennial censuses and from the 2010 March Current Population Survey. The table gives
poverty rates based on family pre-tax money income the previous calendar year. Money income
includes wages and salaries, Social Security payments, cash welfare benefits, and other sources
3 Most U.S. data sets (including the ones we use here) ask individuals whether they are Hispanic, not Latino. We
therefore treat the two as equivalent here. We also use the terms “immigrant” and “foreign-born” interchangeably in
this paper. Immigrants are individuals born abroad who are not U.S. citizens at birth, although we categorize people
born in outlying territories, including Puerto Rico, as immigrants here.

3
of cash income except for capital gains (or losses). It does not include the value of in-kind
benefits, such as food stamps. Official poverty status is determined by comparing family income
with a poverty threshold based on family size and the age of family members.4 Poverty status is
the same for everyone in a family, and everyone in a household is assigned the head’s immigrant
status and ancestry.
The poverty rate among Hispanics has remained virtually unchanged since the 1970s. In
2009 (the 2010 data), the poverty rate was almost 16 percentage points higher among Hispanics
than among non-Hispanic whites. That gap has fluctuated between 14 and 16 percentage points
since 1970. There is little evidence that Hispanics are “catching up” with non-Hispanic whites,
although the gap with non-Hispanic blacks has narrowed because poverty has declined
considerably among blacks since 1970.
Native-born Hispanics have lower poverty rates than foreign-born Hispanics. Natives
benefit from having more education, better English fluency, and being U.S. citizens by birth.
However, the poverty rates would be considerably higher in Table 1 among native-born
Hispanics, particularly in the 2010 data, if children were classified based on their own place of
birth instead of the head’s. Children are more likely than adults to be poor in the United States,
and Hispanic children are particularly likely to be poor. Over one-third of all Hispanic children
were living in poor families in 2009. The poverty rate is even higher—almost 40 percent—
among foreign-born Hispanic children. Between 1969 and 1999, the poverty rate rose among
children of immigrants, with the largest increase occurring among non-Mexican Hispanics (van
Hook et al. 2004).
4 For a more detailed explanation of how poverty is determined in the United States, see
http://www.census.gov/hhes/www/poverty/about/overview/measure.html.

4
Since 1970, the poverty rate has trended up among foreign-born Hispanics. This reflects a
relative decline in education levels among inflows of Hispanic immigrants and a shift toward
poorer immigrants, with both trends related to the rise in immigration from Mexico and Central
America. Poverty rates differ by national origin and ancestry. Among Hispanic natives, those
who report Mexican or Puerto Rican ancestry are considerably more likely to be poor than
Cuban-Americans, although the poverty rate has risen among U.S.-born Cubans over time.5
Looking at the foreign born, poverty rates are highest among immigrants from Mexico and the
Caribbean (not including Cuba) and lowest among immigrants from South America. Other
research shows a similar pattern of considerable diversity across national-origin groups (e.g.,
Mogull 2005; Reimers 2006).
Poverty is particularly high among Hispanics who recently immigrated to the United
States. Although poverty declines significantly with duration of U.S. residence, poverty rates
among Hispanic immigrants do not catch up with those among either Hispanic natives or non-
Hispanic whites over time. To illustrate this, Table 2 shows the evolution of the poverty rate over
time in the United States for various cohorts of Hispanic immigrants.6 The top panel includes all
Hispanic immigrants while the second panel includes those who were aged 18-34 in the first
census year following their arrival; the motivation for this subset is that most people are in that
age range when they migrate. The bottom two panels follow Hispanic and non-Hispanic white
natives, respectively, who are 18-34 in the census year shown first.
5 People born in Puerto Rico are U.S. citizens by birth. We follow other researchers, such as Reimers (2006) and
Sullivan and Ziegert (2008), and classify them (and other people born in U.S. territories) as immigrants here.
6 Raphael and Smolensky (2009) present a similar table for all immigrants relative to all natives (not just non-
Hispanic whites). People are classified according to their own immigrant status, not the head’s, in Table 2.

