Americans are spending more than ever on educational gifts

Textbooks are the new sweater.
Textbooks are the new sweater.
Image: Reuters/Han Jae-Ho
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If you asked Santa for a set of textbooks this year, you might be in luck. According to data from the US Consumer Expenditure Survey, an annual survey of what Americans spend money on, 25% of US gift-giving goes to educational materials. The average household spent almost $1,200 annually on gifts from 2016 to 2018, and nearly $300 of that money went to textbooks, school supplies, or equipment needed for classes.

By comparison, a little over 10% of gift spending went toward education in the early 1990s. As education rose, gift spending on apparel, food, and appliances declined.

This follows broader trends in the US economy. Americans have been spending an increasingly large share of their budget on education over the past several decades, as the cost of textbooks and tuition rose. At the same time, clothing and electronics actually became cheaper. A gift giver could actually be giving the same amount of clothing and school supplies as they used to; it’s just that money spent on the former goes further now.

This change is what economists refer to as “Baumol’s cost disease.” The idea is that when certain industries experience rapid productivity growth, it makes industries that don’t have as much productivity growth relatively more expensive. Manufacturing has become way more productive in the past 50 years, but education and health care have not. As a result, college debt and medical bills now take up an increasing share of the typical person’s income, while the share of spending devoted to household goods and clothing have decreased.