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Las Colonias in the 21st Century

Focus Area: Economic Opportunity

Success Story | Looking Forward: The Digital Divide

Forty-two percent of the Texas colonia population lives below the poverty line and another 19 percent are close to it. While the national average for median income is $52,762, colonia households struggle to survive on a median income of $28,928. Roughly 40 percent of households rely on public assistance or food stamps. The charts below show comparisons among counties.

Poverty Is Far Reaching in Colonias
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.
Colonia Median Household Income Falls Short
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.
Colonia Residents Rely More on Public Assistance
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

A home-based small business in Cameron County; an example of a store/home combination common to colonias (see Housing section)

Because of these struggles, many Texas colonia residents rely on alternative financial service providers, such as payday and auto title lenders, pawnshops and rent-to-own stores. Although these lenders may be able to provide relatively fast and easy money to families in a bind, they come with extremely high interest rates that make the loans nearly impossible to pay off.

Despite these challenges, many colonia residents have been able to improve their financial well-being through entrepreneurship. Proximity to the border creates a competitive advantage for small-business owners and cost savings for consumers.

Much of this work is part of the border’s informal economy, which means it provides little job security or government protection and regulation; however, it can be what allows a family to make ends meet. In Texas colonias, 43 percent of residents are not in the labor force, so it is evident that many residents support themselves by participating in this informal economy as employers, employees and consumers.

Fewer Colonia Residents Participate in Formal Economy
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.
Employment Concentrated in Different Sectors in Colonias than in Texas and Nation
NOTE: A comprehensive list of what each category includes is available at http://www.bls.gov/cps/cenocc2010.pdf.
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Pulgas, or flea markets, are the hub of the informal marketplace and common to colonias. They provide entrepreneurs with flexibility and the opportunity to sell a wide range of products. Community members can also buy basic goods at pulgas at an affordable price. They enable colonia residents to regularly earn an income, stretch their budgets and develop social networks.

A booth at a pulga

A vendor and booth at a pulga

SUCCESS STORY

Leticia Jones

Some entrepreneurs in the informal economy have been able to move to the formal economy. One example is Leticia Jones, a colonia resident from Garciasville, Starr County, who runs a meal delivery and catering business called Letty’s Comida Casera.

She exemplifies how LiftFund, a microlender that helps small-business owners who have limited access to capital, can help businesses grow and create formal relationships with banks. Jones attended a workshop as part of a program called AVANCE at the Colonias Unidas community center in nearby Las Lomas. A senior loan officer with LiftFund explained how to prepare business financials, qualify for a loan, keep a ledger with a formal bookkeeping system, and repair and build credit.

Jones has received several business loans from LiftFund and now her future is bright. She began her cooking business out of her home, selling platters to teachers at the schools her children attended. Due to an increase in clientele and her need for more space, LiftFund helped her find a location for her business and receive approval for a loan to cover the rent. With more prep space, she was able to expand the business.

Jones says the catering business has had a profound impact on the lives of her children, who help out when needed. Her daughter, a student at University of Texas—Pan American, intends to earn her degree in business administration to formally study what she learned at an early age watching her mother. The business is a true family asset, teaching her children resourcefulness, resilience and discipline as well as entrepreneurial skills that cannot be learned in a classroom.

LOOKING FORWARD: THE DIGITAL DIVIDE

For more information on improving access to broadband infrastructure for underserved communities, read the Dallas Fed report, “Closing the Digital Divide: A Framework for Meeting CRA Obligations pdf.”

According to the Center for Public Integrity’s Investigative Reporting Workshop, there is a distinct digital divide between low-income and higher-income households. Broadband adoption continues to lag behind for some population segments, including those who are low income, older, disabled, black, Hispanic, Native American or in rural communities. Of the 381 metropolitan statistical areas (MSAs) in the U.S., those with the lowest rates of computer ownership and Internet use by individuals include three Texas border MSAs. See the chart below for a comparison between these MSAs and Austin–Round Rock, which has the highest percentage of broadband and computer adoption in the state.

Metropolitan Area % With Computer Regional Computer Gap % High-Speed Internet Regional High-Speed Internet Gap
Laredo 69.3 -22.7 51.8 -31.0
Brownsville–Harlingen 71.7 -20.3 57.4 -25.3
McAllen–Edinburg–Mission 75.6 -16.4 55.2 -27.6
Austin–Round Rock 92.0 0.0 82.8 0.0
Source: Census Bureau, 2013 American Community Survey.

This is noteworthy because employment, banking and educational opportunities, among others, often require computer and broadband capabilities. Limited access to the Internet can result in further economic, social and political exclusion for historically underserved populations.

To address these issues in the colonias, the Dallas Fed is leading a collective impact initiative, Digital Opportunity for the Rio Grande Valley (DO4RGV), with many community partners, including: ACT, the University of Texas Rio Grande Valley, the University of Texas at Austin, Capital One Bank, Region One Educational Service Center, La Joya Independent School District, Pharr–San Juan–Alamo (PSJA) ISD, City of Pharr, City of McAllen, Doctors Hospital at Renaissance, the Health and Human Services Commission, the Small Business Administration, Verizon, Dell and Kajeet. The Texas Association of Telecommunications Officers and Advisors is a consultant on the project.

The goal of DO4RGV is to design and implement an effective model to close the digital divide in the Rio Grande Valley. Project objectives are to improve:

The initial demonstration project will be focused on providing students and families in PSJA ISD with computers, Internet access, bilingual training and technical support. DO4RGV partners will work with local governments, Internet companies, anchor institutions and other stakeholders to provide broadband access more equitably.

For more information on this initiative, contact Jordana Barton .