5
Trends in Income Inequality
Incomes are less equal among Hispanics than among non-Hispanic whites but more equal than
among non-Hispanic blacks. The last column of Table 1 presents the Gini index for various
groups using data on 2009 family pre-tax money incomes from the 2010 March Current
Population Survey. The higher the Gini index (which must be between zero and one), the less
equal the income distribution. The Gini index is higher among Hispanics than among non-
Hispanic whites, indicating more inequality in family incomes. Among Hispanics, the top
quintile of families takes home 51 percent of all Hispanic income, while the top quintile takes
home 49 percent of total income among non-Hispanic whites. The opposite is true with respect to
non-Hispanic blacks, where the top quintile gets 52 percent of total black income and the bottom
quintile 2.3 percent.
When comparing foreign- versus native-born Hispanics, incomes are more equal among
Hispanic immigrants than among Hispanic natives and more equal among immigrants who have
been in the United States longer than among recent immigrants. There are interesting differences
by national origin as well.
Since about 1973, income inequality has risen considerably in the United States.7 Real
earnings have fallen at the bottom of the distribution while rising sharply at the top. Calculations
of Gini indexes in the 1970 census data analogous to those reported here for the 2010 data show
an increase in inequality over that 40-year period for every race/ethnicity and nativity group we
examine. As in the 2010 data, the pattern of Hispanics having more income inequality than non-
Hispanic whites but less than non-Hispanic blacks holds in the 1970 data as well. However,
incomes were more equal then among Hispanic natives than among Hispanic immigrants.
7 See Autor, Katz, and Kearney (2008) for a discussion of the extent and possible causes of the increase in income
inequality in the United States.

6
These stylized facts compare inequality across groups rather than looking at Hispanics’
position in the overall income distribution. Consistent with their relatively high poverty rate,
Hispanics are disproportionately at the bottom of the income distribution. In 2009, 15 percent of
Hispanics were in the bottom decile of family incomes, and only 4 percent were in the top decile.
Native-born Hispanics were even more overrepresented than foreign-born Hispanics at the very
bottom of the income distribution, but they were also more likely to be at the top of the income
distribution, although far less so than non-Hispanic whites.
There has been some improvement over time in Hispanics’ position in the income
distribution. During the period 1995 to 2005, the fraction of foreign-born Latinos in the bottom
quintile of the hourly wage distribution fell. Nonetheless, 36 percent of foreign-born Latinos
were in the bottom quintile (the bottom 20 percent) of wage earners in 2005, and only 6 percent
were in the top quintile (Kochhar 2007).
Key Factors in Hispanic Poverty and Inequality
Explaining the Gap
Many factors contribute to the relatively high poverty and income inequality among Hispanics.
The two are interrelated as well. The increase in income inequality since the 1970s has increased
poverty among Hispanics relative to what it otherwise would have been (Iceland 2003). In
addition, factors that increase poverty are likely to increase inequality, and vice versa.
We focus here on Hispanic poverty and the roles of immigrant status, education, ability to
speak English, employment, and family composition in explaining the poverty gap vis-à-vis
other groups. We use a Blinder-Oaxaca decomposition to estimate how much of the difference in
the poverty rate between Hispanics and non-Hispanic whites is due to differences in those

7
factors. To do so, we estimate a probit model of poverty status among household heads. The
model includes variables measuring whether the household head is an immigrant, the head’s
education, English ability, and age (and age squared), the number of people (age 16 and older)
working in the family, whether the head was employed all year, the number of people and
number of children in the family, whether the head is a single female, and the family’s
metropolitan status and state of residence.8 Using the estimated coefficients for non-Hispanic
whites from that probit regression, we estimate how much of the difference in poverty rates can
be attributed to differences in average characteristics between Hispanics and non-Hispanic
whites. The portion that is not attributed to differences in average characteristics is attributed to
differences in the estimated coefficients for Hispanics and non-Hispanic whites.9 We perform the
decomposition using data from the 2009 American Community Survey because it has data on
self-reported English ability, which the Current Population Survey does not ask about. The data
about economic variables therefore refer to the 2008 calendar year.
Differences in immigrant status partially explain why Hispanics are more likely to be
poor than non-Hispanic whites. As the second row of Table 3 reports, 0.4 percentage points of
the 12.1 percentage point difference in the poverty rate between Hispanics and non-Hispanic
whites is due to the greater fraction of Hispanics who are foreign born. In other words, if the
fraction foreign born was the same among Hispanics as among non-Hispanic whites, the poverty
gap between the two groups would be 11.7 percentage points instead of 12.1 points. This may
8 Education is measured in four categories: no high school diploma or equivalent, high school diploma or equivalent,
some college, and college graduate. English ability is measured using the five categories for self-reported English
ability: only speak English, speak English very well, well, not well, and not at all.
9 For a more detailed discussion of the technique, see Sullivan and Ziegert (2008). Ideally we would have data on
how many people in the family were employed full time, year round (at least 35 hours per week for at least 50
weeks), but data on hours worked last year are not available in the 2009 American Community Survey.

