Affirmative Action and the Economic Costs of “Diversity”

by Edwin S. Rubinstein

Research from
The National Policy Institute
All NPI publications can be found at:
http://www.nationalpolicyinstitute.org/publications

Synopsis

In their 1993 Forbes article, “When Quotas Replace Merit, Everybody Suffers,” Peter Brimelow and Leslie Spencer determined that the “total shortfall” or cost attributed to federal compliance with affirmative action policies and Equal Employment Opportunity Commission (EEOC) regulations was close to four percent of GNP or well over $225 billion.

As the authors pointed out, the total economic cost of racial preferences and diversity in both the private and public sector is difficult to pinpoint in an aggregate sum, but is not impossible to calculate in terms of a reasonably reliable estimate. The following paper analyzes the economic costs to taxpayers as a result of federal compliance with affirmative action and equal employment-based regulations. Estimates show “that for every dollar spent on regulatory enforcement, about twenty dollars is spent on compliance costs by the private sector.”

The policy implications of federal EEOC regulations apply an unnecessary burden in terms of direct and indirect costs to taxpayers, in addition to undercutting merit-based employment practices, and therefore Executive Order 11246 and subsequent regulations should be repealed.

President Bush says he is against quotas and racial preferences. During the 2004 presidential campaign he stated that the best way to help minority businesses is to open all contracts to competitive bidding “….so people have a chance to be able to bid and receive a contract to help get their businesses going.” “Minority ownership of businesses is up,” the president said, “because we created an environment for the entrepreneurial spirit to be strong.”

Yet from day one the Bush administration has backed affirmative action plans. The first opportunity came in August 2001 when the administration asked the Supreme Court to uphold a Transportation Department program intended to help minority contractors. In its brief the Bush Justice Department took the same position that the Clinton administration had in the case, which grew out of a challenge by a white-owned construction company in Colorado Springs. The company, Adarand Constructors, submitted the low bid for a Transportation Department contract. But the contract was awarded to a minority contractor as part of the department’s “disadvantaged business enterprise.” In its 50-page brief, the Bush Justice Department asserted that “the program is not unconstitutional,” noting that all companies that are economically disadvantaged could apply for the same preferences in receiving contracts. Of course, their solution discriminated against the more efficient non-minority contractor, as preference programs usually do.

That didn’t bother the White House. Even the George Bush regime seems-or at least seemed-interested in the rights of particular groups rather than colorblind equality. When it comes to affirmative action, the Bush administration goes by the book: The Federal Code of Regulations states that individuals who certify that they are members of named groups (Black, Hispanic, Native American, Asian Pacific, Sub-continental-Asian) are to be considered socially and economically disadvantaged. Under some programs, women “shall be presumed to be socially and economically disadvantaged individuals” too. The rules affect everything from “surface transportation,” which requires that 10 percent of federal monies go to minority and female contractors, to the space program, which requires that 8 percent of the dollar value of its contracts go to such firms. The Small Business Administration reserves portions of its contracts for, among others, Asian-Americans, Sri Lankans, Tongans, and “Hasidic Jewish Americans.” Nor does government intervention end when a company hires the appropriate percentage of minorities. An initiative began by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) in the early 1990s requires companies to focus on promotion and pay disparities among workers of different races and genders.

Defining Disadvantaged Up

Reports of the death of affirmative action are premature. But this is not your father’s affirmative action: Companies owned by white females are eligible for consideration as disadvantaged businesses under the Transportation Department program supported by the Bush Administration. Nineteen separate…

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