The poor spend nearly as much as the rich at restaurants

Posted at 3:32 PM, Aug 02, 2016

It’s easy to imagine the very rich spending a significant amount of their income on dining out. After all, why cook for yourself when you can afford to have someone else do it for you — not to mention clean up afterward?

Would you believe that on a percentage basis, the poorest Americans tend to spend a similarly high percentage of their income on restaurants? That was one of the findings from a recent study from the JPMorgan Chase Institute.

The study focused on fifteen specific metropolitan areas, studying credit and debit card purchases from more than fifteen billion anonymous transactions and characterizing them by quintiles of income. This allows an analysis of “consumption inequality” and can lead to greater insight about purchasing decisions at different income levels.

Spending on nondurables such as groceries and clothing consumed the highest percentage of income for all income levels, ranging from 51% at the lowest 20% of incomes to 40.9% at the highest 20% of incomes. For all groups except the wealthiest, spending at restaurants was the second highest category of spending, beating out fuel, durable goods, and other services.

The four categories other than restaurant purchases tended to rise or fall with income level in rather predictable fashion. You would expect poorer Americans to spend a greater percentage of their incomes on necessities such as non-durables and fuel, while wealthier Americans can afford to spend a greater percentage of their income on big-ticket durable items and indulge in other, non-essential services. The survey confirms those tendencies. Restaurants follow the same trend as durables and non-essential services, with one exception: the poorest Americans.

Since restaurants are an elective choice, it would make sense that wealthy Americans would indulge more often in eating out because they can afford to do so, and poorer Americans would spend less because they cannot. However, the poorest 20% spend 16.6% of their income at restaurants, tied with the fourth quintile and trailing only the wealthiest quintile at 17.8%. The second quintile spent the least percentage at 15.8% while the middle quintile spent 16%.

Why would this be the case? The major factors may be lifestyle and time. It isn’t that poor Americans are indulging while the middle-class allocates their money more effectively. Poorer households often deal with constraints that those with greater means simply do not have. They may be working multiple jobs to make ends meet, have unreliable transportation, or long commutes that make it difficult to have sufficient time to prepare meals at home. Fast food is a simple and relatively inexpensive (albeit less healthy) option.

However, it’s not fair simply to conclude that poorer people prefer to pick up fast food because it provides cheap calories. A 2015 study from the Centers for Disease Control (CDC) found that America’s fast food indulgence cuts evenly across economic lines. Across the economic spectrum, kids get roughly the same percentage of their caloric intake from fast food. The issue is simple economics — the same amount of calories from fast food takes a larger share of poorer Americans’ income.

It’s possible that focused efforts on education and time management can help poorer Americans balance their time and money toward eating healthier meals at home, and saving money in the process. Unfortunately, time pressures and the tempting allure of take-out food make it more likely that poorer Americans will continue to devote more than their expected share of their income to restaurants.

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