A Brief Study of Minority Purchasing Power


I was having a debate with some people today about Donald Sterling and Larry Johnson.  As some of you may know, Don Sterling is the NBA Basketball franchise owner who made racist comments about Black Americans, causing a storm and debate about institutionalized racism.

 

Larry Johnson is a former NBA basketball player who came out advocating for a Black owned basketball league in response to the perceived institutionalized racism.  Of course, of the 192 NBA (Basketball), NFL (Football), and MLB (Baseball teams), only 3 are owned by minorities (2 Indian, 1 Black – Michael Jordan).

 

So the argument was that more teams should be owned by Black owners.  The debate ended up at a point where someone spoke out in support of a Black owned league, and how Black Purchasing Power was enormous and should command more respect.  And that Black Americans, as a significantly large purchasing power, should be producers as well as consumers.

 

So I decided to do some research and found the following article showing that the claim was true, that Black Purchasing Power was indeed impressive.  (Source:  Huffington Post)

 

However, after further research, I realized that while this was true, it wasn’t actually a positive for the Black community, as we need to put it in perspective of population size, income, and other factors to get a real picture where Blacks spending was indeed a positive and a negative.

 

In fact, as a result of my research, I came to an alarming conclusion, that Blacks may account for an enormous purchasing power, but that didn’t necessarily translate into the right expenditures or investments.  Please read my response and research below, and feel free to share your thoughts and opinions.

 

My Response:

 

You’re right about Black Purchasing Power, but it’s not something to be proud of.  If anything, Black Purchasing Power is part of the root causes why Blacks are consumers rather than producers.  There is an article I read about how it’s concerning that 13% of the population is making 30% of the purchases (Source: Politic365), and how Black Americans are not saving the money or investing it.

 

To put this in perspective, Asians represent only 5.4 % of the population, and their buying power is 9% (Asian buying power grew the fastest in last decade, by 164%, Native Americans at 156%, Hispanics at 142%, Blacks at 73%, and the US as a whole at 69 %).  Hispanics represent 17% of the population, but their buying power is at 10%.  Native Americans comprise 1.3% of the population, and account for 1% of the buying power.  (Source:  The Multicultural Economy 2012 at the National Minority Supplier Development Council, Inc.)

 

What this means is that by comparison, is that Blacks are spending more (more than double their population size).  Now that wouldn’t be alarming, if it weren’t for the fact that African Americans rank the lowest in median income.  A 2009 stat (couldn’t find anything more recent, but I doubt there are drastic changes in a 3 year period).

 

2009 Annual Income by Race (Source: Census):
All Familes $60,088
White $62,545
Black $38,409
Asian $75,027
Hispanic $39,730

 

So if you consider the above numbers, Blacks median income is nearly half to two-thirds that of Asians and Whites, and nearly equal to Hispanics.  But they spend nearly three times that of Asians and Hispanic.  In fact, you could combined the Hispanic and Asian populations (17% + 5.4% = 22.4%, or double that of Blacks, but they still spend two thirds that of Blacks).

 

So yes, Blacks have more buying power, but they’re not saving it, which means they’re not putting money away to start up business, and as long as they do that, they will continue to be consumers, not producers, and thus having less of a say as to how businesses treat Blacks.

 

To add additional perspective, figures from the Census in 2007 showed the following facts (2012 figures are not in yet, Source: Census):
There were 1.9 million Black owned businesses.  In comparison there were 1.9 Asian-owned businesses (even though they had one third the population of Blacks), and Hispanics had 2.3 million businesses.  Women owned 7.8 businesses.

 

In terms of revenue, Black businesses made $137.4 Billion, compared to $513.9 Billion by Asians (nearly four times that of Blacks), $34.5 Billion by Native Americans (1/13th of Black population but making 1/3 revenues of Black businesses), and $345.2 Billion by Hispanics.

 

So you can see from these figures, despite making less revenue and income, Blacks are spending nearly 2.3 times more than the other races, and if you combine the population of the Asians, Hispanics, and Native Americans (23.7% or nearly one quarter of the US population), they still spend less at 20% than Blacks are spending at 30%.  That’s alarming, and a big reason why Blacks are consumers and not producers.  Without savings and investments, how can you ever hope to own the businesses that produce?