8
seem small, but the model controls for other characteristics that tend to differ considerably
between immigrants and natives, namely education and English ability.
Lower educational attainment among Hispanics contributes to the poverty gap. As the
third row reports, differences in average education among household heads appear to boost the
poverty rate by 1.2 percentage points among all Hispanics, 0.8 percentage points among
Hispanic natives, and 1.5 percentage points among Hispanic immigrants relative to non-Hispanic
whites. This method probably understates the role of education in poverty among Hispanic
immigrants because it treats all education as the same regardless of where it was acquired. The
return to education is typically lower for Hispanic immigrants because most of their education is
acquired abroad (Duncan et al. 2006).
Limited ability to speak English is the most important factor in explaining why Hispanics
are more likely to be poor than non-Hispanic whites. Differences in self-reported English ability
among household heads explain 5.7 percentage points of the poverty gap for all Hispanics and
8.6 percentage points—over one-half the gap—for Hispanic immigrants. Interestingly,
differences in English ability also matter, albeit less so, for native-born Hispanics.
The Hispanic population is relatively young, and this contributes to the poverty gap. As
the decomposition shows, the average age of household heads among Hispanics, which is eight
years lower than among non-Hispanic whites, is at least as important as education in explaining
the poverty gap.
One common reason why families are poor is because of not enough work. The American
Community Survey does not have the ideal variables to measure whether family members
worked full time year round, so we use two proxies: how many people currently in the family
worked at all last year and whether the current head worked at least 50 weeks (year round) last

9
year. The results in the table show that the number of employed adults in the family plays little
role in the poverty gap. This is not a surprising result since Hispanic immigrant families are more
likely to be multigenerational and have more workers than other families. Whether the head
worked year round is more important. Differences between Hispanics and non-Hispanic whites
in the proportion of heads employed all year boosted the relative poverty rate among Hispanics
by about 1.6 percentage points.
The larger number of children in Hispanic families, particularly those headed by an
immigrant, tends to boost poverty rates. The average Hispanic family has 0.6 more children than
the average non-Hispanic white family. This tends to mechanically increase poverty since having
more people in the family raises the income required to be above the poverty threshold and
children are unlikely to contribute to family income. However, family size acts to reduce poverty
among families headed by a Hispanic immigrant, even after controlling for the number of adult
workers in the family.
Female-headed households account for over one-half of poor families in the United
States. Families headed by a single female are disproportionately poor because they have only
one potential earner, and that adult typically has relatively low educational attainment and does
not work full time. Female headship is less common among Hispanic immigrants than among
Hispanic natives and therefore reduces the poverty rate among the former while raising it among
the latter.
Place of residence appears to affect the poverty gap as well. Differences between
Hispanics and non-Hispanics whites in urban status and state of residence actually lower the
poverty gap. This may be surprising since many Latinos live in areas with poor housing, schools,
and other amenities (Alba et al. 2010), but likely reflects Hispanics’ increasing tendency to

