The richest 20 percent of Americans spend an average of $99,000 per year, according to the Labor Department. That’s nearly twice what the median household earns in a year. Not surprisingly, an outsized portion of what the rich spend goes to luxuries, like video games and motorcycles. The poor, meanwhile, spend on food, rent, utilities, and cigarettes.
2 revealing charts that illustrate the lifestyles of the richest and poorest Americans
That’s what data from the Labor Department tells us about the biggest differences between how the rich and the poor spend. The department maintains detailed data on how Americans spend on a variety of detailed categories. The below chart shows how much US consumer units (a Labor Department measure that most often stands for “families”) in the lowest quintile of incomes spend as a percent of the top quintile. While the poor on average spend less than a quarter of what the rich do in a year, they spend far more than that on a few areas in particular.
Rent is one of only two areas where the poorest Americans outspend the richest, which makes sense, as the richest Americans overwhelmingly own their homes.
Food also dominates this chart, and the numbers broadly suggest, first of all, that the poorest Americans are more economical in their food spending than the richest. On any given item, they at most spend around half of what the rich spend. But then, there’s only so little (and so much) you can spend on food — rich or poor, you need to eat, but whether you buy your groceries at the Dollar Store or Dean & Deluca, there’s only so much food you need (and therefore only so much you can spend on cereal or butter).
Tobacco, of course, also stands out as one area where the bottom 20 percent outspend the top quintile. An excellent CNN opinion piece from early last year breaks down why tobacco use would be so high in poor communities, showing that the causes are far more complex than "bad choices," according to the authors, two pediatricians from Boston Medical Center — for example, childhood adversity is linked to poor health outcomes later, and tobacco companies target poor communities with their marketing. (These charts, however, don't show that all three of the middle quintiles spend way more money on tobacco, on average, than either the lowest or upper quintiles.)
The rich, meanwhile, spend more on luxuries — entertainment, new cars, and floor coverings.
(Note: the broader category "personal insurance and pensions" was removed from this list, as it was redundant and contains the subcategory "pensions and Social Security")
While the poor spend a lot on rent compared to the rich, the rich spend way more on mortgage interest and on retirement.
You might also notice that the rich have an annoying amount of unclear "other" categories up there, but that's telling in its own way, in that those tend to be luxuries — niche goods that didn't merit their own separate categories. "Other vehicles" includes motorcycles and private planes, according to the consumer expenditure survey glossary. "Other lodging" includes hotels and vacation homes, as well as rooming at college. "Other entertainment" includes a wide variety of diversions, like video games and boats.
Maybe a lot of these results aren’t that surprising (my colleague Matt Yglesias did something very similar a few years back and uncovered similar trends); after all, one of the big messages is that the richest spend an outsized amount on luxuries and the poor spend a lot on necessities.
But smaller trends aside, this data does point to one big difference between the richest and the poorest Americans, and that’s wealth-building. The rich spend a lot compared to the poor on mortgage interest. The poorest, meanwhile, spend a lot on rent. For lots of Americans, renting is a good decision, of course, but it’s true that spending on a house builds wealth, while paying a landlord each month doesn’t. It’s also a shame that pensions (which here includes both defined-benefit plans and defined-contribution plans like 401(k)s) and Social Security are combined here, as it mixes together spending you have to do (taxes) and spending you choose to do (401(k) contributions) — and higher-income people will of course spend more on Social Security than low-income people. But it’s well documented that the gap between the retirement savings of the richest and poorest Americans is wide and growing. And that’s maybe the most important truth from this data about what it means to be high-income in America — the rich’s spending helps them get even richer.
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