F*** Rich, Let's Get Wealthy
where we spent our scratch in 2007
By Donna Johnson and Boyd Klingler
You’re young, you're hip, a trailblazing trendsetter. You’re mobile—by phone, by car, by ear--in every sense of the word. And if you’re African-American, you’re not just keeping up with the Joneses. In the eyes of merchandisers, and marketing directors, you are the Joneses. Congratulations, you’ve arrived—to the tune of $845 billion in buying power in 2007.
To give you some quantifiable sense of what that number actually feels like, only nine other countries in the world have a larger GDP than the $845 billion African-Americans contributed to the U.S. economy last year. Nine. Which means, in dollar amounts, African-America is the tenth largest country on the planet.
After pouring over a mountain of mind-numbing statistics and data, we’ve worked up a summary of the $845 billion impact African-Americans made in 2007 on an overall $10 trillion U.S. economy. And the aftershock goes beyond the numbers.
One other quick note before we get started: Wherever mentioned, Latinos are grouped by ethnicity and not race. The category of race is reserved for African-Americans, Asian-Americans, Native Americans and Whites. If you have issues with this classification, take it up with the Census Bureau.
Otherwise, here’s a breakout of just some of the more significant findings:
Cell Phones – Much to the annoyance of us urban dwellers who regularly take public transportation it comes as no surprise that African-Americans, particularly the ones with teens and twenty-somethings, spent more after-tax income than non-blacks on cell phone purchases and services. So it comes as no coincidence that most television commercials competing for those consumer telecom dollars are aimed at clingy parents who can’t cut the cord already.
To be fair, Asian and Latinos also spend a good portion of their money on telecommunications, but African-American households still have the edge. Imagine what would happen if meaningful discussions were actually taking place amidst all the chatter.
Fashion – African-Americans spent more on women and girls fashions than non-black consumers combined, and almost twice as much on footwear. Not particularly shop-till-you-drop numbers, those figures represent only 2.3 percent and 1.5 percent respectively out of a 100 percent total, yearly after-tax income. Significant still when you consider it’s one group versus all others combined. Expenditure on men’s gear was about the same compared to non-blacks combined.
Groceries – One explanation as to why groceries is one of those categories where African Americans spent a higher proportion of their money is that even though household populations are about the same for Blacks as Whites (but not Latinos), Blacks are more likely to have children under 18.
But another account provided by the Brookings Institution suggests that in lower-income neighborhoods, smaller grocery stores are more prevalent, making their goods more expensive and larger, economically diverse grocers that offer considerably more choices are less available. According to Brookings, "a combination of real and perceived market risks, market abuses and uneven consumer access…contribute to these additional costs incurred by lower income consumers."
Pensions & Social Security – The good news is that African Americans spent 10% of their after-tax income on pension contributions in 2007. Whether that number represents maxing out what’s allowable or the minimum set-aside after employer contributions is not clear. Social Security has to do with how much you earn during your working life, and since African Americans are so far relegated to earning less than their White counterparts, that 10% may not hold firm over time.
Transportation – The bad news is that retirement contributions still rival the 17% that Black Americans lavish on automobile purchases and upkeep. So unless you intend to be buried in your SUV, consider spending fewer disposable dollars pimping out your ride and more on the comfort level you hope to achieve in later years.
Education – Here’s a myth-busting fact: Asian-Americans aren’t any smarter than the rest of us--they just spend more of their disposable income on education. That amounts to $1790 versus $940 per household--almost twice as much as everyone else combined.
As we mentioned in an earlier column on investing, while some parents prefer to dole out more of their discretionary income keeping their kids in Akademiks, Asian-Americans put that same money presumably to better use making sure their offspring can actually spell the word correctly. These non-publicly funded expenditures like tutoring and college prep courses begin in pre-school and ultimately lead to career advancement through additional training and continuing education classes. Education pays when you pay for education. What a concept!
Raw numbers, however, don’t always tell the whole story: What’s beyond the importance of sheer buying power is that African Americans are setting trends for use by U.S. consumers of every racial and ethnic background.
The size of the African-American market has been important to market watchers for decades. Currently, that market is experiencing above-average growth. Despite continued lower income levels, African-American consumption draws the attention of companies that make consumer goods and marketing professionals engaged in trend spotting because they know that the tastes and preferences initiated in the African American community eventually intersect with the larger society and translate in importance to the overall market.
Then there’s the international bounce.
One of the most profitable products that the American private sector exports is culture in the form of fashion, movies, music and other media. It’s safe to say that, good or bad, U.S. lifestyles set the standard for the rest of the world in the form of international influence on fashion, media & entertainment. Companies that set their sites on African American consumption know that the trends that emerge from the Black community also cross over overseas.
For some, this is not necessarily news, but neither is the opportunity to capitalize on the influence that African-America can have on these industries at home and abroad.
If you think what happens on Main Street isn’t noticed by Wall Street, think again. The Fortune 500 have already made their nut, and in 2007 $845 billion of it was derived from Black buying power. Why not resolve to make 2008 your year of wealth creation and financial empowerment. A prosperous New Year to all.
Donna Johnson and Boyd Klingler are Giving You the BusinessSM, in an occasional column for EbonyJet.com. Send your business and finance-related questions to our e-mailbag.