Hispanic Buying Power
The immense buying power of the nation’s Hispanic consumers continues to energize the nation’s consumer market, and Selig Center projections reveal that Hispanics will control $1 trillion in spending power in 2010. Nearly one person in six who lives in the U.S. is of Hispanic origin, and the U.S. Hispanic population continues to grow much more rapidly than the non-Hispanic population.
Over the 26-year period, 1990-2015, the nation’s Hispanic buying power will grow dynamically. In sheer dollar power, Hispanics’ economic clout will rise from $210 billion in 1990, to $499 billion in 2000, to $1 trillion in 2010, and to $1.5 trillion in 2015. The 2010 value will exceed the 2000 value by 108 percent—a percentage gain that is far greater than either the 48 percent increase in non-Hispanic buying power or the 52 percent increase in the buying power of all consumers. U.S. Hispanic buying power will grow faster than African-American buying power (60 percent), Native American buying power (69 percent) and Asian buying power (98 percent).
In 2010, Hispanics account for 9.3 percent of all U.S. buying power, up from only 6.8 percent in 2000 and from 5 percent in 1990. Due to this brisk growth, Hispanic buying power essentially pulled even with African-American buying power in 2005 and surpassed it in 2006. The estimates show that gap between the two groups’ total buying power expanded in 2010 and will widen further in future years.
Of the myriad forces supporting this substantial and continued growth, by far the most important is favorable demographics. Because of both higher rates of natural increase and strong immigration, the Hispanic population is growing more rapidly than the total population, a trend that is projected to continue. Between 2000 and 2010, the Hispanic population increased by 39.8 percent compared to 5.5 percent for the non-Hispanic population and the 9.8 percent gain for the total population.
The relatively young Hispanic population, with proportionally more Hispanics either entering the workforce for the first time or moving up on their career ladders, also argues for additional gains in buying power. Hispanics’ spending patterns already help to determine the success or failure of many youth-oriented products and services. According to the 2008 American Community Survey, 34.2 percent of the Hispanic population is under age 18 compared to 22.5 percent of the non-Hispanic population. Also, in 2008, only 5.6 percent of Hispanics were over 65, compared to 14.1 percent of the non-Hispanic population.
A jump in entrepreneurial activity and a rising level of educational attainment illustrates Hispanics’ upward mobility. The 2009 Current Population Survey indicates that 61.9 percent of Hispanics over age 25 had a high school diploma. By comparison, in 2000 only 57 percent of Hispanics had graduated from high school. The proportion with a bachelor’s degree increased from 9.2 percent in 1990 to 10.6 percent in 2000 to 13.2 percent in 2009. The Census Bureau cautions, however, that levels of educational attainment for Hispanics are lower than those for non-Hispanic whites, blacks and Asians largely because of the vast number of less educated foreign-born Hispanics.
As was the case for Asians, employment gains can be cited as one of the key forces supporting the growth of Hispanic buying power. From January 2000 through July 2010, the number of jobs held by Hispanics increased by 28 percent—or 4,358,000 jobs—which is impressive. But even though the number of jobs held by Hispanics is up by considerably from where it stood at the beginning of the decade, the recession is hitting Hispanics very hard. For example, from its peak in May 2008, the number of employed Hispanics has dropped by 624,000. That signifies the loss of one out of every eight of the new jobs (held by Hispanics) created in the previous eight and a half years. The heavy concentration of Hispanics in the construction and hospitality industries undoubtedly accounts for many of the lost jobs.
“Hispanic” refers to a person of Mexican, Puerto Rican, Cuban or other Spanish/Hispanic/ Latino culture or origin, and is considered an ethnic category rather than a racial group. Persons of Hispanic origin therefore may be of any race, and since their culture varies with the country of origin, the Spanish language often is the uniting factor. Three out of every five Hispanics living in the U.S. are born here, and among the foreign born, most are of Mexican origin, which suggests that a great many Hispanics share similar backgrounds and cultural experiences. Nonetheless, spending patterns differ significantly based on country of origin, and the composition of the nation’s Hispanic population is changing.
