Are Hispanics moving up or down the social scale?

Commentary

April 24, 2012

By Wayne Lusvardi

The ongoing economic malaise of the past half decade has slammed most social and economic groups in California. How are Hispanics doing here, especially in light of the bursting of the Housing Bubble?

For example, consider Riverside County, which according to the 2010 U.S. Census is 46 percent Hispanic. Housing prices there have dropped 30 percent. Worse, construction work, a mainstay of Hispanic family income, has crashed 70 percent.

This matter was considered recently in the City Journal by Heather Mac Donald in her article, “California’s Demographic Revolution.” She wrote that, “unless Hispanics’ upward mobility improves, the state risks becoming more polarized economically and more reliant on a large government safety net.”

But she is mistaken that California is beset by a lack of upward social mobility for most Hispanics solely caused by social and economic pathologies.  If the Housing Bubble demonstrated anything, it was that Hispanics have suffered not from too little, but too much, upward mobility by government-induced home ownership for Hispanics.

Moreover, the percentage of young Hispanic gang members is less than 5 percent of the total population of Hispanics age 15 to 24 in Los Angeles County.  While Mac Donald’s concern about lack of social mobility for Hispanic gang members is warranted, it lacks a sense of proportion.

Unfortunately, the evidence Mac Donald offers is based on selective casual interviews and observations from those at the very top and bottom of the social class spectrum, rather than from upwardly mobile suburban Hispanics themselves.

Mac Donald drew her conclusions largely from highly selected interviews with members of the Crazy Little Stoners gang in the city of Santa Ana; an anti-gang intervention cop; educators from UCLA and the University of California, Berkeley; California’s largest Spanish-language newspaper, “La Opinion”; a San Jose State University political science professor; and a publisher of a Spanish-language classified advertising newspaper. Mac Donald bases most of her observations on the City of Santa Ana, which is comprised of 78 percent Hispanics.

Gathering the views of gang members from dysfunctional families in ethnic enclaves, ethnic newspaper publishers and university faculty club members isn’t likely to shed much light on Hispanic upward or downward social mobility.  To do that one would have to interview first, second and third generation Hispanics who have immigrated to California.

Where upwardly mobile Hispanics would be found in the Los Angeles area would be in suburban San Gabriel Valley, where, contrary to many stereotypes, Hispanics are a near majority.  There are 1.5 million people in the San Gabriel Valley and 45 percent, or 675,000 people, are Hispanic.

Downwardly mobile Hispanics would likely be found in the cities of Stockton, Modesto, Fresno and Visalia, where home loan defaults and foreclosures are some of the highest in the United States.

But Mac Donald didn’t interview Hispanics in suburban San Gabriel Valley or California’s Central Valley.  If she had, she might have found that economic inequality is not the same as lack of social mobility.

Inequality Not Same as Social Immobility

Sociologist Peter L. Berger once observed, “Thus one may have a society with very unequal distribution of income and wealth in which there is, nevertheless, a high degree of social mobility; conversely a society with egalitarian distribution may have little social mobility.”

Mac Donald seems to confuse economic inequality with lack of social mobility. She accurately reports:

“Hispanics made up 60 percent of California’s poor in 2010, despite being 38 percent of the population. Nearly one-quarter of all Hispanics in California are poor, compared with a little over one-tenth of non-Hispanics. Nationally, the poverty rate of Hispanic adults drops from 25.5 percent in the first generation — the immigrant generation, that is – to 17 percent in the second but rises to 19 percent in the third.”

But this trend of third generation downward economic mobility is typical of nearly all income and ethnic groups in American history and proves the openness of the social class system.  Sociologists even have a term for it: the “circulation of the elites.”

There’s also an old saying in America, “from shirtsleeves to shirtsleeves in three generations.” We’ve all seen a go-getter rise above the socio-economic level of his parents (who often were immigrants), then witness his children not perform as well. Perhaps the kids had it too easy and became lazy. In any case, it happens all the time.

As Berger explains:

“Put simply: the son of the truck driver has a reasonable chance of making it into the world of professional or business privilege; but individuals in the latter world have a high chance of failing to prevent their sons from ending up as truck drivers.”

Both upward and downward movements along the social class spectrum don’t invalidate but support the egalitarian dynamics of American society. It is less of an advantage to start out at the top and less of a handicap to start out at the bottom. Historically, mobility rates from manual to white-collar occupations have been higher in American than in other industrialized countries, capitalist or socialist.

Mac Donald’s Thesis Similar to Upton Sinclair’s

Mac Donald’s thesis that most Hispanics are trapped in an underclass of dysfunctional families in an oppressive economy sounds similar to famous California socialist and novelist Upton Sinclair.  In his 1906 book, “The Jungle,” Sinclair portrayed the plight of a Lithuanian character named Jurgis Rudkus, who believed in the Horatio Alger dream that through hard work he could realize the American Dream.

Sinclair wrote that the fictional character Rudkus found “the whole country…was nothing but one gigantic lie.”  But as The Economist magazine points out, we would find it ridiculous today to be troubled about poverty of Lithuanian-Americans. Arguably, Hispanic immigrants have more opportunities today than Lithuanian immigrants had in 1906. For many Hispanic economic migrants from rural Mexico, just moving to California is upward mobility.  Social mobility is relative.

In 1934, Upton Sinclair ran as a Democrat for governor of California on a platform of “End Poverty in California — EPIC.”

California’s Hispanic Housing Bubble and Bust

Arguably, Hispanics received the most benefit and the most harm from subprime lending during the Housing Bubble.

