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From Affirmative Action Review: Report
to the President, Clinton White House Staff
Chapter 3,
July 19, 1995
Affirmative Action: Empirical Research
Modern affirmative action, then, was established as policymakers groped for a way to address continuing problems of discrimination. Has it worked to help eradicate or prevent such discrimination? In a fundamental sense the question must be posed for the broader society-wide effort of which federal programs are only an element and, ideally, a model.
3.1 Review of the Empirical Literature, in Summary
Over the past three decades, minorities and women have made real, undisputable economic progress. Before the Civil Rights Act of 1964, the median black male worker earned only about 60 percent as much as the median white male worker; (10) by 1993, the median black male earned 74 percent as much as the median white male. (11) The male-female wage gap has also narrowed since the 1960s: median female earnings relative to median male earnings rose from about 60 percent during the 1960s to 72 percent in 1993. (12)
This section of the Report addresses three issues: (1) Why has there been an earnings gap between black and white workers, and what role did anti-discrimination legislation and affirmative action play in the reduction of that gap? (Earnings gaps for Hispanics and Asians also exist which have been linked to discrimination. The wage gaps for African Americans and women are examined here in detail in order to illustrate the relationship between the problems and historic solutions.) (2) Why has there also been an earnings gap between men and women, and what role did government policies play in the reduction of that gap? (3) Is there any evidence that affirmative action boosted minority or female employment?
3.2 Effect on Earnings
3.2.1 Anti-Discrimination Policy, the Minority-White Earnings Gap
- The ratio of the average black workers' earnings to the average white workers' earnings increased significantly in the 1940s, increased slightly if at all in the 1950s, increased significantly between 1960 and the mid 1970s, and declined somewhat since the late 1970s. (13)
- Hispanic men earn 81 percent of the wages earned by white men at the same education level. Hispanic women earn less than 65 percent of the income earned by white men with the same education level. (14)
- There has not been an improvement in the employment-population rate of black workers relative to whites since the 1960s. If anything, there has been a deterioration in the relative employment-population rate. (15)
- Education and work experience are the two most reliable predictors of a worker's earnings. Black workers historically have had much lower education than white workers. Adjusting for racial differences in education and work experience can account for about half of the wage gap between black men and white men, and about one-third of the gap between black women and white women. Additionally, holding constant differences in individuals' test scores leads to a further reduction in the black-white earnings gap. For example, in one study, in 1991, black males earned 29 percent less than white males without any adjustments, 15 percent less after adjusting for education and experience, and 9 percent less after additionally adjusting for test scores. For women, the gap declines from 14 percent to almost zero after making these adjustments. (16) There is some controversy as to how to interpret the black-white wage gap after holding constant differences in education, test scores, and other variables. In particular, differences in education or test scores may themselves represent the discrimination. Thus, the reduction in the racial gap after controlling for these factors may not mean that discrimination is any less, but it may mean that attention should also focus on discrimination prior to entry into the labor market.
