African Americans have long endured criticism about their spending habits. Conservative campaigns in the 1980s and 90s used stereotypical images of “gold diggers” and “welfare queens” to convince white, middle-class Americans that low-income minorities not only drained government resources, but also spent those resources on frivolous items. Republican Congressman Jason Chaffetz played to these sentiments recently when he said, “Americans have choices, and they’ve gotta make a choice. And so maybe, rather than getting that new iPhone that they just love and they want to spend hundreds of dollars on, maybe they should invest in their own healthcare.” New research by Raphaël Charron-Chénier, Joshua Fink and Lisa Keister goes beyond such individual-level explanations to investigate the structural factors that contribute to racial disparities in consumption.
The authors use data from a nationally representative sample of over 9,500 households from the 2013 and 2014 Consumer Expenditure Surveys. These surveys measure total household purchases, including spending on food, entertainment, health care, housing, transportation and utilities. The authors then examined differences between black households and white households across low, middle, and high socioeconomic statuses.
Charron-Chénier and colleagues show that the average total spending for black households was significantly less than for white households, with black households spending $8,387 and white households spending $13,713. More specifically, blacks spent less on housing, transportation, healthcare, and entertainment. Low-income blacks in particular also spent less money on goods that required significant amounts of money up front than did low-income whites, though this difference diminished with income increases. Black households, however, did spend more than white households on goods that required long-term contracts, such as utilities, due to the threat of late fines and fees. So despite common criticisms about black consumer spending habits, this research shows that blacks actually spend far less than whites on “frivolous” items like new iPhones and they spend more on the long-term costs of maintaining a household.