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What Are the Effects of Affirmative Action Regulation on Workers’ Careers?

Authored By 
Noriko Amano
Publication date 
January 12, 2017

It’s been 50 years since the passage of Affirmative Action laws that aim to reduce discrimination in employment. But have they been successful?  There is little information about the long-term effects that Affirmative Action regulation has on workers’ careers. My research aims at filling this gap by constructing a detailed dataset on workers’ job-histories together with thorough information about the firms that these jobs are in.

Affirmative Action regulation forbids employers to discriminate against individuals because of their race, color, religion, sex, or national origin in decisions regarding hiring, firing, compensation or other forms of employment. Due to its nature, this regulation likely affects workers if and when they are hired or working for a regulated firm. However, can Affirmative Action impact workers even after that? How?

The idea behind Affirmative Action requirements is that, by promoting interactions across people of different groups, stereotypes against minority groups will decrease, and thus, in the long run, so will discrimination. It is not obvious that this is the case today as theoretical models suggest.

Suppose employers associate the “minority” label with lower quality training and thus, minority workers find it harder to get a job they are qualified for. In this scenario, a minority worker would potentially benefit significantly from being hired at a regulated firm. Indeed, once he holds a job at a regulated firm, he possesses a new signal that can outweigh the “minority” label that he carries. This credential may give him an advantage to move forward as other firms may now disregard the label and offer him a new job; helping him climb the ladder. In this case, Affirmative Action fulfills its purpose. Now suppose that firms assume that if the job is held at a firm that is regulated, then the worker is actually not as good as majority workers with his credentials. Instead, employers assume that the minority worker was hired to comply with the regulation. So even if the worker is hired and promoted because of his performance, he may find hard to convince other employers of his skills, probably even more so than in the absence of Affirmative Action.

There is substantive evidence that Affirmative Action regulation has played an important role in reducing differences in wage and in unemployment rates between white men and women, and between majority and minority workers. However, many questions about this regulation remain open: does Affirmative Action affect workers only when they work for a regulated firm or can the regulation impact them even after that? If effects persist, are they all positive? For how long and how are they propagated?

In spite of the voluntary compliance design it has, previous studies have found that Affirmative Action regulation in the labor market has positive effects in equalizing employment rates for women and minorities with respect to white men. There is also evidence that the share of minority employees increases when firms become regulated. More strikingly, there is evidence that firms in the same industry as a regulated one, tend to change their hiring practices in a similar fashion as those that are under the regulation, and that in those firms that are regulated, the share of employees continues to grow even after the firm is deregulated.

Affirmative Action has an intrinsic dynamic component because firms may anticipate the racial composition requirements for their workforce under the regulation, and take action before they contract with the government. Likewise, if firms anticipate being regulated again in the near future – whether this materializes or not – they may also display persistence in their hiring patterns even if their perception of minorities remains intact. These dynamic effects make the effects of the regulation hard to uncover.

To investigate the mechanisms of potential long lasting effects of Affirmative Action regulation in workers’ careers, my research involves constructing a dataset linking EEOC data[1] for monitoring compliance, together with the Longitudinal Employer-Household Dynamics data (assembled and made available by the U.S. Census Bureau). These data will contain the working trajectories of individuals: their earnings’ paths together with the employers they’ve had, and whether these employers were or not regulated by Affirmative Action.

The relevance of the construction of this unique dataset is to allow the quantification of the effects of Affirmative Action on the path of wage rates, hours, and earnings for different genders and racial groups. Additionally, this unique dataset will enable me to analyze the way in which changes in firm characteristics – such as size, age, occupational structure and productivity – affect the average path of earnings and its variance.

Today, over half a century since the inception of Affirmative Action regulation in the labor market, we have the tools to uncover its long-term effects.  My work aims to measure the persistence of these effects and to try to uncover the mechanism that propagates them. The results will shed light on the extent and duration of the effects of Affirmative Action regulation on workers’ careers and, can potentially help with the development of future equal employment opportunity policies.

[1]I refer to the Equal Employment Opportunity Employer Information Reports, also known as EEO-1 records. These records report the overall racial, and gender composition disaggregated by 9 major occupation groups and are annually submitted to the Equal Employment Opportunity Commission (EEOC) by private sector firms and each of their establishments meeting size requirements. 

Noriko Amano is currently a PhD candidate in Economics at Yale. Her research focuses on inequality and in particular, explores the effect that different policies have on the well-being of individuals in the long run. 

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