Article: Black Spending Power to Hit $1T by 2015, But Black Wealth is Dropping,

Date: May 30, 2013


Yesterday, Black Enterprise analyzed a 2012 Nielsen study that concluded that African American buying power will reach 1 Trillion dollars by 2015.  The BE piece tackled the data from the perspective of how marketers and advertisers have taken this group for granted, but maybe shouldn’t given all the money it has to spend.

Mainstream underestimation of Black spending potential is an important observation to point out, as I myself have argued that more businesses ought to be investing in emerging markets (those in predominantly minority communities, in business owned by minorities and those servicing minority communities).

However, barely beneath the surface of what maybe should be an optimistic report is an underlining distressing story.

Should we be proud of just making up 13% of the total population yet spending at a rate of growth that outpaces the remaining population by 30 percent?

While it is wonderful to acknowledge the report’s data which shows that the Black American demographic is younger, more educated and have higher incomes than commonly believed, what can be said about the fact that we aren’t retaining that wealth for the long term and at a rate sufficient to pass down wealth to subsequent generations?

And it is getting worse just as this report shows we are spending more, a more recent report from the Urban Institute released in April reveals that the Black –White wealth gap has widened significantly over the past half decade.  It noted that in 2010, white families earned, on average, about $2 for every $1 that black families earned, a ratio that has been the same for the past 30 years.   And in terms of assets, cash savings, homes and retirement accounts, subtracted from debt like mortgages and credit cards, white families have six times the wealth.

And for all the spending we are doing, it’s not necessarily going to help black businesses either.

Although Blacks make up 13% of the US population, they own merely 5% of all US firms and only 1.8% of companies that employ more than one person, a Small Business Administration Report states.  And Black owned firms are not necessarily the most profitable either. More than half of Black-owned businesses had less than $10,000 in business receipts in 2002, compared with one-third of White-owned firms and 28.8 percent of Asian-owned firms.

The report further found that on average, for every dollar that a White-owned firm made, Pacific Islander-owned firms made about 59 cents, Hispanic-, Native American-, and Asian-owned businesses made 56 cents, and Black-owned businesses made 43 cents.

And in this economy where sequestration is affecting contractors, it is key to note that minority firms depend more heavily on government contracting opportunities than do non minority-owned businesses, according to a 2012 report.  Thus, minority-owned small businesses are suffering the most under austerity cuts.

Of course, it is fair to note the role of institutions like slavery in the gap. Black workers were prevented from earning money for their labor and to build wealth to pass down. Later, institutional discrimination played a part, like that which prevented blacks from benefiting from free education via the GI Bill of the  1940s and 1950s or from the Homestead Act which awarded whites virtually free land.

But since then and despite ongoing discrimination and racism as impediments, there should be an examination into whether leanings toward instant gratification  purchases as opposed to saving and investing in homes, businesses and other sustainable areas are dooming our  prospects to build wealth.

Thus, Nielsen 1 Trillion spending and buying power by 2015 prediction is not necessarily good news when turned on its head,and juxtaposed with a not so good Black financial outlook.

That report should not be a call for marketers to spend more time and energy trying to convince us to buy their stuff, but rather a call to arms to better educate ourselves on saving and growing money so that it lasts longer than one pay period.

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