- Historically there have been great differences in the quality of education between black and white students. In South Carolina in 1920, for example, black students attended schools with class sizes twice those of white schools. Partly as a result of the Civil Rights Act of 1964, the Elementary and Secondary Education Act of 1965, and the Green decision, schools became increasingly integrated in the late 1960s. The improvement in the quality and quantity of education of black workers since the 1960s accounts for about 20 percent of the gain in black workers' relative earnings. (17)
- There is near-unanimous consensus among economists that the government anti-discrimination programs beginning in 1964 contributed to the improved income of African Americans. Nevertheless, it is difficult to draw conclusions about which specific anti-discrimination programs were most effective. And it may well be that the programs collectively helped even though no single program was overwhelmingly effective. (18)
- The female-to-male ratio of earnings of full-time, year-round workers was roughly stable at around 60 percent from the early 1900s until the mid 1970s. In 1993, earnings of women who worked full-time, year-round had risen to 72 percent as much as men. After adjusting for differences in education, experience, and other factors, the wage gap is reduced by about half (i.e., the adjusted ratio is approximately 85 percent). (19)
- An increase in women's work experience and a shift into higher-wage occupations are the major causes of their improved economic position relative to men. The decline in higher-paying manufacturing jobs, which is partly responsible for the decline in the earnings of less-skilled men, has also contributed to the narrowing of the male-female wage gap. Nevertheless, a substantial part of the improved earnings of women cannot be explained by these factors, and probably reflects a decline in discrimination. (20)
- The relative roles in this story of anti-discrimination laws and affirmative action, in education and the workplace, are unclear. The major equal opportunity laws covering women were passed in the mid-1960s, and the most rapid growth in women's earnings and occupational status did not begin for another decade. The lag between the change in law and the increase in earnings may be due to time it took for women to acquire education and training for traditionally male-dominated occupations. The rapid growth in the number of female graduates from professional schools coincided with increased anti-discrimination efforts. (21)
- The Labor Department's Office of Federal Contract Compliance Programs (OFCCP) administers Executive Order 11246, which imposes nondiscrimination and affirmative action obligations on most firms that contract to do business with the Federal government. According to five academic studies, active enforcement by OFCCP during the 1970s caused government contractors to moderately increase their hiring of minority workers. (22)
- According to one study, for example, the employment share of black males in contractor firms increased from 5.8 percent in 1974 to 6.7 percent in 1980. In non-contractor firms, the black male share increased more modestly, from 5.3 percent to 5.9 percent. For white males, the employment share fell from 58.3 percent to 53.3 percent in contractor firms, and from 44.8 percent to 41.3 percent in non-contractor firms.(23)
- The literature also finds that contractor establishments that underwent an OFCCP review in the 1970s subsequently had faster rates of white female and of black employment growth than contracting firms that did not have a review. (24)
- Other than studies comparing employment records of government contractors with non-government contractors, it is hard to separate the effects of affirmative action from broader civil rights enforcement. Non-government contractors often took active steps to ensure diversity and compliance with equal opportunity laws, even though they were not covered by the OFCCP. Some, or perhaps much, of this behavior may be attributable to government anti-discrimination efforts. Also, the recruitment efforts of both contractors and non-contractors may have bid up the wages of minorities and women, reducing wage disparities regardless of the effect on occupational disparities.
- OFCCP enforcement was greatly scaled back during the 1980s. For example, the real budget and staffing for affirmative action programs was reduced after 1980. Over the same period, fewer administrative complaints were filed and back-pay awards were phased out. Perhaps not surprisingly, available evidence suggests that OFCCP did not have a noticeable impact on the hiring of minority workers by contractor firms in the early and mid 1980s. (25)
- Although the literature clearly shows that, when actively enforced, affirmative action can lead to an increase in minority employment in contractor firms, some have questioned whether this employment represents a net gain or merely a shift of minority employees from non-contractors to contractors.
- The extent to which affirmative action has expanded minority employment in skilled positions is unclear. The academic literature suggests that before 1974, minority employment growth in contractor firms was predominately in unskilled positions. Since 1974, there is evidence of modest occupational advance in contractor firms. But some researchers think this may be the result of biased reporting. (26)
- There is no systematic qualitative evidence that productivity is lower in contracting firms as a result of OFCCP. The one systematic study found that contractors do not appear to have lower productivity, suggesting that OFCCP has not caused firms to hire or promote less qualified workers. (27)
Notes
10 Bureau of Labor Statistics, Current Population Survey.
11 Bureau of Labor Statistics, Current Population Survey.
12 Bureau of Labor Statistics, Current Population Survey.
13 Bureau of Labor Statistics, Current Population Survey. For a time-series discussion of black/white earnings rations, see Donohue, John and James Heckman, 1991. "Continuous versus Episodic Change: The Impact of Federal Civil Rights Policy on the Economic Status of Blacks," Journal of Economic Literature, 29:1603-43. See also, Bound, John and Richard Freeman, 1989, "Black Economic Progress: Erosion of Black Americans" in The Question of Discrimination.