10
locate in regions of the country that experienced strong economic growth during the 2000s, such
as the South, Southwest, and Mountain West. Another interesting factor we do not capture is
whether families live in a predominately Latino neighborhood, which might boost earnings by
giving residents a bigger network or reduce earnings via more competition for jobs.
The Unexplained Poverty Gap
The decomposition results indicate that differences in characteristics, particularly in English
ability and year-round employment, play important roles in explaining why Hispanics are more
likely to be poor than non-Hispanic whites. Nonetheless, differences in average characteristics
cannot fully explain the poverty gap. The bottom row of Table 3 shows how much of the gap is
not explained by differences in means for the factors listed earlier in the table. Differences in
those factors explain 81 percent of the poverty gap for all Hispanics, 78 percent for native-born
Hispanics, and 82 percent for foreign-born Hispanics.
The unexplained portion of the gap is often attributed to discrimination because it is due
to differences in the returns to characteristics. There are other reasons why returns to some
characteristics might differ, most notably for education, as discussed above. Other research,
however, concludes that discrimination is an important factor in why Latinos earn less than non-
Hispanic whites (Reimers 1983). That research indicates there are differences in the extent of
discrimination across national origin groups, with discrimination appearing to be less important
in explaining low wages for Mexicans and Cubans than for other groups of Hispanics (Reimers
1983; Trejo 1997). We do not look here at phenotype, or skin color, which may affect the extent
of discrimination among Hispanics.

11
There are many other factors that are likely to contribute to poverty among Hispanics.
One of these is lack of legal status. Nearly two-fifths of Hispanics are foreign-born, and almost
one-fifth, or half of the foreign-born Hispanics, are likely to be undocumented immigrants.
Unauthorized workers probably have lower earnings than comparable documented workers
because they are willing to work for lower wages, in part because they have more difficulty
finding an employer willing to hire them. They also change jobs more often, invest less in
training, and tend not to take up fringe benefits.
In recent years, partly in response to government changes in the wake of September 11,
2001, employers have become more reluctant to hire unauthorized workers and more diligent in
checking documentation, which is another factor that could be affecting the earnings of
undocumented workers (Orrenius and Zavodny 2009). Family incomes also are lower because
the undocumented are categorically ineligible for all government cash benefit programs. Any
U.S.-citizen children in “mixed-status” families are eligible for benefits on the same basis as
other U.S. citizens, but parents may be reluctant to file for benefits for fear of revealing their
unauthorized status.
The period from late 2007 through mid 2009 marked a deep recession in the United
States, which hurt all groups but particularly Hispanics. While the unemployment rate for
Hispanics is always higher than for non-Hispanics whites, it is more volatile over the business
cycle for Hispanics. In other words, unemployment rises more for Hispanics during recessions
but falls more during expansions (DeFreitas 1986; Reimers 2000). Hispanics also become
unemployed earlier in economic downturns and stay unemployed longer than non-Hispanics
(Ewing et al. 2008). This greater volatility in unemployment is one reason why the business
cycle has a bigger impact on incomes and poverty among Hispanics than among non-Hispanic

12
whites (Cancian and Danziger 2009). Hispanics are more vulnerable to the business cycle
because of their relatively low average level of education and concentration in cyclical sectors,
such as construction (Orrenius and Zavodny 2010).
Relatively high unemployment takes a toll on Latinos in terms of accumulated work
experience as well. A higher probability of not working at a given point in time turns into less
accumulated work experience over time. Research shows that Mexican-American young adults
earn less than non-Hispanics whites in part because they tend to have fewer years of actual work
experience (Antecol and Bedard 2004). For the foreign born, experience accumulated abroad
also may matter relatively little to employers.
The low level of the minimum wage also likely plays a role in Hispanic poverty and
inequality. Latino workers are disproportionately likely to earn the minimum wage, particularly
foreign-born Latinos. While foreign-born Latinos made up only about 8 percent of hourly
workers during the period 1994-2007, for example, they accounted for 18 percent of hourly
workers paid exactly the minimum wage (Orrenius and Zavodny 2011). Hispanics also are
overrepresented among workers who earn less or slightly more than the minimum wage. The
federal and state governments tend to raise the minimum wage infrequently, and its real value
erodes between increases as a result of inflation. This may increase poverty at the bottom end of
the labor market, where many Hispanics are, and may increase income inequality as well.
Other institutional features of the U.S. labor market, such as low union coverage, may
also affect poverty and inequality. About 11 percent of Latino workers are union members or
represented by a union, slightly below the overall unionization rate (Schmitt 2008). Latino
workers who are in a union earn almost 18 percent more than comparable Latinos who are not

