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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Barr, William: Files
Folder Title: [Affirmative
Action Studies] (6 of 7)
Box: 1
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https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
-Do Not Cite or Quote-
The Impact of Affirmative Action on Employment and Turnover
Jonathan S. Leonard
School of Business Administration
University of California, Berkeley
January, 1983
I thank Mr. J. Griffen Crump of the Director's Office, OFCCP, for his
assistance in the use of the data used in this study, which was provided
by the OFCCP's Division of Program Analysis. This project was funded
under purchase order No. B9M12517 from the Office of the Assistant
Secretary for Policy, Evaluation and Research. Points of view or opin-
ions stated in this document do not necessarily represent the official
position or policy of the Department of Labor.
Affirmative action, mandated by Executive Order 11246 in 1965, is one of the most
controversial government interventions in the labor market since abolition. 1 While
much has been said concerning the propriety of affirmative action in theory. little is
known about the impact of affirmative action in practice. If affirmative action has not
changed the employment patterns of non-whites and females, then much of the dis-
cussion since 1965 of its philosophical merits amounts to shadow-boxing. The goal of
affirmative action is to increase employment opportunities for females and minorities.
Has affirmative action been successful in achieving this goal? This paper will use two
new and comprehensive sets of rich establishment level data to examine the effects of
being a federal contractor subject to the affirmative action obligation, and of undergo-
ing a compliance review, on the employment and turnover of minorities and females.
The evidence to be presented in this paper indicates that affirmative action under
the contract compliance program has led to improved employment opportunities for
females and minorities. This result is based on a statistical comparison of the change
in demographics at more than sixty-eight thousand establishments with more than 16
million employees between 1974 and 1980. 1 shall argue that minorities' and females'
share of employment has increased more at establishments that are federal contrac-
tors, and so subject to affirmative action. than at non-contractors. Compliance
reviews, while questionably targetted, will be shown to have been an effective regula-
tory tool in increasing black and female employment. Turnover data from a new
source which has not previously been analyzed, will be marshalled to demonstrate that
these employment gains have not been transitory, and that blacks and women have
experienced relatively stable employment. I shall also draw implications for the rela-
tive wages of members of protected groups.
Section 1 presents cross-tabulations and log-odds equations with multiple control
Sciend
variables comparing changes in the employment share of detailed demographic groups
across contractor and non-contractor establishments. Have compliance reviews been
- 2 -
a useful tool in the affirmative action effort? Many in private business and in advocacy
groups argue that compliance reviews generate a lot of paper. but little real change.
To determine the efficacy of compliance reviews this section also compares changes in
the representation of minorities and females across reviewed and non-reviewed con-
tractor establishments.
The channels of adjustment to affirmative action are examined in Section 2. Have
employers been most successful in changing hiring. termination or promotion poli-
cies? Some would argue that affirmative action has caused excessive churning in
labor markets, with few permanent employment gains for members of protected
groups. This section examines previously unavailable data on turnover at 2000 estab-
lishments and develops flow/stock models of employment change to judge the con-
sistency of this new independently derived turnover data with observed stock change
data. This stock/flow model also shows that affirmative action may be successful in
increasing the shares of minorities and females in hires in the contractor sector, and
decreasing their shares in terminations, without producing any corresponding
increase in the growth rate of their employment in the contractor sector. I also show
that in a sample of reviewed establishments, females and black males have been
underepresented in separations relative to their share of hires, implying a compara-
tively stable employment relationship.
A debate of major policy significance has been continuing between the view
represented by Heckman and Butler, and that found in the work of Freeman, concern-
ing the role played by the federal government in reducing racial economic inequality.
The final section discusses the impact of affirmative action in reducing racial inequal-
ity in earnings, and presents the conclusions of this research.
The findings to be presented here speak directly to those concerned with the
position of minorities and females in our society, and with the role the federal govern-
ment plays in improving their position. The single most certain aspect of affirmative
- -3-
action is that it is controversial. This study brings new evidence to bear on that con-
troversy: evidence that can enlighten discussions both of discrimination in the United
States, and of the impact of government regulation.
