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How are race and spending habits linked?

We have heard a lot in recent years about economic inequality, but most, if not all, of the discussion has focused on income inequality. However, a new study out of Duke University, and highlighted in the Atlantic, points to another way economic inequality persists between white and Black americans. To do this, the authors used data from the Consumer Expenditure Survey to analyze the spending habits of white and Black households in 2013 and 2014. They found that Blacks spend less, in aggregate, than whites, even when income levels are similar, and they posit this is a result of differences in access to credit, residency in retail deserts, and other subtle forms of discrimination.

What separates income inequality from other economic inequalities?

It’s pretty straightforward. We know that Black americans earn, on average, less that white americans, and so, on average, we spend less. That is the income inequality. But spending differences still crop up when you control for that income. When a Black family makes as much as a white family – even in the high income brackets – this study suggests that the Black family has less access to goods and services. That is a different economic inequality that occurs beyond earnings or income.

So how does this lack of access play out?

You shouldn’t be shocked to hear this because we have talked about it on ‘Money Monday’ before. One of the biggest differences in spending between Black and white americans was seen in purchases that require a substantial sum of money up front. This could be down payment on a refrigerator or a car.

When researchers looked at the numbers, lower-income Black families were much less likely to make these purchase than lower-income white families. Why? Most signs point to the race gap in access to credit, and the difference between whites and Blacks with regard to credit scores. The good news? As income increases, the gap between Blacks and whites when it comes to this kind of purchase narrowed, suggesting that the credit barrier becomes surmountable as Black families climb the economic ladder.

You mentioned other ways we lack the same access as whites. What are they?

The researchers noted two other items the data pointed to. First, when they examined frequently purchased items, such as groceries, lower-income Blacks and whites tended to spend at similar levels. However, when you moved up the income ladder with more disposable income, there was a shift: affluent white families spent more on these items than affluent Black families. Why? The same choices are less available to higher-income Black families, due to retail deserts.

These geographic regions that lack the same spectrum of options and amenities such as well-stocked, higher-end grocery stores, numerous retailers, and entertainment venues, are more frequently found in minority communities, making it more difficulty for Black families to spend in the same way as whites even if they wanted to.

Beyond this access, Black families on the lower end of the income spectrum tend to pay more for long-term contracts, on things like cell phone or utility bills. While the authors note that this may not be due to overt racism, it points to an implicit bias in pricing strategies of such goods, and impacts those with poor or no credit in a negative way. Because the demographics of this group comprise a larger percentage of Blacks than the general populace, it impacts Black families more disproportionately than other groups.

It’s a very interesting topic that needs some attention.

It certainly does. Economic inequality goes beyond money alone. There are structural factors at play here that we need to continue to highlight in order to get the solutions we need.

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Money Mondays: Race And Spending Habits  was originally published on