Tuesday, October 16, 2012

Affirmative Action Enforcement: The Federal Contract Compliance Program

                                    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.
  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
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.
    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
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”.
 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.
   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
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.

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