Columns:: Money in the bank: Buying power of U.S. minority households continues to grow at a rate faster than that of white households

since 12/15/98

Columns::August 18, 2003

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Money in the bank
Buying power of U.S. minority households continues to grow at a rate faster than that of white households

By Jim Kvicala
jimkvicala@terry.uga.edu

The amount of disposable income controlled by minority households continues to grow faster than that of white households,

Jeff Humphreys

according to a report released last week by the Selig Center for Economic Growth in the Terry College of Business.
The report shows substantial gains in after-tax income among African Americans, Hispanics, Asian Americans and Native Americans, thanks to fundamentally strong national and regional economies that have benefited most U.S. consumers since 1990.
It also forecasts continued rapid growth in total buying power over the next five years for the nation’s largest racial and ethnic minority groups, thanks to both population growth and better employment opportunities.
“In sheer dollar power, the economic clout of the nation’s minorities--Hispanics in particular--is formidable,” says Jeff Humphreys, Selig Center director and author of the report.
Interesting revelations from this year’s Minority Buying Power report include:
• By 2008, the combined buying power of African Americans, Asian Americans and Native Americans will exceed $1.5 trillion, more than triple the 1990 level of $456 billion. That’s a gain in buying power of $1.1 trillion, or 231 percent.
• California is the top-ranked state in terms of total buying power for every minority group except African Americans (California is number two in that category; New York is number one).
• Hispanic buying power in California is an estimated $189.1 billion, significantly outdistancing second-ranked Texas by more than $76 billion annually.
• Based on its size, growth rate and concentration, Georgia remains the nation’s most attractive African-American consumer market. It’s the fourth largest and the sixth fastest-growing. One out of every five consumer dollars spent in Georgia is controlled by African Americans.
• Even as minority buying power leads in growth rate, white households control a large majority of the nation’s total buying power. The combined buying power of African Americans, Asian Americans and Native Americans is projected to account for 14.3 percent of total U.S. buying power by 2008.
Buying power, also referred to as disposable income, is the total personal income available for spending on goods and services after taxes. Humphreys says the fast-paced growth of minority buying power is significant because the market share that is claimed by a targeted group of consumers directly affects the costs of providing goods and services. The higher the market share of a given group of consumers, the lower the cost of reaching a potential buyer in that group, he says. Seeking better ways to service the market segments represented by minority households should be a strategic priority for 21st-century American business leaders.
“For example, by 2005, Hispanic buying power will exceed that of African-American buying power for the first time,” says Humphreys. “Within the next two years, Hispanic markets will become the nation’s largest minority market, and that lead will widen with each passing year.”
“The Multicultural Economy: Minority Buying Power in the New Century” is the latest in a series of state-by-state studies of minority buying power Humphreys has conducted since 1990. Initially limited to African Americans, the series was expanded to include the nation’s four most populous minority groups.
The report estimates buying power by applying economic modeling and forecasting techniques to data from various U.S. government sources. The model developed by the Selig Center integrates statistical methods used in economic forecasting with those of marketing research.
In addition to the state-by-state breakdowns, the 2003 report also breaks down minority buying power on a county-by-county basis and by Metropolitan Statistical Areas for Georgia and Florida.
In comparison, the U.S. Bureau of Labor Statistics annually publishes only national and regional estimates on what consumers purchased in the previous year, without any year-to-year perspectives or projections.

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