13
represented by a union (Schmitt 2008). Unionization also appears to improve benefits, such as
being covered by employer-sponsored health insurance and a pension plan.
In the United States, official poverty status is based on pre-tax cash income. This measure
does not include transfers via the tax system, such as the child tax credit and the Earned Income
Tax Credit (EITC), or the value of in-kind benefits. It therefore misclassifies as poor some
families that receive large government transfers and in-kind benefits. This misclassification is
potentially large. For example, according to the Census Bureau, including the EITC would lower
the poverty rate among Hispanics by about 4 percentage points.10 In-kind benefits are another
important resource for Hispanics (Reimers 2006). Accounting for these other sources of funds or
resources would reduce poverty and inequality among Hispanics.
The above analysis only decomposes poverty status during a single year. Chronic poverty
is of more policy concern than poverty at a single point in time. Research indicates that
Hispanics have relatively high rates of chronic poverty as well as long spells of poverty (Iceland
2003; Mauldin and Mimura 2001). However, there is no difference between young adult
Hispanics and non-Hispanic whites in their exit rate out of poverty, controlling for observable
characteristics, which implies that the Hispanic poverty gap may narrow in the future.
What Does the Future Hold for Hispanics?
Average statistics on poverty and inequality paint a bleak picture for Hispanics in America. The
poverty rate among Hispanics overall has barely budged during the past 40 years, during which
time the poverty rate among non-Hispanic blacks fell by over one-quarter. Inequality is rising
among all groups, including Hispanics, and is higher among Hispanic natives than among
10 See http://www.census.gov/hhes/www/cpstables/032010/rdcall/2_009.htm. Unauthorized immigrants are not
eligible for EITC.

14
Hispanic immigrants. The underlying causes for the poverty gap point out key challenges, such
as low average levels of educational attainment and poor English ability, particularly among
immigrants.
Hispanics have made little economic progress as a group because of the youthfulness of
this population and the high rates of Hispanic immigration and its recency. But it is important to
realize that the aggregate statistics mask considerable progress for many individuals. In addition,
despite facing high poverty here, most immigrants are better off than they were in their home
countries. Hispanic immigrants also tend to experience considerable income gains quickly after
arrival in the United States, particularly when the macroeconomy is doing well, and their poverty
rates fall significantly over time as a result. Hispanics, both immigrants and natives, have other
important pluses as well, such as higher labor force participation rates than any other group
considered here and lower unemployment rates than blacks. Hispanics also tend to live in
thriving areas, which boosts their employment and earnings.
With native-born Hispanics growing quickly as a share of the Hispanic population, future
progress likely depends on them. There are some bright spots. Poverty among Hispanic natives
has fallen over time, albeit not as quickly as it has among blacks. When following an age cohort
of Hispanic natives across decades, their poverty gap vis-à-vis similar cohorts of non-Hispanic
whites shrinks by about 1.2 percentage points per decade. There has been considerable
intergenerational progress in educational attainment and earnings among Latinos (Smith 2003,
2006). While 49 percent of Hispanic immigrants lack a high school degree, only 20 percent of
second-generation Hispanics and 18 percent of third generation and higher Hispanics lack a high
school degree. Despite the improvement, this is still 10 percentage points above the share of non-
Hispanic whites that lack a high school degree (8 percent).