Past Studies
5/12/83
Past studies of affirmative action are divided into studies of the regulatory pro-
cess that find it mortally flawed, and studies of impact that find it successful. The pro-
cess studies by the U.S. Commission on Civil Rights, the General Accounting Office, and
the House and Senate Committees on Labor and Public Welfare all conclude that
affirmative action has been ineffective and blame weak enforcement and a reluctance
to apply sanctions. That this is not merely politics can be judged from the fact that
the Department of Labor has been sued with some measure of success more than onc
for failure to properly enforce affirmative action.² Debarment, the ultimate sanction,
has been used only 26 times, with debarment of the first non-construction contractor
not occuring until 1974. The GAO and USCCR have found that other forms of regula-
tory pressure such as pre-award reviews, delay of contract award. and withholding of
progress payments have not been forcefully and consistently pursued. However, as
evidenced by the increased incidence of debarment and backpay awards, enforcement
did become more aggressive after 1973.
In light of the unanimity of these process studies in finding the affirmative action
regulatory mechanism seriously deficient, it is suprising that the few past econometric
studies of the impact of affirmative action in its first years, by Burman, Ashenfelter
and Heckman, Goldstein and Smith, and Heckman and Wolpin, all based on a com-
parison of EEO-1 forms by contractor status, have generally found significant evidence
that it has been effective for black males. While these few studies of the initial years
of affirmative action between 1966 and 1973 are not directly comparable because of
differing specifications, samples, and periods, they do generally find that despite weak
enforcement in its early years, and despite the ineffectiveness of compliance reviews,
- 4
affirmative action was effective in increasing black male employment share in the con-
tractor sector, but generally ineffective for other' protected groups. This study will
use a new data set to examine a more mature affirmative action program between 1974
and 1980, after the beginning of substantial enforcement of regulations barring sex
discrimination, after the start of aggressive enforcement in the early seventies, and
including the period after the major reorganization of the contract compliance agen-
cies into the OFCCP in 1978.
seeks to This
a
Section 1: The Impact of Affirmative Action on Minority and Female Employment
pector
The male share of employment has fallen steadily since 1960 as females have
flooded into the labor force. In 1974, .389 of the employed were female. By 1980 this
had increased by 7.2% to .417. While the proportion of non-white males in total
employment remained stable over this same period at .060, their proportion among
males rose by 5%, from .098 to .103. On their face, these growth rates in representa-
tion are not strikingly higher after 1970 than before. At the same time, both females
and non-white males share of unemployment has been growing. along with their
employment shares. The period between 1974 and 1980 witnessed growth in females'
share of employment, and in non-white males share of male employment. What part
has affirmative action played in these increases?
Affirmative action may usefully be thought of as a tax on the employment of white
males in the contractor sector, a tax that shifts the demand for white male labor
down. If affirmative action is effective, I expect the rate of change of protected
groups' employment share to be higher in contractor establishments than in non-
contractor establishments, ceterus paribus. Since affirmative action goals are similar
within industry within region, I also expect the variance of employment share to fall
more and remain lower at contractor firms, controlling for industry and region. In the
long run, 1 expect the levels of the employment shares of protected groups to be
higher in contractor firms, controlling for industry and region which determine skill
- 5 -
requirements and local labor supply. and are not controlled for in the following cross-
tabulations. The crucial tests are those on changes in levels of employment shares
which difference out unchanging variables. Since stocks are only susceptible to policy
through changes in flows, 1 expect the flows, or in other words the change in stocks to
be a more sensitive indicator of the impact of policy. It should also be noted that 1974
is an early year in the history of affirmative action, especially for females. While
affirmative action became effective in 1965, the provisions pertaining to females were a
later addition, first enforced about 1974. For both non-whites and females, the adjust-
ment process was by no means over by 1974.
Comparison of Mean Changes in Employment Shares in the Contractor and Non-
contractor Sectors
Table 4.1 shows that between 1974 and 1980 black and female employment shares
increased significantly faster in contractor establishments than in non-contractor
establishments. T-tests in Table 4.1 reject the equality of changes in means in all
cases except non-black minorities, which are the smallest group. There is no striking
evidence in the changes in variances in representation over time, but the variance in
the contractor sector is always significantly less than in the non-contractor sector.
Contractor establishments start with proportionately more non-white males but fewer
females in 1974, which in itself casts doubt on the argument that female intensive
establishments are being selected as contractors. The most compelling evidence of
the impact of affirmative action in Table 4.1 is the significantly greater increases in
female and black male employment shares in contractor establishments.
The interpretation of tests of affirmative action would be less straightforward
were scale effects to differ greatly across sectors. However we see in Table 4.1 that
there is only a small difference in the growth rates of contractor and non-contractor
establishments; both are growing at between 2 to 3 percent per year, so differences in
scale effects across sectors are likely to be negligible. On net in these establishments
- 6 -
members of protected groups are, in part, being substituted for white males over time.
