4th WORLD CONFERENCE ON REMEDIES FOR ECONOMIC
INEQUALITY
HUBERT
HUMPHREY INSTITUTE
UNIVERSITY OF MINNESOTA
October 12, 2012
Dr. Bernard
E. Anderson, the Wharton School, University of Pennsylvania
Affirmative
Action Enforcement: The Federal Contract
Compliance Program
In the year of
our Lord 2012, this country continues to be afflicted by racial inequality in
American economic life. Black
unemployment persistently remains at twice the unemployment rate of white
workers, black families continue to make do with $6 for every $10 enjoyed by
white families, and black wealth, measured by net worth, hovers in the
neighborhood of $5000, compared with $116 thousand for white families.
These egregious
economic disparities are rooted in past and present labor market
discrimination. The quest to overcome employment discrimination requires the use
of many tools; affirmative action is one of the most important, and effective.
Government purchasing power is the foundation for federal
government anti-discrimination, affirmative action policy. The idea to use
government purchasing power to fight discrimination was first introduced in
1941 by A. Philip Randolph, the great labor and civil rights leader, when he
threatened to lead a march on Washington in opposition to discrimination in the
defense industries.
Mr. Randolph
met with President Franklin D. Roosevelt and explained why Presidential action
was necessary to assure black participation in the war effort. When the President concluded that he could
not sweet talk Mr. Randolph to call off the march by appealing to his
patriotism in a time of war, he issued Executive Order 8802, which established
the Fair Employment Practices Committee (FEPC).
The Committee, with authority limited to defense industries, had only investigatory
power, and was limited to moral suasion to pierce the veil of virulent
discrimination that was rampant at that time.
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President
Roosevelt’s action in creating the FEPC set in motion a process that saw each succeeding
chief executive issue a similar order to address employment discrimination among
government contractors:
·
President Truman created the Committee on
government contracts, and broadened coverage to all industries;
·
President Eisenhower continued the Truman
Committee, and appointed Vice President Richard Nixon chairman
·
In 1961, President John F. Kennedy issued
executive order 10925, which created the President’s Committee on Equal
Employment Opportunity (OFCCP), and named Vice President Lyndon B. Johnson
chairman.
The Kennedy executive order was the first to introduce
the concept of affirmative action. Previously, the enforcement policy only
exhorted employers to practice nondiscrimination, and to act in their self-interest to hire “qualified Negroes”. Affirmative action went beyond nondiscrimination,
and called on employers to take specific steps to reach out, recruit, and hire
workers defined as members of the “protected class.”
The concept of
affirmative action is rooted in equity, a concept pioneered by the British
Court of Chancery. In the American
context, affirmative action is defined as public or private action, or
programs, which provide, or seek to provide opportunities or benefits to
persons on the basis of their membership in a specific group. The Kennedy order focused on employment or employment
related benefits, for persons identified by race, national origin, or religion
In 1965,
President Lyndon B. Johnson issued Executive Order 11246, the legal enforcement
authority that remains in place today. The Johnson order shifted enforcement
authority from the White House to the Department of labor, and created the Office
of Federal Contract Compliance Programs (OFCCP). The new agency was given authority to
promulgate regulations that define affirmative action, and specify -3-
employer practices that are intended to assure equal
employment opportunity in all phases of the employment process. Initially, that included goals and timetables
for noncompliant contractors.
The context of
President Johnson’s order- - - an order that included stronger enforcement
authority than previous orders, is important. There’s a causal relationship
between the urban unrest in 1964-68 and the implementation of affirmative
action employment policy. In June 1964, President
Johnson was the commencement speaker at Howard University. In discussing the need for special efforts to
correct for past discrimination, he said “You can’t keep a man in chains for
400 years, remove the chains, take him to the starting line and tell him to run
the race, and think you are being fair”.
