How Blacks and Whites Spend Differently
Middle-class African American families aren’t spending as much on groceries as white families, and the reason isn’t a lack of money, but a lack of options.
Rich Americans spend their money differently than poor Americans—no great surprise there. But the differences in how families spend go beyond earnings. For instance, rich white families spend more on entertainment and groceries than rich black families. And black families at all income levels spend more on things that require a long-term contract, such as electricity and heating services, than white families at corresponding income levels.
These discrepancies illustrate an under-recognized aspect of racial inequality: Blacks don’t just tend to earn less than whites. Even when they earn as much, they seem to still have less access to goods and services than their white peers do.
That’s the finding of a paper by the sociologists Raphaël Charron-Chénier, Joshua J. Fink, and Lisa A. Keister of Duke University, who used data from the Consumer Expenditure Survey to assess the spending habits of white and black households in 2013 and 2014. They argue that access to credit, retail deserts, and discrimination could be major factors in why blacks spend less, in aggregate, than whites. Only one of these challenges—access to credit—is mitigated when black families earn more money.
When it comes to purchases that require a substantial sum of money up front, for instance a downpayment for a car or household appliance, lower-income black families were much less likely to make a purchase than their low-income white peers. That may point to inadequate credit access, a problem that plagues poor black households more frequently than poor white households. As income increases, that gap between blacks and whites narrowed, suggesting that higher-income black households were able to use income to overcome the credit barrier.
But that improvement wasn’t true for all types of consumption. For goods that are purchased over and over again, such as groceries or entertainment, low-income blacks and whites spent relatively similar amounts. But as researchers looked at black and white families further up the income chain, they noticed that affluent white families spent more on these items than affluent black families. That suggests that white Americans had both access and propensity to buy goods that their black counterparts didn’t. More than a matter of preference, that could point to a lack of availability in black communities: Retail deserts—geographic regions that lack amenities such as well-stocked grocery stores (and the healthier and more expensive options therein), clothing stores, banks, and pharmacies—are more common in majority-minority neighborhoods. The lack of resources can make it harder for blacks to consume the same type of goods their white peers do. Discrimination can play a role too, the authors suggest, through overt means such as denial or through less obvious methods. “Shop owners, for example, may petition municipal authorities to change public transportation routes to restrict the flow of low-income black commuters to their establishments,” they write.
The one area where black households tended to spend more, the paper found, was for services that required a long-term contract, like utilities. The authors suggest that while this may not suggest overt racism, it does suggest implicit bias that results from the pricing strategies of such goods. Long-term contracts for goods like electricity, water, gas, and some types of insurance can require additional fees, or deposits from those with low credit scores, which can disproportionately impact low-income and minority customers across all income levels.
The results show that some forms of economic inequality surpass issues of income. That means that solving these problems will require policies and solutions that address not only gaps in earnings and wealth, but also the structural inequalities that separate Americans by race, gender, and a myriad of other divides.