This also suggests that contractor firms are not growing fat on government largesse.
allowing them to expand total employment to take on relatively unproductive minori-
ties and females. This is consistent with evidence presented in other work that the
productivity of members of protected groups relative to that of white males did not
fall as their relative employment share increased.
Reviewed VS. Non-Reviewed
Given that contractor establishments have increased their employment of non-
whites and females more than non-contractor firms have, what administrative tools
have been useful? Do compliance reviews matter? One alternative is that the threat
of a compliance review is sufficient to obtain the desired behavior. so that reviewed
establishments do not differ significantly from non-reviewed contractor establish-
ments. This would be plausible if the threatened penalty if caught were severe enough
to outweigh the small probability of being caught. This is unlikely, because both the
probability of review and the penalties imposed are not great. The OFCCP has records
of at least 27,000 reviews completed between 1973 and 1981 at 11,000 different
identifiable establishments. In 1980, roughly 115,000 establishments were government
contractors, so at least ten percent of all contractor establishments had been
reviewed between 1973 and 1981. Twenty-six of these reviews resulted in the ultimate
penalty of debarment. Between 1969 and 1976, compliance reviews produced 331 con-
ciliation agreements according to a Department of Justice memorandum. These
agreements awarded $61,279,000 in back pay. or $185,133 per company in a heavily
skewed distribution. Short of debarment or backpay awards, affirmative action
extracts only promises, though as we have seen, these promises are not empty.
Compliance reviews have been targeted at large establishments that already
employ proportionately more non-whites. The economics of targetting enforcement,
and detailed empirical tests of actual enforcement patterns are analyzed in other
- 7 -
work. Here I shall only note that while there are obvious advantages in terms of
economies of scale and signalling to reviewing large establishments first, there seems
little to be gained in terms of reducing discrimination by enforcing affirmative action
primarily at establishments that already have the highest representation of non-
whites, conditional on size. Among the 41258 establishments that were contractors in
1974. the establishments that were reviewed between 1975 and 1979, inclusive,
employed an average of 745 workers in 1974, far more than the average of 239
employed by non-reviewed contractors. In addition, the employment share of non-
whites was 24% greater at reviewed contractors than at non-reviewed contractors in
1974, before review. This helps explain why we previously observed no decline in the
variance of representation among contractors. If one thought of the growth of no:
white representation as following a logistic growth curve, then squeezing further gains
from establishments in the upper tail of the distribution would be difficult. If reviewed
contractors start out above the mean in protected group employment, compliance
reviews that prompt them to increase their employment of minorities further may
actually increase the variance in representation in the contractor sector.
Establishments that were reviewed expanded in size, though not significantly
more than the non-reviewed. Since the reviewed establishments were relatively non-
white intensive, the likely scale effect would work against an increase in non-white
employment share among the reviewed.
It is also interesting to note that contractor establishments that were reviewed at
all underwent an average of 1.8 reviews between 1975 and 1979 inclusive, and that
these reviewed contractors were more likely to maintain contractor status than were
the non-reviewed contractors. Only 3.4 percent of the reviewed contractors were no
longer contractors by 1980. In contrast, 11.8% of the non-reviewed contractors
ceased being contractors. While not controlling for other variables, this comparison
does not in itself suggest that the compliance review process is so burdensome as to
- 8 -
lead firms to eschew federal contracts.
The observed impact of compliance reviews should be interpreted in view of a
plausible simultaneity argument: the OFCCP tends to review those establishments with
the lowest growth rates of female and minority employment. This is indeed among the
things the OFCCP claims to do. If so, this simultaneity would bias against finding a
higher growth rate for female or minority representation among reviewed establish-
ments.
Multivariate Log-Odds Models
?
Soc. methobilogy sc. research
Do compliance reviews and contractor status have the same impact if other vari-
ables are controlled for? For example, the size of the establishment could be a crucial
variable. Large plants might tend to be good corporate citizens, or they may be more
likely to have formalized and rationalized personnel systems. Or simply by being large
they may escape the familial or tribal tendencies of small workforces. For any of
these reasons, one might expect larger firms to have better affirmative action records.
At the same time, one might expect contractor status to be positively correlated with
establishment size. In this case, the previous finding in cross-tabulations of a positive
relationship between contractor status and growth rates of female and minority
employment share might be spurious; it might be picking up the correlation between
protected group share and the omitted establishment size. Similar arguments of a
more tenuous nature may be made about industry and region.
