September 27, 2006

Latino Labor Report 2006: Strong Gains in Employment

VIII. Growth in Wages, 2005-06

The growth in wages reflected the trends in employment growth. Hispanics and blacks, who experienced relatively large drops in their rates of unemployment, also witnessed higher wage growth. For non-Hispanic whites and Asians, who have much higher median incomes compared to Latinos and blacks, wages showed little or no movement from the previous year.

Among Hispanics, the wage picture varied by nativity. While overall Latino wages went up between 2005 and 2006, after two years of decline, the gain nevertheless masked a significant loss. Foreign-born Hispanics—the biggest part of the Latino labor pool and the ones who have benefited the most in terms of employment—actually experienced a decline in the median wage.

Latinos also earn less than any other racial or ethnic group. The unemployment gap between Hispanic workers and non-Hispanic whites may be tightening, but the wage gap remains.

At the other end of the earnings scale were Asians, both foreign and native born, who have the highest median wage among all workers.

The improvement in wages for Latinos and blacks in 2005-06 appears to have narrowed the earnings gap between low-income and high-income workers. The modest improvement notwithstanding, the gap was still higher than it was before the recession and remains high in absolute terms.

Latino Wages, Rise and Fall

The median weekly earnings of Hispanic workers grew faster than the earnings of other racial and ethnic groups. The median weekly wage for Latinos in the first half of 2006 increased 1.8% compared with the first half of 2005, or from $423 to $431 (Table 14).

Despite the increase, the median wage for Hispanic workers remains the lowest among all workers. For blacks, the median wage in 2006 was $487, or 13% higher than for Hispanics. White and Asian workers earn between 45% and 50% more than Latinos.

Among native-born Latinos, the median wage increased from $481 to $487. For foreign-born Latinos, the median wage decreased from $400 in 2005 to $389 in 2006. Foreign-born Hispanic workers have the lowest earnings among the groups represented in Table 14.

Asians

The median weekly earnings for Asians decreased 0.4% between 2005 and 2006, dropping from $665 to $662 (Table 14). Wages for native-born Asians increased from $640 to $655. Among foreign-born Asians, however, the median wage was essentially unchanged ($673 in 2005 and $674 in 2006). Asian workers, however, continued to have the highest median earnings of all racial and ethnic groups.

Blacks and Whites

Black workers, like their Latino counterparts, experienced an increase in median weekly earnings between 2005 and 2006. For blacks, the median wage increased from $480 in 2005 to $487 in 2006, or 1.4% (Table 14).

The median weekly earnings for non-Hispanic white workers decreased marginally between 2005 and 2006. For these workers, the median wage dropped from $624 in 2005 to $623, or 0.1%.

The foreign-born population for both non-Hispanic whites and blacks is small. Therefore, the overall wage trends for these racial and ethnic groups mirror the experiences of native-born workers.

Closing the Wage Gap?

Workers at the top of the income scale experienced a decline in their median weekly income from mid-2004 to mid-2006. At the same time, workers at the bottom of the income scale experienced an increase. The result is modest tightening of the income gap—though those at the top were still earning more than six times as much as those at the bottom.

The strongest growth in wages between 2004 and 2006 was among low-income workers, or those who were in the first quintile (Table 15). For those workers, many of whom are Hispanic or black, the median weekly wage increased from $207 in 2004 to $214 in 2006, or 3.6%. Meanwhile, for workers in the fifth quintile, more likely to be white or Asian, the median wage decreased from $1,432 in 2004 to $1,404 in 2006, or 1.9%.

Described another way, high-income workers in 2004 earned 6.9 times as much as low-income workers. By 2006, they were earning 6.6 times as much. The earnings gap is still high in absolute terms and it remains higher than it was before the recession.