14 EEOC, Office of Communication, The Status of Equal Opportunityin the American Workforce (1995). For a discussion of empirical evidence on earnings gaps and discrimination for Hispanics, see Gregory DeFreitas, Inequality at Work: Hispanics in the U.S. LaborForce (New York: Oxford Press, 1991).
15 Bureau of Labor Statistics, Current Population Survey.
16 Rogers, Bill, 1994,"What Does the AFQT Really Measure: Race, Wages, Schooling and the AFQT Score," mimeo., William and Mary. The figures cited here adjust for racial geographic differences.
17 See Card, David and Alan Krueger, 1992, "School Quality and Black-White Relative Earnings: A Direct Assessment." The Quarterly Journal of Economics, p.151-200.
18 An important study that points out the near unanimous opinion among economists of the positive impact of government anti-discrimination programs on improved income of African-Americans is Donohue, John and James Heckman, 1991, "Continuous versus Episodic Change: The Impact of Federal Civil Rights Policy on the Economic Status of Blacks, "Journal of Economic Literature, 29:1603-43. Freeman, Richard, 1973, "Changes in the Labor Market for Black Americans, 1948-72," Brookings Papers on Economic Activity, vol. 1 was among the first to identify government anti-discrimination programs as a source of progress.
19 See Blau, Francine and Marianne Ferber, 1992. The Economics of Women, Men and Work, Englewood Cliffs: Prentice Hall, p.129.
20 See Blau, Francine, and Lawrence Kahn, 1994, "Rising Wage Inequality and the U.S. Gender Gap." American Economic Review 84:23-28, for a discussion of the large decline in male-female wage differentials that occurred from the mid 1970s to the late 1980s.
21 Department of Education, National Center of Education Statistics.
22 The five studies are: (1) Leonard, Jonathan, 1984, "The Impact of Affirmative Action on Employment," Journal of Labor Economics, 2:439-463; (2) Leonard, Jonathan, 1984, "Employment and Occupational Advance Under Affirmative Action," The Review of Economics and Statistics; (3) Ashenfelter, Orley and James Heckman, 1976, "Measuring the Effect of an Anti-discrimination Program, in Estimating the Labor Market Effects of Social Programs, Eds: Orley Ashenfelter and James Blum. Princeton NJ: pp.46-89; (4) Heckman, James and Kenneth Wolpin, 1976, "Does the Contract Compliance Program Work? An Analysis of Chicago Data," Industrial and Labor Relations Review 29:544-64; (5) Goldstein, Morris and Robert Smith, 1976, "The Estimated Impact of Anti-discrimination Laws Aimed at Federal Contractors," Industrial and Labor Relations Review.
23 Leonard, Jonathan, 1984, "The Impact of Affirmative Action Regulation and Equal Employment Law on Black Employment," Journal of Economic Perspectives, 4:47-64.
24 See above studies plus Donohue and Heckman, Continuous versus Episodic, 29, Journal of Economic Literature, p.1631.
25 For a full discussion of the impact of weakened affirmative action enforcement during the 1980s, see Leonard, Jonathan, 1990, "The Impact of Affirmative Action Regulation and Equal Employment Law on Black Employment," Journal of Economic Perspectives, 4:47-64.
26 For a discussion of the impact of affirmative action on minority employment in skilled positions, see Leonard 1990, The Impact of Affirmative . . . .," 4 J. of Econ. Perspectives 47.
27 See Leonard, Jonathan, 1984, "Anti-discrimination or Reverse Discrimination: The Impact of Changing Demographics, Title VII and Affirmative Action on Productivity," Journal of Human Resources, vol. 19, No.2, pp.145-74.
This document is not necessarily endorsed by the Almanac of Policy Issues. It is being preserved in the Policy Archive for historic reasons.