In this section I present the results of log-odds equations that correct for estab-
lishment size, growth rate, corporate structure, percent non-clerical white-collar,
industry. region, and initial period demographics. The sample means of these control
variables, and the abbreviations by which they shall be referred in the following tables,
are indicated in Table 4.2. The interpretation of contractor effects in this section
assumes that both contractor and non-contractor establishments are wage takers in
the same labor markets, and that both sectors have the same wage elasticity of
- 9 -
demand.
Table 4.3 presents the primary log-odds results. and shows a consistent pattern
across demographic groups. Establishments that were contractors in 1974
significantly increased the employment share of black males, other males, white
females and black females. According to Table 4.3, compliance reviews also played a
significant role in advancing black males, white females and black females, and in
retarding the employment of non-black males.
The estimate in equation 2 is that black males' share of employment increased .82
percentage points more in contractor establishments, not counting the direct effect of
reviews. Since 6.8 percent of all contractor establishments accounting for 17.4 per-
cent of all contractor employment were reviewed in subsequent years, the additional
impact of compliance reviews is to increase black males share by .174 times 1.03, or
.18 percentage points. The total impact of the contract compliance program is then to
raise black males' share by one percentage point in the contractor sector over the six
years between 1974 and 1980. Dividing by six, yields a rough annual impact of .17.
This is about the geometric mean of previous estimates: a fourth of Heckman-Wolpin's
estimated .7 percentage point annual impact, but four times greater than Goldstein-
Smith's .036. This shift over six years is not small. It is equivalent to 14 percent of
black males' initial weighted employment share in the contractor sector, not an insub-
stantial demand shift.
These demand shifts, the central results of Table 4.3. are summarized in Table 4.4.
With the exception of the residual and smallest group, non-black minority females,
members of protected groups have enjoyed improved employment opportunities at
contractor establishments. This also holds true for white females in this log-odds
specification, although the effect is of marginal significance. In row 2. compliance
reviews appear to have been an effective tool in changing employment patterns. The
impact of compliance reviews is greater than the impact of simply being a federal con-
- 10 -
tractor in every case except non-black minority males. Direct pressure does make a
difference.
The evidence here is that a process that has been frequently criticized as largely
an exercise in paper-pushing has actually been of material importance in prompting
companies to increase their employment of minorities and females. The combined
impact of being a contractor, and of undergoing a review as in the case 17.4 percent
of all contractor employment, is presented in row 3. Row 5 displays the relative extent
of these contract compliance induced demand shifts by expressing them as a propor-
tion of initial 1974 employment shares in the contractor sector. The shift is largest
for blacks: fourteen percent for black males, and eleven percent for black females.
The proportionate shifts for white females and for non-black minority males are not as
large: two and five percent respectively. It has been commonly speculated that
employers can kill two birds with one stone by hiring black females. The evidence
here is that while black females have gained relatively more under affirmative action
than white females, they have not gained more than black males, so that being black
appears more important than being female. Had black females been especially
favored, we would have expected their relative gains to be the greatest.
To derive an estimate of the effect of affirmative action on market demands, I
assume that affirmative action has not directly altered labor demand schedules in the
non-contractor sector. I also maintain the assumptions that the demand elasticities
are equal in both sectors, and the supply curve identical, so that the differential
between employment shifts in the contractor and non-contractor sectors can be
identified as a demand shift. Since 68.6 percent of employment in the sample is in
contractor establishments, the market demand shift in row 6 is taken to be .686 times
the shift in the contractor sector. In other words, the market shift is simply the
weighted average of sectoral shifts. Because many small employers who are not con-
tractors are not included in the sample, this may well overestimate the shift in the
- 11 -
economy as a whole.
Employment opportunities depend critically on growth. Table 4.3 also indicates
that minorities and females experienced significantly greater increases in representa-
tion in establishments that were growing and so had many job openings. For every
percentage point increase in the growth rate of establishment employment, white
males employment share drops by about half a percentage point, suggesting that
members of protected groups dominate the net incoming flows. Establishment size
has only a small impact, but establishments that are not part of multi-plant corpora-
tions have significantly lower growth rates of employment for members of protected
groups.4 Corporate size matters rather than establishment size, with larger corpora-
tions showing greater increases in minority and female employment. Except for black
males, members of protected groups also do far better at establishments that are
non-clerical white-collar intensive.