There was much
unrest associated with civil rights demonstrations at that time. Various studies on the protests of the 60s,
the black power movement, the Kerner Commission Report, and other investigations
all recognized the economic plight of the black community as a major cause of
the unrest. The uneven distribution of
jobs, the long exclusion of black workers from many occupations and some industries,
not only in the segregated South but in other regions of the country generated
racial economic inequality that showed no tendency to change without government
intervention. The Civil Rights Act of 1964 was enacted to address these
conditions.
It is important
to recall that the August, 1963 March on Washington, which brought a quarter
million people to the Washington Mall, was a march for jobs and freedom. The juxtaposition of those words was no
accident; they reflected the view of A. Philip Randolph, the father of the
march (some 22 years delayed) that there can be no freedom or civil tranquility
in the absence of economic opportunity and economic security.
In 1969, one of
the early affirmative action enforcement initiatives was led by Arthur
Fletcher, the black Republican who was appointed by President Nixon to
Assistant Secretary of Labor for Employment Standards Administration. Fletcher
used the Johnson executive order to attack discrimination in the construction
industry. After tense negotiations with
local building trades unions, he forged an agreement named “The Philadelphia
Plan”, which set specific goals and timetables for hiring minority workers.
Similar agreements called “Home Town Plans” were negotiated in other cities.
The social and
political circumstances underlying the agreements were compelling. The Johnson administration had introduced a
War on Poverty that included major funding to revitalize cities through urban
renewal. The black unemployment rate, for youth and adults, had long been twice
the rate for white workers. Yet, the
black
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unemployed watched while white construction workers in well-paying
jobs proceeded to build housing, schools, and other facilities in their
neighborhood. That sparked major, often violent, demonstrations that could only
be contained by breaking the barrier that barred black workers from employment
in the construction industry.
The organization
of the construction industry labor market poses unique difficulties for
affirmative action enforcement. The
construction industry labor market is a referral system in which the union determines
the employer’s workforce. To get a job,
the worker must be a member of the union; and as a private organization, the
union has the right to determine its membership. That undergirds discriminatory
practices.
The route to
employment in the commercial construction industry is through apprenticeship
programs. From the early 60s, efforts
have been made to increase minority participation in apprenticeship in order to
increase minority employment in the industry.
But little progress has been made, and commercial construction continues
to display wide racial disparities.
OFCCP
The federal
contract compliance program is an important tool for assuring equal employment
opportunity in American industry. About
200 thousand business firms have federal contracts, valued at $ 10,000 or more,
the definition of firms covered by the executive order.
Nearly one-fourth
of the American workforce is employed by defense and nondefense firms with
federal contracts.
OFCCP regulations
require each firm to have an affirmative action program, which includes an
employer review of employment policies and practices to assure that there are
no structural or institutional barriers to recruiting, hiring, evaluating,
training, and promoting employees on the basis of race, gender or national
origin, and that compensation systems provide equal pay for equal work.
Employer compliance
is monitored through about 4,000 contractor reviews each year. Noncompliant
employers are required to change their employment practices if violations are
found. Violations may result in costly penalties, including back pay. The
ultimate enforcement weapon is debarment from future contract opportunities.
The goal of affirmative
action is to assure nondiscriminatory decision making in all phases of the
employment process. In hiring, for example, the goal is to assure that all job
applicants have an equal chance to be selected.
If the process is fair, the proportion
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of members of the protected classes who are selected from
a pool of diverse applicants should reflect the diverse composition of the
applicant pool.
For example,
assume that there are 100 marbles in a bowl, and all marbles have the same
size, weight, and smoothness, and differ only in color. Some marbles are black, others white, yellow,
green, or red. Now ask a blindfolded
selector to pick 10 marbles from the bowl. What is the likelihood that all 10
will have the same color? The probability of that outcome is very low. The
reasonable conclusion is that the selection process is flawed.
In reviewing
hiring outcomes, enforcement officials examine the hiring process to assure
that the selection of new hires bears a reasonable relationship to the
diversity of the pool of equally qualified applicants. Affirmative action plans are intended to
assure nondiscriminatory practices in outreach to assure a diverse applicant
pool, and nondiscriminatory systems for training, performance evaluation,
promotion, and compensation that treat all employees equally, regardless of
differences in their immutable characteristics.
