U researcher: Gift-giving good for economy, but only if we get what we want

Gift cards
About 10 percent of gift card dollars -- or about $8 billion -- aren't redeemed each year.
Photo by Justin Sullivan/Getty Images

A University of Minnesota economist suggests that traditional holiday shopping leads to economic waste.

Joel Waldfogel, who has conducted more than 15 years of research on holiday spending patterns, said Americans will vaporize $14 billion this year by purchasing gifts that have less value to their recipients than they cost.

"We know what gifts we want, but others may not. That's where the problem lies," he said.

Waldfogel's research is based on an analysis of more than 90 years of holiday spending trends and thousands of surveys. He concludes that to recipients, most gifts have 20 percent less value per dollar spent than gift cards or cash.

The solution can be buying gift cards instead of that sweater the recipient might not like or a toy for the kids that turns out to be so last-year.

Waldfogel said gift cards also allow people who are in less frequent contact with their recipients to give. "They eliminate the guessing game. Mom and Dad should keep giving presents to their kids. I'm not denying that," he said. "Just leave the gift cards for your cousin Billy across the country." A National Retail Federation survey in November found that the average American will spend about $145 on holiday gift cards. An International Council of Shopping Centers report said gift card spending is expected to reach nearly $25 billion this year, a 10 percent increase from last year. Waldfogel said gift cards have become ubiquitous and have mostly replaced cash. "Cash presents are socially unacceptable unless they're from a person with whom someone has a strong relationship. It's seen as tacky," he said.

However, gift cards also have their drawbacks. Waldfogel said 10 percent of gift card dollars -- or about $8 billion -- aren't redeemed each year.

That's prompted some states, including Minnesota, to prohibit expiration dates and service fees on gift cards and gift certificates. Many shoppers in St. Paul this month said gift cards are easily misplaced, making it difficult to take advantage of them.

Norma Vergara, of St. Paul, said she has lost several gift cards over the years and has decided to buy traditional gifts this year.

"Gifts are very special. They say something about a relationship. Gift cards are impersonal," she said.

Dee Darras, of St. Paul, called gift cards her "secret" to holiday giving. "I've been the victim of bad gifts too many times to keep giving presents that won't be used or that will end up re-gifted," she said. But Darras admits her loyalty to gift cards has its limits, especially when she receives one. "That doesn't mean I'll use the gift card from a restaurant in the middle of nowhere," she said.