Introduction
In an open letter addressed to President Barack Obama on Sept. 6, 2011, economist Dr. Claud Anderson offered suggestions to improve the economy for the betterment of the Black community. “With more than 25 million people unemployed and the actual unemployment rate of Blacks in America over 50 percent, the nation’s economy must turn around and produce more jobs if Blacks have a chance of survival,” he wrote.
Anderson suggested proper allocation of government spending as a solution to revitalize the dire economic conditions of the Black America. From immigration reform to the creation of more public works jobs, he left no room for the government to reject any possibilities for facilitating Black economic growth. But even if legislation were approved in support of Anderson’s ideas, Black people must embrace taking control their own financial freedom.
Financial Literacy
Understanding capital, credit and banking practices has been a challenge for many members of the Black community. The Jump$tart coalition, an organization dedicated to financial education of children and teens, conducted a survey in 2007 and discovered that 40-50 percent of Black students polled had general knowledge of money management.
Laura Levine, director of Jump$tart, said the number of financially informed Black students has not improved since the survey was introduced in 1997.
Spending Habits – More Value on Liabilities and Less on Assets
Nielson’s “The State of African-American Consumers “report, projects that Blacks will have a collective buying power of $1.1 trillion by 2015. A study by Target Market, a company that tracks Black consumer spending, found that many Black consumers chose to use this power by spending money on luxury goods with no asset-building potential.
In 2002, Target Market reports that the Black community spent $22.9 billion on clothes, $3.2 billion on electronics and $11.6 billion on furniture. In addition, African-Americans account for 12 percent of the population, but make up 30 percent of all Scotch whiskey sales.
The Ariel Mutual Funds/Charles Schwab 2003 Black Investor Survey comparing Blacks and whites making the same income showed that whites saved for retirement 20 percent more than Blacks. The survey also found that 30 percent of Black people earning $100,000 a year barely had $5,000 in retirement savings.
Spending Habits – More Value on Liabilities and Less on Assets
Nielson’s “The State of African-American Consumers “report, projects that Blacks will have a collective buying power of $1.1 trillion by 2015. A study by Target Market, a company that tracks Black consumer spending, found that many Black consumers chose to use this power by spending money on luxury goods with no asset-building potential.
In 2002, Target Market reports that the Black community spent $22.9 billion on clothes, $3.2 billion on electronics and $11.6 billion on furniture. In addition, African-Americans account for 12 percent of the population, but make up 30 percent of all Scotch whiskey sales.
The Ariel Mutual Funds/Charles Schwab 2003 Black Investor Survey comparing Blacks and whites making the same income showed that whites saved for retirement 20 percent more than Blacks. The survey also found that 30 percent of Black people earning $100,000 a year barely had $5,000 in retirement savings.
Home Ownership
Most Black Americans are taught from childhood that owning a home is the pinnacle of American success. But many people fail to realize that owning a home can be a liability, instead of an asset, due to recurring mortgage debt that lasts 15 to 30 years. Home maintenance, property taxes, and utilities can also prove to be financially burdensome.
Scott Riley of Homebuyer Nation believes most people should not invest in a home ownership unless they have reasonably weighed the pros and cons of the commitment that comes with the purchase. He notes, “You’ll be paying that mortgage for the next 15 to 30 years. Buy a house that you can see yourself living in for the long term. Envision your life 15 years from now.”
In addition, Riley says, “For a recent point of reference, as the market was crashing in 2008-2009, a slew of first-time home buyers jumped in and bought homes believing the market hit the bottom and they were getting the deal of the century. Turns out, that wasn’t the bottom, and many bought way too much than they could afford. Now they are stuck with a hefty underwater mortgage and with an overvalued house.”
Single Parent Homes
A study conducted by the Organization for Economic Cooperation and Development revealed that 72 percent of African-American children are raised in single parent homes. Reportedly, single parents are more likely to be employed, but they are also more likely to fall below the poverty line. Basic child-raising costs such as health care, nutrition, caregiver services and housing accommodations can financially strain many families.
As the seemingly endless expenses mount, disposable income is often not available to most adults in single parent households. Additionally, the challenge of making ends meet does not leave much capital to save for retirement or invest toward economic mobility.
Single Parent Homes
A study conducted by the Organization for Economic Cooperation and Development revealed that 72 percent of African-American children are raised in single parent homes. Reportedly, single parents are more likely to be employed, but they are also more likely to fall below the poverty line. Basic child-raising costs such as health care, nutrition, caregiver services and housing accommodations can financially strain many families.
As the seemingly endless expenses mount, disposable income is often not available to most adults in single parent households. Additionally, the challenge of making ends meet does not leave much capital to save for retirement or invest toward economic mobility.
Entrepreneurship Limitations
A 2007 census study found that there are almost 2 million Black-owned companies in the United States. The most popular industries for Black businesses are health care services, professional services and transportation. Manufacturing, wholesale trade and mining were among the least popular. Out of 2 million Black businesses nationwide, a whopping 1.9 million do not have paid employees.
Marc Morial, president of the National Urban League states,”Many Black-owned firms still remain very small businesses. Eighty-seven percent of all Black-owned firms, according to the survey, earn less than $50,000 dollars a year in receipts.” This alarming fact is evidence that the majority of Black-owned businesses are not receiving the support necessary to expand, which limits economic growth.
Competitive pricing is another obstacle for Black entrepreneurs. Lawrence M. Watkins, founder of Great Black Speakers, explains, “What people do not consider is that Black businesses neither have the size nor the solidarity that it takes to command low prices from suppliers.”
He adds, “Large companies have the ability to buy in large quantities, which lowers the cost per item. There has never been a company started by Black people of that size, therefore the prices that suppliers charge us is higher. We have a habit of comparing the attributes of Fortune 500 companies with those of small businesses, even though they are not always competing on an even playing field.”
Devaluing Group Economics
An article written by Ujaama Deals Co-Founder Lawrence Watkins cites the biggest objections Black consumers have for supporting Black businesses – higher costs, lack of service and goods diversity, and poor customer service.
With support from Black consumers, Black-owned businesses can develop economic stability within Black communities. Urban League President Marc Morial says, “By focusing attention on helping Black-owned businesses grow, you can create jobs and economic growth in the community.”
Sources:
http://www.consumer-action.org
http://www.debtconsolidationlowdown.com
http://www.americanconsumernews.com
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