15
Continued educational progress is crucial to narrowing the income and poverty gaps
between Hispanics and non-Hispanic whites. Current fiscal woes at the federal, state, and local
levels appear likely to boost the cost of higher education and lower the quality of K-12 education
for all groups, but the poor will be hardest hit by cuts in education budgets. This may bode ill for
progress by native-born Hispanics and other minorities both in the short run and for years to
come as these youths move into the labor force.
The widespread movement by Hispanics, particularly Hispanic immigrants, into new
destinations across the United States that began in the 1990s is likely to affect income trends.
This greater geographic dispersion seems likely to reduce poverty and inequality among
Hispanics because the new destinations tend to be better along a variety of dimensions, including
labor market opportunities, than traditional immigrant gateways (Alba et al. 2010; Capps et al.
2010). Whether the movement toward new destinations will continue and how growing Hispanic
populations will change those communities are interesting questions that will affect poverty and
inequality among Hispanics.
There are two troubling trends among native-born Hispanics that deserve attention: the
rise in non-marital births to Hispanic women and the growing elderly Hispanic population.
Although non-marital births are still relatively uncommon among Hispanic immigrants, they are
common among Hispanic natives. Unmarried women account for over one-half of births among
Hispanics (Hamilton et al. 2010). This is troubling given the high rate of poverty for female-
headed households. It creates intergenerational concerns as well since children who grow up in
poverty experience considerable disadvantages. More positively, however, the birthrate for
Hispanic teens has been declining (Hamilton et al. 2010). Meanwhile, the elderly Hispanic
population is growing. While the elderly tend to experience low poverty rates in the United

16
States, elderly Hispanics are relatively unlikely to have a pension or receive Social Security
benefits and therefore have high poverty rates (Reimers 2006). This population is likely to
continue to grow, although the fraction that is poor may eventually decline as the Hispanic
population becomes increasingly native-born and therefore more are eligible for Social Security
and other government programs.
Future immigration patterns will affect Hispanics in the United States. Changes in U.S.
immigration policy that reduce the number of low-skilled immigrants, who primarily enter under
family preference categories or are undocumented, would improve the relative standing of the
Hispanic population in the United States. The adverse wage effects of low-skilled immigration
are the greatest among prior immigrants and low-skilled natives. Educational progress and
economic development in sending countries also would benefit Hispanics in the United States by
boosting the education levels of new immigrants. Such changes in underlying economic
conditions typically occur only slowly, whereas policy can lead to an abrupt change in the
characteristics of new immigrants.
Another policy change that would affect poverty and inequality among Hispanics is a
legalization program in the United States. The U.S. experience with the Immigration Reform and
Control Act in 1986 suggests that a large-scale legalization program would boost earnings and
thereby reduce poverty among Hispanic immigrants.11 There might be intergenerational effects
as well, with U.S. citizen children’s life prospects improving as their parents benefit from
legalization.
11 Research indicates that Latin American immigrants who legalized their status under the 1986 Immigration Reform
and Control Act (IRCA) experienced wage increases in the range of 6 to 13 percent (Kossoudji and Cobb-Clark
2002; Rivera-Batiz 1999)

17
Conclusion
As the fastest-growing demographic group in the United States, what happens to Hispanic
incomes and poverty matters for future U.S. economic prosperity. Hispanic immigrants have
relatively high poverty rates, but they experience considerable progress soon after migration and
have high labor force participation rates, high geographic mobility, high marriage rates, and low
nonmarital birth rates. The future for Hispanics depends crucially on whether today’s Hispanic
youth can boost their educational attainment and English ability while retaining those positive
attributes of Hispanic immigrants. Also important is the state of the macro economy. Hispanic
economic outcomes are sensitive to the business cycle; poverty rates rose over 4 percentage
points for Hispanic immigrants between 2000 and 2009 and jumped over 2 points among
Hispanic natives. An improving macro economy in coming years will disproportionately help
Hispanics. Lastly, government policies with regard to education and immigration also will play a
key role in determining the future of Hispanic poverty and inequality.

