Desperation or Aspiration? Latinos and the California Dream
Editor’s Note: Mike Madrid is one of our featured presenters at next month’s Southern California Regional Gathering in Santa Ana. Madrid and Steven Greenhut, from whom we will have an article tomorrow, will join Chuck Marohn for a live podcast recording on the pros and cons of redevelopment initiatives. Space is limited, so register right away. Thanks to the generous sponsorship of Fieldstead and Company, tickets are now 75% off. Just use the code BLACKFRIDAY at checkout.
Madrid is a nationally recognized expert on Latino voters and serves as a senior advisor to the California Latino Economic Institute (full bio below). This article first appeared in the Orange County Register as well as on Mike Madrid’s Medium page.
For Latinos, the California Dream is becoming an unattainable fantasy.
The dream that inspired generations to come West and find success as defined by the individual has all but vanished for the state’s largest ethnic group. The days when workers flocked to the state for employment in everything from the storied Gold Rush to the Hollywood back lots to today’s Silicon Valley have vanished. It’s not just workers who are finding it impossible to climb the economic ladder; small business owners, who have historically been viewed as the base for a community’s economic growth, are flailing.
For context: California is the fifth largest economy in the world, Latinos are the largest ethnic group in the state and have attained an unprecedented amount of power in state government. Latino policy makers have never wielded so much power over public policy than at this moment in our state’s history. But even as Latino entrepreneurship in California has exploded in recent years, a deep dive into data provided in a recently released report by the California Latino Economic Institute tells a different tale.
Latino-owned businesses, which exploded by 43.9 percent during a five-year period from 2007 to 2012 and are nearly a quarter of all firms in the state, account for just 6.5 percent of total gross receipts and have the fewest employees of any ethnicity. In fact, they are much more likely to be sole proprietorships than partnerships or corporations, which means these businesses are borne of desperation and not aspiration.
Latinos are much worse off economically than white and Asian Californians, having a substantially lower average household income and substantially higher poverty rate. Latinos are disproportionately affected by a lack of housing affordability and are over-represented in our low-performing schools and prisons.
Another recent report, from Oakland’s Insight Center for Community Development, found that more than half of Latinos are struggling to pay basic expenses like food, electricity and housing. The study further found broad swaths of Latinos are living with economic insecurity and are earning significantly less than Californians overall.
Latinos are relatively competitive with people of other ethnicities in terms of high school graduation rates, but we are dead last in attainment of four-year college degrees or higher, and while nearly 12 percent of the state’s workforce is in a STEM field, just 4.7 percent of employed Latinos are employed in those high tech jobs of the future.
Let’s face it, California is a much more welcoming place for highly skilled and educated white and Asian workers. The booming economy our policy makers crow about is driven by and made for precisely these demographics. The “dynamic” job growth we regularly hear about in Sacramento is very different depending on your race and ethnicity in California. For black and Latino Californians, the economics of the service sector work where the state is creating jobs for these communities means wages below sustenance level.
Other hindrances exist for Latinos trying to scratch out a living as well. The exorbitant cost of living and, of course, onerous taxes and regulations forced on these small businesses play a role, as does access to capital.
According to national data provided by the Stanford Latino Entrepreneurship Initiative, the majority of Latino-owned businesses did not apply for financing in the past 12 months—which further supports the assertion that most of these businesses are about survival, not growth. But even for those that did apply, more than 25 percent received no amount of financing, and white applicants are nearly twice as likely to receive full financing as Latinos, suggesting either Latino-owned firms are not well-suited for financing or a racial bias exists, or possibly both.
Policymakers need to focus on how to help Latino entrepreneurs take that next leap. Beyond the shiny veneer of press clippings glowing about the California economy, it’s easy to see that things could clearly be much better: good enough is not really good enough. Without doing so we risk losing the state’s fastest growing community to a cycle of generational poverty just as it is emerging as the state’s largest ethnic group.
If we lose this generation of Latinos to a shrinking middle class, we also lose the California Dream.
Rebuilding an entrepreneurial and middle class is a complex problem, but it’s not that difficult to solve. It simply requires the political will. To preserve the California dream we must overhaul the public school system, dramatically expand housing stock and make our state more friendly for small businesses. These three policy areas comprise the holy trinity of middle class aspirations.
This means elected officials must be willing to take on their own parties and special interests. The local control funding formula implemented by former Gov. Jerry Brown was a great first step. Now it’s time to take the next step and implement more transparency, accountability and student-focused outcome policies tied to those same dollar increases. Students aren’t prepared for the coming economy and the data showing Latinos are suffering is clear.
Increasing housing means demanding dramatic changes to the California Environmental Quality Act, significant financial incentives to local governments to build and financial penalties for those that don’t. We have chosen poverty and unaffordable housing over a burdensome and broken environmental scheme for too long.
Finally, it’s time to finally recognize that the environment for small business owners in this state has been a man-made disaster. We need to considerably relax and remove the regulatory requirements for the smallest enterprises that need the most help—eliminate all state and local permitting fees, expand federal opportunity zones and tax breaks to every single city and county below the median employment and or poverty level and provide greater incentives for financing capital to invest in micro-enterprises with the fewest employees.
Top photo via California State University, Fullerton.
About the Author
For over 25 years, Mike Madrid has been changing the outcomes of political campaigns throughout the country. His active involvement in local, state, and federal races has helped him to develop a keen insight into the successful characteristics of winning campaigns. Madrid is a nationally recognized expert on Latino voting trends. He graduated from the Edmund G. Walsh School of Foreign Service at Georgetown University. The completion of his thesis at Georgetown University in Washington DC on Latino voters became the basis for his pioneering work on Latino communications and outreach strategies nationwide. He has served as the press secretary for the California Assembly Republican leader and as the political director for the California Republican Party. Madrid served as both the public affairs director to the League of California Cities and as a senior advisor to The California Redevelopment Association where he successfully ran statewide campaigns to protect local government revenues from state incursion. In 2001 Madrid was named as one of America’s “Most Influential Hispanics” by Hispanic Business Magazine. Madrid currently serves as a senior advisor to the California Latino Economic Institute. He serves on the Board of Directors of the American Association of Political Consultants (AAPC) and currently teaches as a visiting lecturer on Race, Class and Partisanship at the University of Southern California.
You can connect with Madrid on Twitter: @madrid_mike.
Christian Grey is the executive director of inCOMMON Community Development, an organization that aims to alleviate poverty at a root level by uniting and strengthening vulnerable neighborhoods.