The enforcement
standards applied by the Department of Labor are influenced by legal challenges
to affirmative action in other domains.
For example, United Steelworkers v. Weber (1971) a title VII case, and
Fullilove v. Klutznick, a Department of Commerce minority contracting case set
the framework for permissible actions a firm could take to expand minority and female
employment opportunities.
Congressional
oversight also plays an important role.
In 1995, Senate Robert Dole, then Senate Majority leader, challenged the
affirmative action program for federal employees. In response, President
Clinton launched a government-wide review of affirmative action. The review was led by Christopher Edley then Assistant
to the President, and now Dean of the University of California Berkeley Law
School; and Joseph Stiglitz, the Nobel Laureate economist, who was then
Chairman of the White House Council of Economic Advisors.
The review
revealed that while there were some shortcomings in the management of
affirmative action in a few agencies, the great weight of evidence showed that
the federal government’s protection of EEO was greatly enhanced by affirmative
action.
President Clinton
announced his verdict on the reviews in July 1996 in a speech at the National
Archives. After summarizing the evidence
on racial economic disparities, the history of slavery and segregation after Emancipation,
and the adoption of the Civil Rights Act of 1964, President Clinton declared
that in the matter of affirmative action, we should: “Mend it , Don’t End It”.
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Over the last two
decades, two developments have framed the context for the enforcement of
affirmative action by OFCCP. The first is
the decline in the use of the term affirmative action, and the emergence of the
more felicitous term “diversity”. Most
Fortune 500 companies now have senior executives with the title “Director or
Vice President of Diversity”, and departments that specialize in diversity
management. The focus of their concern
is how to integrate employees with different backgrounds into a collaborative
workforce where each can develop his or her individual talents to help maximize
corporate performance.
The emphasis on
diversity management may divert attention from the implementation of policies
and practices that promote hiring and equal compensation for minorities and
women. Diversity management is no
substitute for affirmative action. Employers must continue to be alert to the
necessity to recruit, hire, train, and promote racial minorities and women in
numbers commensurate with their presence in the applicant pool. Affirmative
action does not mean quotas; quota hiring is unlawful. But numbers are not insignificant in
determining the effectiveness of affirmative action.
The other
important development is the increasing number of well-prepared minorities and
women in the applicant pool seeking private sector jobs. The number of racial
minority and female college graduates has grown steadily over the past two
decades. Employers can no longer say that they’d like to hire a minority or
female employee, but can’t find one. Thirty years of compliance assistance, coupled
with sophisticated electronic information systems opened the door to efficient
recruitment systems that facilitate targeting on employee groups that were
overlooked in the past. The partnership
of OFCCP with enlightened employer groups, like the Industry Liaison Group,
also contributes to a higher level of compliance with affirmative action.
Conclusion
Progress has
been made over the last four decades in widening the doors of employment opportunity
for racial minorities and women in American industry. Gone are the days when the Bell Telephone
system had separate employment offices for men and women, black workers were
systematically denied employment in personal contact jobs, and a straight A
black college graduate seeking a job as a management intern would be told by an employment recruiting
firm that no business client would hire him because he was a Negro.
Affirmative action is responsible for much of the
progress that eliminated those practices from the workplace. But few who are acquainted with corporate
business practices, and follow industry employment trends will argue that
discrimination no longer exists. For
example, the gap in the black/white unemployment rate for college graduates
narrowed
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significantly between 1977 and 2007. But it widened noticeably after the rapid
rise in layoffs in the midst of the 2007-2009 recession. It’s important to assure that the pattern of
layoff and recall during the business cycle does not reflect discriminatory
decision-making. Vigorous enforcement of affirmative action can secure that
outcome. Affirmative action is a sine qua non for eliminating racial inequality
in American economic life.