There is significant variation in the growth of minority and female representation
across industries and regions. To determine the within industry within region impact
of affirmative action. all of the equations in Table 4.3 include 27 industry and 4 region
dummy variables. The omitted groups were retail trade and New England. Some of
these variables had significant and strong effects. White males' employment share, a
summary measure, is significantly five or more percentage points higher in mining.
construction, lumber, stone clay and glass, and transportation. It is five or more per-
centage points lower in apparel. Mirroring this, white females' share is significantly 5
or more percentage points lower in agriculture, mining. construction, stone clay and
glass, primary metals, petroleum and coal products, and transportation. and five or
more higher in apparel and furniture. Black males' share is significantly at least 2
percentage points lower in agriculture, mining, apparel, lumber, leather, and electrical
machinery. Since initial 1974 employment share, region, growth rate, and percent
non-clerical white-collar are controlled for, these appear to reflect real differences
- 12 -
across sectors in the growth of minority and female employment. Across regions.
blacks increase their employment share significantly more in the South, although F-
tests do not reject the equaltiy of coefficients on contractor and review status in the
South and nationally.
Changes in Contractor Status
The impact of establishments which change contractor status between 1974 and
1980 is explored in Table 4.5. In the case of black males, the coefficients line up in the
expected order of magnitude. Black males experienced the greatest employment
gains at establishments that remained contractors, followed in order by establish-
ments that left contractor status, those that became contractors, and finally. those
that never were contractors. For all protected groups, employment gains, if any, were
smaller at establishments that were not contractors in 1974 and 1980 than in estab-
lishments that were contractors in either or both years. Except for white females,
establishments which left contractor status demonstrate better employment records
for members of protected groups than do establishments that just became contrac-
tors. This is consistent with state dependence based on the inertia of employment
stocks and personnel policies. Except for black males, the impact of affirmative action
actually appears to have been greater at establishments that ceased being contrac-
tors than at those that remained contractors. If some establishments found the cost
But studied only
of complying with affirmative action exorbitant, one might well expect them to give up
those fich
being contractors before incurring the cost. In this sense, the pattern observed in
these cases is anomolous. Similarly. unless screening of new contractors has become
more stringent, it is not obvious why new entrants should have better records of
employing white females and of not employing white males than contractors of long-
standing. If these establishments are becoming contractors because they find it easy
to comply with affirmative action, as one self-selection argument goes, why didn't they
choose to reap the benefits of being a federal contractor six years sooner? Before
098
- 13 -
leaving Table 4.5, note that while the status change variables are usually individually
significant, they do not generally contribute to a significant reduction in the standard
error of the estimate.
The tests presented here suggest that while generating tremendous public criti-
cism and resistance and while undergoing frequent requlatory reorganization,
affirmative action has actually been successful in promoting the employment of minor-
ities and females. In the contractor sector affirmative action has increased the
demand relative to white males of black males by 14.8%, of non-black minority males
by 6.3%, and of white females by 2.9%. Among females, it has increased the demand for
blacks relative to whites by 9.0%. For a program lacking public consensus and
vigorous enforcement, this is a suprisingly strong showing. While the gains of white
females are smaller than those of blacks, it is important to keep in mind that the
employment of females and minorities has been increasing in both sectors. Indeed, if
the OFCCP pressured establishments to hire more females and minorities compared to
their own past record rather than compared to industry and region averages, the
observed pattern is just what we would expect to see during a period when female
labor supply had been growing. Females' share would increase at all establishments
due to the supply shift, and contractor establishments would be under little pressure
to employ more females than non-contractors. The relatively shorter history of
affirmative action for females, as well as the demographic composition of the
bureacracies that enforce affirmative action, may also help explain the differential
impact of affirmative action across protected groups.
The statistical tests shown here give evidence of a contract compliance program
that works. Executive Order 11246 has led to significant employment gains for females
and for blacks in contractor establishments, and compliance reviews have played an
important role in this process.
- 14 -
Selection or Changed Behavior?
It is not implausible to suppose, along the lines of Heckman and Wolpin. that those
establishments with a relative overabundance of white males would avoid being federal
contractors. Some of the findings presented above might be qualified if there were
evidence of such selection: if establishments with high protected group employment
were more likely to be contractors. Because of the recursive nature of the system.
this proposition is tested in Table 4.6 in logit estimates of the probability of being a
contractor in 1980 as a function of 1974 demographics, the change in demographics
between 1974 and 1980, and establishment size, growth rate, corporate status, indus-
try and region. There is little evidence here to support the proposition that establish-
ments with a high or growing level of minority or female employment are more likely
to be contractors. This leads one to speculate that perhaps the costs of affirmative
action are not great on average, or that they are balanced by lump-sum transfers
from the government in a contracting process that does not turn on price alone.