Hispanics will comprise 16.1 percent of the country’s population in 2010, and will have disposable income of just over $1 trillion ($1,036 billion). In 2010, the 10 states with the largest Hispanic markets, in order, are California ($265 billion), Texas ($176 billion), Florida ($107 billion), New York ($81 billion), Illinois ($44 billion), New Jersey ($39 billion), Arizona ($34 billion), Colorado ($22 billion), New Mexico ($20 billion) and Georgia ($17 billion).
Hispanics and their buying power are much more geographically concentrated than non-Hispanics. California alone accounts for 26 percent of Hispanic buying power. The five states and the 10 states with the largest Hispanic markets account for 65 percent and 78 percent of Hispanic buying power, respectively. In contrast, the five states with the largest non-Hispanic markets account for only 36 percent of total buying power and the 10 largest non-Hispanic markets account for only 53 percent of total buying power.
The top 10 states, as ranked by the rate of growth of Hispanic buying power over 2000-2010, are South Dakota (253 percent), North Dakota (237 percent), Arkansas (229 percent), Alabama (228 percent), South Carolina (226 percent), Maine (222 percent), Tennessee (220 percent), West Virginia (211 percent), Mississippi (206 percent) and Maryland (204 percent). Only Maryland (ranks 17th) is among the nation’s 25 largest Hispanic consumer markets, however.
The share of buying power controlled by Hispanic consumers will rise from 5 percent in 1990 to 6.8 percent in 2000 and to 9.3 percent in 2010, and the group’s share will rise in every state. In 2010, the 10 states with the largest Hispanic market shares will be New Mexico (31.5 percent), Texas (20.7 percent), California (18.7 percent), Arizona (16.7 percent), Florida (16.4 percent), Nevada (15.9 percent), Colorado (11.6 percent), New Jersey (9.8 percent), New York (9.7 percent) and Illinois (8.9 percent).
Nevada’s 5.1 percent shift in Hispanic market share, from 10.8 percent in 2000 to 15.9 percent in 2010, is the nation’s largest. Florida will see its Hispanic market share climb from 11.9 percent to 16.4 percent, a gain of 4.5 percent. New Mexico’s Hispanic population will claim 31.5 percent of that state’s buying power, a 4.2 percent advance over their 27.3 percent share in 2000. Arizona’s Hispanics will claim 16.7 percent of the state’s buying power, up 4.1 percentage points from their 12.6 percent share in 2000. Hispanics’ share of the Texas consumer market will rise by 4 percent, from 16.7 percent to 20.7 percent, which is remarkable for a state with such a large established market. Hispanics’ share of California’s market will rise by 3.7 percent (from 15 percent in 2000 to 18.7 percent in 2010).
Because of differences in per capita income, wealth, demographics and culture, the spending habits of Hispanics as a group are not the same as those of the average U.S. consumer. The most recent Consumer Expenditure Survey indicates that Hispanic households spent in total only about 84 percent as much as the average non-Hispanic household.
Despite markedly lower average income levels, Hispanic households spent more on groceries, telephone services, apparel and footwear. Also, Hispanics spent a higher proportion of their money on dining out, housing, utilities and transportation. They spent about the same as non-Hispanics on alcoholic beverages, household operations, furniture, appliances, public transportation and personal care products and services. Compared to non-Hispanics, they spent substantially less on health care, entertainment, education, cash contributions and personal insurance and pensions.
Data show that Hispanic households are substantially larger than non-Hispanic households (3.2 persons per household vs. 2.4 persons for non-Hispanics), and have nearly twice as many children under 18. On average, there are 1.6 vehicles per Hispanic household compared to 2 vehicles per non-Hispanic household. According to the 2008 American Community Survey, 12.8 percent of Hispanic households do not own or lease at least one vehicle compared to 8.3 percent of non-Hispanic households. The survey also indicates that 49.1 percent of Hispanics are homeowners compared to 68.8 percent of non-Hispanics. The median value of homes owned by Hispanics is $199,000, which is almost the same as $197,400 median value reported for the non-Hispanic population.
Reproduced with permission by. The Multicultural Economy 2010, p. 23-Table 11; Copyright 2010 by the Selig Center for Economic Growth, Terry College of Business, The University of Georgia. All rights reserved. August 2010.