Creation and growth of Latino-owned businesses fuel employment and economic prosperity for US

The growth and creation of Latino businesses helped bolster the U.S. economy even amid adversity, according to a new report by the Latino GDP team at UCLA and Cal Lutheran University.

“The story of the U.S. Latino GDP - which we can now also show through business data - has been one of consistent, robust growth since 2007, in spite of adversities that flattened other economies,” said UCLA Fielding’s Dr. David E. Hayes-Bautista, professor in the Department of Hesalth Policy and Management, distinguished professor of medicine at UCLA, and co-founder of the Latino GDP project.

The number of Latino-owned businesses grew nearly seven times faster than the number of non-Latino businesses during the 16-year period of 2007-2023. The researchers found this business creation also occurred despite two difficult economic periods: the Great Recession of 2007-2009 and the COVID-19 pandemic of 2020-2023.

A long-term trend of business creation

Drawing on data from census bureau surveys, the researchers found that when considering all types of businesses - large and small, employer and non-employer - the number of Latino businesses grew by 157.9% during the study, whereas the number of non-Latino businesses grew by only 23.7%.

This growth also contributed to overall U.S. business growth. For instance, from 2007 to 2012, which includes the Great Recession, the number of businesses owned by non-Latinos declined by 49,000, whereas the number of Latino-owned businesses grew by over 1 million.

“Business growth usually leads to job growth,” said co-author Dr. Dan Hamilton, economist at the Center for Economic Research and Forecasting at CLU. “The rapid growth of Latino businesses points toward an important source of job growth for the future.”

The researchers also found that every year for the past 16 years, the average annual growth rate of Latino businesses - 6.7% per year - is 3.7 times larger than the non-Latino rate of 1.8% per year.

“This 16-year history reveals that Latinos power through challenging economic times, such as severe recessions and pandemics. In this way, Latinos are a critical source of resilience for the broader economy,” said Dr. Matthew Fienup, economist at CLU’s Center for Economic Research and Forecasting and the report’s co-author.

Demonstrated economic resilience

The 16-year period studied also revealed strong growth in the face of challenging times when Latino businesses were examined in relation to significant events.

Triggered by the financial crisis, the Great Recession of 2007-2009 saw the national GDP contract severely, as unemployment rose and homes were repossessed. As a result, from 2007 to 2012, the number of non-Latino businesses declined by 0.2%. However, in sharp contrast to that shrinkage, the number of Latino businesses grew by 46.3% in the same period.

When the COVID-19 pandemic hit in 2020, it caused millions of deaths, and in the U.S., Latinos were harder hit than most other populations.

“In 2020, the Latino age-adjusted death rate for COVID-19 was more than twice the non-Latino white rate,” said UCLA Fielding’s Dr. Paul Hsu, assistant professor in the Department of Epidemiology, who also contributed to the report. “In large part, this was caused by greater exposure to the coronavirus due to high labor force participation.”

Despite this, the researchers found that Latino-owned businesses grew by 47.3% during 2017-2023, more than four times the non-Latino growth rate of 11.1%.

Latinos as employers

The report delved deeper and examined employer businesses, which are defined as firms that hire at least one individual worker in addition to the owner.

Over the entire period studied, the report found that the growth of non-employer businesses in the U.S. was substantially more rapid than that of employer businesses. This pattern holds for owners of all ethnicities.

However, over the latest period (2017 to 2023), the growth of Latino-owned employer firms exceeded that of Latino non-employer businesses by an average of 4.5 percentage points per year. The growth also increased to an average of 7.3 percentage points per year, faster than non-Latino employer businesses, which demonstrated either anemic or negative growth. This shows that the growth of U.S. jobs over this period was driven in large part by the increase of Latino-owned employer businesses.

As seen in the Latino GDP report series with labor force growth, labor force participation and educational attainment growth, the businesses’ data in this report demonstrates that Latinos’ participation in the U.S. economy is more active and more intense than that of non-Latinos. They play a significant role in employer firm creation, especially in recent years, which provides work and workplaces for all households, regardless of race or ethnicity. The researchers continue to stress that the vitality of the overall U.S. economy depends on the intensity of the economic activity of U.S. Latinos.

“Resilient Latino GDP growth reliably drives U.S. economic growth through good times and despite adversity,” Hayes-Bautista said. “And everyone in the U.S. - on-Latino and Latino alike - benefits from higher standards of living, opportunities for economic mobility and wage increase.”