Historically, minorities have not had the same spending power as racial inequality, lack of education, and low minimum wages have affected the communities that make up more than 40% of the United States population. In recent decades, the spending power of these communities has started to grow substantially. But what is exactly meant by “spending power” and how does it affect businesses and consumers?
Spending power (or buying power) is the ability of an individual to purchase goods and services. The overall buying power of the US is estimated at 14.8 trillion; while the combined buying power of African Americans, Asian Americans, Hispanics, and Native Americans is estimated at 3.9 trillion combined (UGA Today, 2019). Out of these groups, Hispanic buying power is the largest at 1.5 trillion. What does this tell us? To put it simply, the demographic landscape in the United States is changing rapidly.
The Center for American Progress estimates that by 2044, whites will no longer be the racial majority and People of Color will take up higher percentages. Changes to the business landscape, personal finance, and market will take place as purchasing trends change. Each minority community has different ways of spending income. Although mostly everyone has to use income for shelter and food, the consumer spending behavior is different across races and ethnicities. For example:
- Black households will spend more money on utilities and shoes and spend less on cars, furniture, and pensions.
- Hispanic households spend more on groceries, clothing, car insurance and spend less on healthcare, entertainment, and personal insurance.
- Asian households spend more on dining out, housing, and education and spend less on utilities, health care, and entertainment.
(For the full article from The University of Georgia, click here)
A factor contributing to the increasing spending power of minorities is more access to education. As these communities become financially literate, we could see an increase in individual and community wealth that can transform into generational wealth.
The changes in the business sector and market will come in the form inclusive and diverse marketing, diverse products and services, and social awareness from corporations. We have already seen a boom with companies expanding trying to expand their client base by offering products that are inclusive and brands participating in the racial discrimination discourse that has been prevalent in recent years.
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SEO keyword(s)/phrases: spending power, buying power, generational wealth
References
Amadeo, Kimberly. “Consumer Spending and Its Impact on the Economy.” The Balance, The Balance, 27 Dec. 2009, www.thebalance.com/consumer-spending-definition-and-determinants-3305917.
Center for American Progress. “Demographic Growth of People of Color.” Center for America Progress, 1 Aug. 2015, cdn.americanprogress.org/wp-content/uploads/2015/08/05075343/PeopleOfColor-Econ-FS.pdf. Accessed 2 Apr. 2021.
eMarketer.com. “US Buying Power*, by Race/Ethnicity, 2000-2023 (Billions).” EMarketer, 21 Mar. 2019, www.emarketer.com/chart/227611/us-buying-power-by-raceethnicity-2000-2023-billions.
Weeks, Matt. “Minority Markets See Economic Growth.” UGA Today, 21 Mar. 2019, news.uga.edu/multicultural-economy/.
UGA Report: Minority Groups Driving U.S. Economy – UGA Today.” UGA Today, 12 Dec. 2017, news.uga.edu/multicultural-economy-report-17/.
