Scott Alexander explains this as a way for upper-class people to maintain their privileges: "The whole point is to make sure the working-class white guy whose best friends are black and who marries a black woman and has beautiful black children feels immeasurably inferior to the college-educated white guy who knows that saying "colored people" is horrendously offensive but saying "people of color" is the only way to dismantle white supremacy."[0]
[0] https://astralcodexten.substack.com/p/a-modest-proposal-for-...