The Economic Engine Behind U.S. Growth

In Brief:

• Latinos accounted for over half of total U.S. population growth from 2010-2021 with 12.1 million added.
• High labor force participation rates persist for Latinos, covering labor shortages.
• Educational attainment is increasing rapidly among Latinos, pointing to future productivity gains.

Surging Latino Population Growth

Over the past decade, no group has contributed more to the healthy clip of U.S. population growth than Latinos. From 2010 to 2021, the number of Latinos living in the country swelled by a staggering 12.1 million. To put that figure in perspective, it exceeded the total growth among non-Latinos by over one million during the same period. In other words, Latinos made up 52% of the entire nationwide increase in population, despite accounting for only 19% of residents in 2021.

This rapidly rising tally translates into a 24.1% expansion of the Latino populace since 2010, over five times the 4.3% uptick observed among non-Latinos. In fact, the 12.1 million increase alone over the past 11 years is larger than the individual populations of roughly half of the U.S. states. Utah, for example, is home to only 3.3 million people in total based on recent census data.

The youthfulness of the Latino community partly explains the outsized influence on growth. The age distribution skews far younger than the non-Latino segment. Those under 25 make up a commanding 45% of Latinos, whereas the same age bracket comprises just 29% of non-Latinos. Even more strikingly, the most common age band among Latinos is 10-to-14 years old. For non-Latinos, it is 60-to-64 years old - a stark contrast highlighting the older average age.

This younger age profile means Latinos account for practically all new additions to the crucial 18-to-64 working-age population as older non-Latinos retire. Without this key replenishment, the U.S. would face a shrinking labor pool and diminished productive capacity. Instead, each generation of Latinos reaching adulthood and jumping into the workforce supports continued economic expansion.

High Workforce Participation Sustains Labor Supply

In addition to sheer population growth, Latinos further bolster the economy through an outsized tendency to participate in the labor force. The labor force participation rate encapsulates the share of the population aged 16 or over who is either employed or searching for work. In 2021, that figure stood at 66.9% for Latinos compared to 61.5% for non-Latinos above age 16.

Put differently, Latinos participate at a rate 5.4 percentage points higher than other groups. This gap has persisted over time and through economic ups and downs. During the last recession induced by the financial crisis in 2009, the participation rate among non-Latinos plunged from 66.2% down to 60.4% by 2011. Meanwhile, Latinos only experienced a more mild drop from 69.0% to 66.8% over the same timeframe.

As the economy gradually recovered, non-Latinos slowly climbed back to a 66.4% rate of participation by 2019. Fast forward to 2021, and the COVID-19 crisis again depressed the figure to 61.5%. However, Latinos once more proved more resilient, sticking to a 65.5% rate throughout the pandemic-triggered downturn.

This consistently greater likelihood to hold a job or look for one counteracts downward pressure on labor supply as the population ages. Older Americans tend to participate at far lower levels than prime working age groups. But the predominantly young Latino community has stepped in to backfill any shortfall.

During 2021's tight labor market, this phenomenon proved vital across various industries struggling to attract employees. From construction to hospitality to healthcare, Latino workers filled open positions and met demand. Without them, staffing shortages and inadequate service capacity would have inflicted even more severe disruptions on the economy.

Educational Gains Setting Stage for Productivity Surge

Rapid population growth and high workforce engagement constitute two essential pillars bolstering GDP. But a third factor will prove equally if not more crucial going forward - human capital development. More specifically, increasing Latino educational attainment hints at substantial productivity gains ahead.

On the surface, the Latino community still significantly lags behind the general public in academic achievement. Only 23.8% of Latinos 25 or older held at least a bachelor's degree in 2021, compared to 36.5% of total U.S. residents in the same age group.

However, drilling down into the progress over the past decade reveals stellar improvement. From 2011 to 2021, the tally of Latinos with a bachelor's or advanced degree grew at an annualized clip of 6.8%. The non-Latino populace saw just 2.8% annualized growth of degree holders - a rate less than half as fast.

In other words, Latinos expanded their ranks of college graduates at more than twice the speed of other groups. This drastic catch-up effect sheds light on why wage growth among Latinos has accelerated above the national average. Better-educated workers simply offer far more productive capacity, amplifying their earnings potential.

Although overall educational attainment remains below the U.S. mean, the rapid narrowing of this gap foreshadows substantial economic gains. Assuming the stellar pace of progress persists, Latinos will continue achievement levels more closely mirroring the general populace.

Major industries stand to benefit from this increasingly skilled talent pool entering the labor force each year. And the country as a whole will reap the rewards of heightened human capital raising productivity. Even with the impressive strides made over the past decade, there remains considerable upside if the community keeps up its drive toward higher academic success.

The combination of surging population growth, high rates of workforce participation, and rising educational attainment paints a promising picture for Latinos' economic impact going forward. This demographic has already emerged as the primary engine behind recent U.S. expansion. But their influence still appears poised to increase as more young Latinos reach adulthood and develop higher skill levels.

Rather than fading, the dynamism fueled by this group looks set to accelerate. That should bring tremendous opportunities across multiple industries in need of new labor and talent. But it will also require proactive strategies to attract, develop, and retain these workers filling business-critical roles. Companies that adapt to leverage this widening pool of human capital stand to gain a disproportionate advantage.