Sizing Up Affirmative Action

_"Assessing Affirmative Action" by Harry Holzer and David Neumark, in Journal of Economic Literature (Sept. 2000), American Economic Assn., 2014 Broadway, Ste. 305, Nashville, Tenn. 37203, and "What Does Affirmative Action Do?" by the same authors, in Industrial and Labor Relations Review (Jan. 2000), Cornell Univ., Ithaca, N.Y. 14853–3901._

Does affirmative action in business and education, along with government "set-asides" for minority firms, result, as many critics suggest, in poorer-performing employees, students, and contract firms? In an overview of past research, and a new study of their own, Holzer and Neumark, economists at Michigan State University, answer no on most counts.

Looking at more than 3,200 employers in Atlanta, Boston, Detroit, and Los Angeles surveyed between 1992 and 1994, Holzer and Neumark found that 56 percent used affirmative action in recruiting. These firms attracted (not surprisingly) more minority and female job candidates, screened them more intensively, were more likely to ignore educational or past employment deficiencies or criminal records when they hired—and were more likely to provide training for their new hires. These actions by employers apparently paid off: Subsequent performance ratings showed that the minority and female workers did, if anything, better than white men.

Some 42 percent of the employers surveyed used affirmative action in hiring (as well as, for the most part, in recruiting). Holzer and Neumark found that these firms were more likely to hire women or minorities with lesser qualifications—but also to give them remedial training, thus erasing the differences. Overall, affirmative action, while boosting employers’ costs, did not appear to result in weaker job performance.

Various studies have attempted to determine whether the proverbial "playing field" is level for minorities and women in the labor market. Summarizing these studies in the Journal of Economic Literature, Holzer and Neumark write that "while differences in educational attainment and cognitive skills account for large fractions of racial differences in wages, employer discrimination continues to play a role." Does affirmative action help? Studies found (again, not surprisingly) that it results in employment gains for minorities and women. But on the question of its impact on the performance of employees and firms, say Holzer and Neumark, the various studies they examined yield "no definitive conclusion." The data suggest, however, that white women in affirmative action firms are not less qualified and do not perform less competently than their male counterparts. Also, the authors observe, while "there is some evidence of lower qualifications for minorities hired under affirmative action programs," especially when measured by test scores or formal education, "evidence of lower performance... appears much less consistently or convincingly."

In universities, Holzer and Neumark note, there is little evidence of discrimination. On the contrary, universities now give minorities preferential treatment in admissions, and though hard evidence of cause-and-effect is lacking, the overall increase in minority enrollments has been "striking." While recent studies indicate that black college students, on average, have lower college grades and graduation rates than whites, those at more selective schools perform better than they would at less selective ones. With minority "special admits" to medical school, there is a further benefit: Minority physicians are more likely to treat patients who are minorities and poor.

As for whether minority set-asides in government contracting and procurement prop up weak companies, the evidence is mixed, the authors say. Some studies have found that minority firms that "graduate" from such programs have no worse failure rates than other firms. "On the other hand, there is some evidence that minority business enterprises deriving a large percentage of their revenue from local government are relatively more likely to go out of business." The cause, however, may be that some of these firms are only fronts set up to exploit the programs for the benefit of large, nonminority enterprises.