A 2005 study by the Federal Reserve Bank of New York of 75,744 minority subprime loan borrowers found the largest percentage was Hispanic (15,647 loans or 20.7 percent).  This study found no evidence of adverse pricing of subprime loans by race or ethnicity and minority borrowers paid lower rates.

A 2008 study by the U.S. Federal Reserve in Washington, D.C. found Southern California was the hot spot for the most subprime loans in all of the United States in 2005.  And out of the top 10 cities with the most subprime loans, six were in California (percent of Hispanic population in parentheses): Riverside (45 percent), Bakersfield (45.5 percent), Stockton (37.6 percent), Modesto (35.5 percent), Fresno (50.3 percent) and Visalia (46.0 percent).  Where Hispanics got into trouble had more to do with home equity loans than primary home purchase loans.

Hispanics were hit hardest with foreclosures after the Housing Bubble popped.

If the Housing Bubble demonstrated anything, it is that Hispanics suffered not from too little, but too much, upward mobility by government-induced home ownership policies.

Hispanic Family Dysfunction and Crime Have Declined

As to Mac Donald’s dysfunctional family hypothesis, the California Hispanic teen birth rate has dropped 33 percent since 1991, according to U.S. Vital Statistics Reports.  The overall teen birth rate has also dropped. But apparently the absolute number of Hispanic teen births has risen because the total Hispanic population has increased.  Hispanic teen birth rates are relative.

Year	Out of Wedlock Birth Rate per 1,000   Hispanic Women
2009	70
2007	82
2005	82
1991	105
Source: National   Vital Statistics Report, Vol. 60, No. 1, November 4, 2011.

Hispanics are 48.7 percent of all arrestees in the state and victims of 44.5 percent of all homicides. Nevertheless, the Hispanic homicide rate has dropped 7.9 percent since 2009. The proportion of Hispanic crime remains high in California. But the percentage made up of young males is highest in California and non-Hispanic crime has declined.

CA Hispanics Are Diverse

All California Hispanics cannot be pigeonholed as being held back from upward social mobility by dysfunctional families and an oppressive economy.

According to the website Los Angeles Community Policing, there are 85,298 gang members in Los Angeles County.  Of this, 53,121 are Hispanic gang members.  This would be the size of a small city in Los Angeles County.  No one has better data than the Los Angeles Community Policing website.

But this needs to be put into broader perspective:  53,121 Hispanic gang members reflect only 3.5 percent of the 1,483,827 young people in Los Angeles County age 15 to 24 (Source: American Community Survey 2010).  In other words, 96.5 percent of youth in Los Angeles County are not members of gangs. California’s future is not as bleak as Mac Donald would have us believe.

There are rural Hispanics described by Victor Davis Hanson who live in “relative poverty.” They have cell phones, big screen TVs and brand new trucks. But they some are involved in the underground economy of copper and other metal theft.

Then there are the Hispanics represented by the Latino Water Coalition in California’s Central Valley.  They formed the coalition after a bogus environmental lawsuit shut down water to Central Valley farms from 2007 to 2010 to protect the Sacramento Delta Smelt fish.  Many of these Hispanics enjoy the relative upward mobility of escaping poverty in Northern Mexico for work in California’s agricultural industry.  It is their children that will be more likely to have upward social mobility.

There are those Hispanics caught up in a system of trying to obtain educational credentials or licenses to work their way up California’s state-controlled occupational ladder.

And there are upwardly mobile Hispanics such as those living in the San Gabriel Valley in Southern California, mentioned above.

Hispanics are diverse and most are not trapped living in dysfunctional gang families who lack a “bourgeoisie” work ethic.

Government can do little to increase upward mobility for those Hispanic families beset by family dysfunction and hard crime.  Hispanics caught in such situations can be salvaged.  But it is mainly up to the civil society of mediating institutions, such as extended families, churches and private organizations to do so.

Hispanics in California benefitted from hyper-social mobility during the Housing Bubble. And Hispanics have disproportionately suffered from the aftermath of that abnormally rapid burst in upward mobility.  Thus, the much-ballyhooed decline of Hispanic social mobility due to social and economic pathologies really isn’t happening.  It is too much government-induced social mobility, not too little, that most Hispanics continue to suffer from.

The apparent social policy underneath the Housing Bubble was an attempt to prop up the decline in formations of intact families that form the basis of the economy.  Without enough young intact families at the base of the demographic pyramid to take out home and business loans, the elderly are unable to get a decent return on their savings and investments.  The result of this demographic imbalance has been an economic depression.

To Get Social Mobility Working Normally Again, Increase Interest Rates

To restart the normal cycle of social mobility for Hispanics and everyone else, interest rates have to rise.  That would mean ending the current Federal Reserve policy of “interest rate repression,” as described by economist Carmen M. Reinhart. Presently, interest rates are below 1 percent for 82 percent of Treasury Bills.

For the intergenerational life cycle of the economy to revive and upward social mobility to resume, interest rates must rise at least 2 percentage points over the current inflation rate of about 3 percent. The current interest rate policy of the U.S. Federal Reserve, unfortunately, is slated to continue for two more years of very low interest rates.

California is presently caught in a pincers between keeping government bond rates low and squelching any economic recovery in the process. This is why current proposals by the governor and the teachers’ unions to raise taxes are being designed to be a “millionaires’ tax” that doesn’t adversely affect most Hispanics or others in the working and middle classes.  But a tax increase will mostly preserve lucrative pensions for upward mobility for government technocrats. A tax increase will do nothing to restore the normal process of social mobility for Hispanics, or restore the economy and prosperity for all Californians.

Heather Mac Donald has good reason to be concerned about the social mobility of young Hispanics in California.  But the problems can be solved with more sensible economic policies.