By Sean Goforth, Syndicated Research Director at Ryan Strategic Advisory

This week BPO thought leaders will meet at the Nexus 2022 conference in New York City. Several weighty issues vie for their attention. Which nearshore market offers the right mix of language skills, human talent, and attractive costs? Which markets are oversaturated? How are advanced technologies like AI altering service delivery?

Amid these heady topics, the demand side of the nearshore equation also warrants analysis: How do consumer behavior and economic conditions in the United States impact service delivery?

Ultimately, it is the demand-side of the outsourcing equation that determines the aggregate need for nearshore solutions. Accordingly, this warrants greater scrutiny, especially because it appears that a linchpin of nearshore demand, the US Hispanic community, faces numerous economic challenges.

Latinos account for nearly one-fifth of the US population but generate only 11.4% of the nation’s consumer spending, according to a recent McKinsey & Co. report, “The Economic State of Latinos in America: The American Dream Deferred.”

On average, US Latinos earn just 73-cents for every dollar made by their non-Latino peers. If rectified, this would vest them with substantially more spending power. By McKinsey’s estimate, full parity in pay would result in an additional $600bn of consumer spending in the US economy. On a per-capita basis, that translates into roughly $24,000 more in spending for each member of the US Hispanic community annually.

Customer experience management in banking, e-commerce and other verticals would witness a surge in demand under such a scenario.

Getting there though requires confronting some hard truths. Many US Latinos live in consumer “deserts,” according to McKinsey, creating a situation where their spending power is dampened due to a lack of banks, shopping malls, grocery stores and the like that suit their needs.

Other indicators are positive only on the surface. 1 in 200 Latinos opens a business each month, the highest rate of entrepreneurship of any demographic group in the US. The problem, McKinsey senior partner Lucy Perez said on a May 26 podcast, is that over three-quarters of them rely on friends and family for startup cash and to cover operational expenses. That is, they do not typically take out bank loans. This crimps businesses owned by members of the US Hispanic community from expanding; it also limits the volume of banking services sent to the nearshore.

While several metrics are dour, there is ample reason for optimism. Wealth increases as first-generation Latinos become second-generation Latinos. In turn, pay disparities with members of the non-Latino population shrink, according to McKinsey. In so doing, this echoes the last wave of European immigration to the US a century ago. If the historical pattern plays out, US Latinos will continue putting down roots, speaking English with growing confidence at work and Spanish at home, and household wealth will increase.

Also, 50% of the pay gap stems from just 4% of professions, including teaching and academia, business management, law and STEM fields. Targeted action toward income equity in these high-wage jobs could whittle away the problem.

If this occurs — granted, that is a big if, as it would require employers to take proactive steps to boost pay for Latinos as well as smart public policies — it would spell a windfall for US Latinos.

For nearshore providers, the gains would be significant. US Latinos are willing to pay 18% more for goods and services that better meet their needs, according to a survey conducted by McKinsey in 2021. Meanwhile, enterprises in the US are the most willing of any major demand market to embrace offshore options to generate CX excellence, according to the 2022 Ryan Strategic Advisory Front Office Omnibus Survey. Based on the competitive offerings of English-Spanish bilingual services on offer throughout much of Latin America, rising US Latino buying power will translate into growth opportunities for nearshore outsourcers.

In short, reducing the pay gap for US Latinos is not only the morally correct thing to do, but it also promises real benefits for businesses. Nearshore operators can enjoy those benefits, provided US Latinos are paid on an equal basis.

Image provided by BByrnes59 under Creative Commons license