Why It Costs More to Be Black in America

Picture this. Two families each bring home $75,000 a year. They shop at the same grocery stores, drive similar cars, and send their kids to the same schools. By the end of the year, however, one family has managed to save thousands of dollars while the other is barely keeping its head above water. What the heck happened? For many black Americans, the answer isn't simply spending habits, it's history. Despite having nearly 2 trillion in annual buying power, Black households still own only a fraction of the wealth held by white households in many cases The issue isn't about black Americans just blowing tons of money every time they pass by a Gucci store It's that it often costs more to build wealth when you start with less in today's video I ask the question. Why does it cost more to simply be black in America? And if black America has two trillion dollars in buying power power, why don't we have more wealth than we do? As you guys all know, my name is Jarrett and I talk about interesting stories and trends at the intersection of black history, lifestyle, and geography. If you're into that, hit the subscribe button and join the conversation. Let's get something straight. Buying power isn't the same as wealth. One of the most misunderstood statistics in today's story is black buying power. Marketing firms estimate that black consumers collectively control nearly $2 trillion in annual purchasing power making them one of the largest consumer markets in the world i mean that sounds impressive and it is but buying power simply measures how much consumers are expected to spend it doesn't measure savings investments or assets think of it this way someone earning 80 000 who spends 75 000 has significant buying power but still struggles to build wealth i mean one emergency and your little bit of savings is probably wiped out someone earning the same amount but spending $55,000 has room to save and invest. Wealth isn't about what comes in, it's about what stays. The roots of today's racial wealth gap stretch back centuries. We all know that. You've heard me say that a thousand times. Slavery, Jim Crow laws, segregation, and widespread discrimination are all stacking blocks in the story of African American economics. One of the biggest turning points came in the 1930s with redlining. This is the soft racism that had hard consequences. Because of redlining, your mortgage lender could simply tell you that you're not approved because of this reason and that reason. But everybody in the room knows the real reason. The federal government and banks routinely marked many black neighborhoods as risky for mortgage lending. Families who qualified financially were often denied home loans simply because of where they lived. Meanwhile, millions of white families purchased homes in growing suburbs. Those homes appreciated in value over decades and became the foundation of generational wealth. Today, housing remains one of the largest sources of wealth for most American families. So how does this play into it costing more to be black in America? That's because black Americans spend the most in America. That is relative to their income, of course. If you are behind the wealth building game or the income game, you have far less money to allocate towards everything, including your needs, your wants and your must-haves like retirement savings if you make forty thousand dollars a year and need to spend thirty eight thousand to just exist then you are spending almost all of your money compared to someone that is earning sixty thousand dollars and spending only thirty eight thousand housing transportation food health care child care and utilities consume a greater percentage of many black families budgets when more of every paycheck goes towards basic living expenses less remains for retirement accounts investment portfolios or emergency savings and then there is the high cost of borrowing access to affordable credit has never been equal historically black borrowers were more likely to face higher interest rates or have fewer traditional banking options that helped create demand for alternative financial services like payday lenders rent to own stores and check cashing businesses we recently did a video on why that payday loans target black communities. I'll leave a link in the description below. Honestly, it's a must watch. There is a phenomenon that economists call the poverty premium. Sometimes having less money actually costs you more. Without substantial savings, families may rely on higher interest loans during emergencies. Poor credit can increase borrowing costs. Living farther from jobs can mean higher transportation expenses. Limited grocery options can make healthy food more expensive, which in turn make healthcare more expensive. It's like paying extra for the privilege of already being broke. And for the next section, I'll have to keep it honest. There are areas where we all have to take accountability. I read this stat by the McKinsey Institute for Economic Mobility that caught my eye. It said that black consumers are about 10 percentage points more likely than non-black consumers to follow luxury brands on social media, making them one of the industry's most digitally engaged audiences. To be honest, I wasn't shocked by this stat because it's something I have done. And it's something that I've seen other black people do around me. We love our expensive brands, even if you can't afford them. I couldn't find clear data on how much of their income black people spend on luxury brands or just in general wasteful spending. That stat is difficult to obtain as you can imagine. So I'm purely basing this on personal experience. And you might say, we're not the only one spending on luxury brands. This group does it or that group does it too. but remember we have the least amount of money to spend so we can't go off on what the joneses are doing but again i want to reiterate that this problem is such a small percentage of the overall issue in black economics the story of black spending isn't really about spending at all it's about wealth it's about who has access to mortgages education quality neighborhoods affordable credit and opportunities to pass assets from one generation to the next black americans today contribute nearly $2 trillion in buying power to the US economy, own businesses at growing rates, and continue making enormous contributions to every sector of American life. Yet many still face financial hurdles rooted in policies and practices that began generations ago. Understanding those historical forces doesn't diminish individual responsibility. It provides the context needed to understand why two families with similar incomes can experience very different financial outcomes. That's it for this video. I'll catch you guys on the next one. Make sure to like and subscribe. Peace.