May 2, 2005

Latino Labor Report, 2004

VIII. Wage Growth in 2004

The rapid growth in Hispanic employment appears to have come at the price of lower wages. Contributing to this trend is their concentration in specific segments of the labor market, in particular, the lower-skill occupations. Consequently, real wages for Hispanic workers declined for the second consecutive year in 2004. The cumulative decline over the past two years amounts to 5 percent, and, as a result, the earnings of Hispanic workers have fallen even further behind the earnings of non-Hispanic workers. The decrease in the earnings of Latino workers has been led by new immigrants who have accounted for the vast majority of new jobs for Hispanics but at relatively low wages. Those immigrants also suffered among the largest losses in earnings in 2004. The fact that employers were able to fill their payrolls without having to bid up wages is evidence that some slack remains in the labor market.

Hispanics are the only group of workers in the economy whose wages have fallen for two consecutive years. In 2004 the median weekly wage (in 2004 prices) for Hispanics fell by 2.6 percent in 2004—from $411 in 2003 to $400 in 2004 (Table 8 and Chart 4). The median wage divides the income distribution into two, with one-half of workers earning more and the other half earning less than the median wage. This mid-point for Hispanics had also tumbled in 2003, falling by 2.2 percent from its level of $420 in 2002. Thus, the median weekly earning of Hispanic workers has eroded by $20 over the past two years.

The wages of white and black workers also fell in 2004 but by much less than the fall experienced by Hispanic workers. Moreover, the wages for these workers had increased in 2003. Thus, over the two-year period from 2002 to 2004 the weekly earnings of white and black workers are best described as unchanging. That stands out in contrast to the 5 percent erosion suffered by Hispanic workers between 2002 and 2004. Asian workers are the only group to have increased their earnings each of the past two years. Overall, the earnings of non-Hispanic workers were up modestly in 2003 and down slightly in 2004.

A more detailed examination of wage trends reveals that the recent decline in wages for Hispanic workers was led by immigrants who arrived in the U.S. in 2000 or later years. As shown above, newly arrived immigrants have accounted for the vast majority of new jobs for Hispanics. But their wages are well below the median wage for all Hispanics (Table 9). Thus, even though the wages of new Latino immigrants increased in 2003, their rapid influx substantially expanded the pool of low-wage workers. Consequently, the median wage for all Hispanics declined in 2003. Moreover, recently arrived foreign-born Latinos suffered a decline of 2.6 percent in their real earnings in 2004. The number of recently-arrived Hispanic immigrants added to the ranks of low-wage workers was again sufficient to produce a loss for all Hispanics combined in 2004. In contrast to the experience of new immigrants, native-born Latinos increased their earnings in both 2003 and 2004. Thus, the large inflow of new immigrants and their concentration in lower-skill occupations has had a strong impact on the earning status of the overall Hispanic work force.

Newly arrived non-Hispanic immigrants did not fare any better than their Hispanic counterparts. The median weekly earnings of these workers fell from $464 in 2002 to $440 in 2004 (Table 9). However, non-Hispanic immigrants as a whole have seen modest gains in wages in each of the past two years. Among the native born, non-Hispanics saw their wages decrease in 2004. Since native-born workers are the dominant component of the non-Hispanic work force, the overall wage trend for non-Hispanics resembles the experience of the native born. In sum, the lasting impression from the wage trends in 2004 is that workers streaming into the labor force in relatively large numbers—the new immigrants—are doing so at the price of lower wages. This could be a consequence of competition among immigrants or the nature of the job opportunities available to them, particularly for foreign-born Hispanics who are concentrated in specific segments of the labor market.