Black, Hispanic, White Consumer Spending During Hard Times

In 1776, the Founding Fathers of the United States of America declared independently that “... all men are created equal... endowed by their Creator with certain unalienable Rights... among these are Life, Liberty and the pursuit of Happiness.”

But the Founding Fathers did not enforce this very well, and discriminated castes did not have equal access to Creation’s endowments. Differences in heritage compounded by differences in income are reflected in the spending propensities of each ethnic segment of the population.

Discrimination and prejudice restrict the ease by which members of Black and Hispanic and “Other” (Asian, Native American, etc.) ethnic segments—disadvantaged by the accident of birth—can achieve high incomes.

During the seven months ending in March, which includes five recession months, the Poor (based on per capita income) accounted for 25% of Black and 21% of Hispanic but for only 9% of White and 10% of “Other” consumers.

The Upper and Middle Class (based on per capita income) accounted for 46% of White, compared to 30% Black, 26% “Other”, and 25% Hispanic consumers.

While the incomes of White consumers are typically higher than the incomes of other ethnic groups, the Consumer Affordability Index (CAI) of 89 for White consumers indicates they are marginally more depressed by recession than Black (93), Hispanic (92), and “Other” consumers (92).

However, the index tracking the financial pressure felt by consumers in each ethnic group does not mirror the minor differences in their CAI Indexes. The Index for financial pressure is highest for Black consumers (153), next highest for Hispanics (132) and “Others” (117), and lowest for White consumers (106).

In line with their feeling of being least secure financially, Black consumers spend least freely for food and other consumable products (56 Index) and Hispanics next least freely (77), while “Other” (85) and non-Hispanic Whites (89) spend most freely.

Contrary to the differences in shopping for consumable products, Hispanics do the most active shopping for cars, housing, and other major goods (118 Index), followed by Blacks (107), non-Hispanic Whites (93), and finally “Others” (89).

Given their lower incomes, Hispanics and Black consumers are forced to shop actively to find an affordable car, house or other major good.

Also, active shopping is, in part, a function of aspirations. It is a way of getting pleasure from reading the “dream book”—the name once applied to the Sears Catalogue.

Easy credit helped consumers with limited income make their dream of home ownership come true. That dream has now turned into a nightmare. A report on the housing crisis is in preparation.

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