18
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Table 1. The poverty rate among Hispanics has changed little since 1970.
Poverty rate Gini index
1970 1980 1990 2000 2010 2010
Non-Hispanic whites 10.0 8.5 8.7 7.9 9.5 .456
Non-Hispanic blacks 34.7 28.6 27.9 23.7 25.7 .496
Hispanics 25.2 22.8 24.4 22.1 25.4 .481
Hispanic natives 25.2 20.1 21.6 18.3 20.6 .481
Mexican ancestry 26.9 21.6 23.3 18.8 22.3 .481
Puerto Rican ancestry 10.1 31.7 29.9 24.6 24.8 .477
Cuban ancestry 4.0 14.7 15.2 12.1 15.6 .467
Hispanic immigrants 25.8 26.6 27.6 24.8 29.0 .470
Mexico 31.7 26.9 30.2 26.8 30.4 .453
Puerto Rico 31.5 38.7 33.6 28.8 23.0 .488
Cuba 13.1 12.9 14.6 15.2 19.1 .490
Central America 14.4 21.8 25.9 22.1 23.5 .462
Caribbean 16.0 32.4 32.7 28.5 27.6 .431
South America 13.8 15.8 15.4 15.8 11.6 .433
Recent immigrants (≤10 years) 20.2 28.9 34.5 32.1 32.9 .469
Nonrecent immigrants 28.3 25.6 24.1 22.1 27.9 .467
Source: Authors’ calculations from data from the 1970-2000 Censuses from Ruggles et al.
(2010) and the 2010 March Current Population Survey from King et al. (2010).
Note: Although people born in Puerto Rico are U.S. citizens by birth, this table lists them as
immigrants for simplicity. Puerto Rican natives are people born in the 50 states and District of
Columbia who report Puerto Rican as their Hispanic ethnicity, and similarly for Mexican and
Cuban natives. Years shown are the survey year; the poverty rate and Gini index are based on
family pre-tax money income the previous year.

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Table 2. Poverty rates decline over time for immigrants but remain higher than for natives.
1970 1980 1990 2000 2010
Period of arrival for Hispanic immigrants:
1965-1970 24.7 17.5 17.5 15.8 13.7
1975-1980 31.5 24.9 18.9 19.1
1985-1990 35.4 23.3 19.7
1995-2000 31.4 27.1
2005-2010 33.1
Period of arrival for Hispanic immigrants ages 18-34 in census year immediately following
arrival
1965-1970 22.4 16.7 16.4 15.2 16.2
1975-1980 28.1 24.2 18.2 20.3
1985-1990 32.6 22.9 19.4
1995-2000 30.3 29.0
2005-2010 32.3
Hispanic natives ages 18-34 in year:
1970 19.0 14.6 13.2 12.6 11.2
1980 16.8 15.1 12.1 12.2
1990 18.6 13.4 13.7
2000 17.5 14.8
2010 20.8
Non-Hispanic white natives ages 18-34 in year:
1970 7.5 6.2 5.3 6.0 6.8
1980 8.5 6.4 5.6 7.3
1990 10.0 6.5 7.4
2000 10.7 8.7
2010 12.9
Source: Authors’ calculations from data from the 1970-2000 Censuses from Ruggles et al.
(2010) and the 2010 March Current Population Survey from King et al. (2010).
Note: Each row of the table shows how the poverty rate for a cohort has evolved over time. The
columns show the period of arrival for immigrant cohorts or the year in which natives were ages
18-34.

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Table 3. English ability, education, and employment play important roles in poverty among
Hispanics.
All Hispanic Hispanic
Hispanics natives immigrants
Difference between group poverty rate 12.1 8.1 15.0
and poverty rate among non-Hispanic whites
Due to differences in:
Immigrant status of head 0.4 0.0 0.7
Education of head 1.2 0.8 1.5
English ability of head 5.7 1.7 8.6
Age of head 1.4 1.8 1.1
Number of employed adults in family 0.0 0.1 0.3
Head employed all year 1.6 1.7 1.6
Number of children in family 0.8 0.1 1.4
Family size -0.6 0.1 -1.0
Head is single female 0.0 0.3 -0.1
Metropolitan area -0.3 -0.3 -0.4
State -0.5 -0.4 -0.6
Difference not explained by differences 2.3 1.8 2.7
in above characteristics
Source: Authors’ calculations from data from the 2009 American Community Survey from
Ruggles et al. (2010).
Note: Shown are results from a Blinder-Oaxaca decomposition of how much of the poverty gap
between Hispanics and non-Hispanic whites can be attributed to average differences in the
characteristics listed here. All rows are expressed in percentage points. The top row gives the
total poverty gap and the bottom row gives the poverty gap after accounting for differences in
sample means of the characteristics listed here.