The evidence in Table 4.6 suggests that the establishments that were more likely
to be contractors in 1980 were actually those with the greatest proportion of white
males and the least proportion of minorities and females in 1974, just the opposite of
what one selection argument would suggest. Similar results are found when contrac-
tor status in 1974 is controlled for in linear probability equations. These effects are
significant. with the exception of black males, who have no significant impact one way
or the other on contractor status at the .05 confidence level. Since the share vari-
ables must sum to one, the smallest group, non-black minority females, is omitted.
Controlling for initial period demographics, Table 4.6 also suggests that establish-
ments with the greatest increases in minority or female employment share were not
significantly more likely to be contractors in 1980. However, one would have expected
some of these coefficients to be positive, and the coefficient on white males is also
negative. While it is possible to interpret these estimates to say that conditional on
- 15 -
1974 demographics, establishments in which white male employment share increased
at the expense of black males were slightly more likely to be contractors, this small
effect is statistically insignificant. In general, there is no significant evidence here
that establishments with a large or growing proportion of minority or female employ-
ees are more likely to be contractors. In this regard. it is worth recalling that the
Heckman-Wolpin estimates imply that individually the level or growth of black male
employment share had an insignificant effect on the probability of being a federal con-
tractor, and that establishments with high or growing female or non-black minority
employment shares were actually less likely to be contractors, though insignificantly
so [Heckman and Wolpin, Table 7. p. 562]. Affirmative action appears to work not by
the selection of firms with good records of protected group employment into contrac-
tor status, but rather by inducing contractors to employ more minorities and females.
Section 2: Turnover: Churning or Stable Employment
We have seen that affirmative action has been successful in increasing the
employment share of protected groups, and that compliance reviews have played a
significant role in this process. Our evaluation of this impact depends on its per-
manence. To take an extreme example, if there were one black economics professor
earning handsome rents by riding circuit with the reviewers across universities, we
might question whether any lasting reduction in discrimination or improvement in the
employment of black professors had been achieved. This speculative example may not
be so far-fetched. given past testimony about black construction workers "bicycling"
from one construction project to another ahead of the reviewers. To what extent has
the observed improvement in the employment of minorities and females been accom-
panied by a game of musical chairs, albeit with added chairs? The interpretation of
protected groups' separation rates relative to white males' will depend on whether the
separations are quits or fires. If members of protected groups have disproportionately
high voluntary turnover then we might infer that affirmative action has induced high
- 16 -
sorting costs by creating a situation of excess demand, in which there are not enough
workers of sufficient quality to meet the imposed goals. An alternative explanation in
the case of disproportionate fire rates is that employers run a revolving door policy.
Hiring minorities and females while under pressure, then firing them.
Turnover may also be viewed in a more positive framework. Given the higher net
growth rates of females and minorities in the contractor sector, through what chan-
nels has this increase been achieved? Have establishments found it most effective to
increase protected groups share of hires and promotions or to decrease their share of
terminations?
In Table 4.7, for a sample of 2240 establishments that were reviewed in 1978. 1
present data on turnover by occupation. Those who are unfamiliar with turnover data
may be surprised at the high turnover rates: 1/3 of the stock is hired, 1/4 separated,
and 1/5 promoted annually. The rates in this sample are actually close to Bureau of
Labor Statistics rates for manufacturing. In 1978, in durable goods manufacturing the
annual new hire rate was .336, while the rate of separations was .408. In non-durables
these rates were .408 and .540 respectively.5 In such a fluid employment situation,
there should be many opportunities to increase the employment of members of pro-
tected groups without displacing sitting white males, although this will depend on the
turnover of positions, not people.
Are black males overrepresented in turnover? In Table 4.8 we see that in no
occupation do black males account for a significantly larger proportion of separations
than of hires. This is consistent with the observed net growth of black male employ-
ment share in the EEO panel data. In another sense, black males are overrepresented
in separations: their proportion of separations is greater than their proportion of
stock in all white-collar occupations, except officials and managers. This may be evi-
dence of churning in the white-collar occupations. In the blue-collar occupations,
black males' share of separations is lower than their share of hires and their share of
- 17
stock, indicating a more stable work force relative to non-black males. Of course,
since turnover is endogeous, this may well reflect employers' policies as well as
employees' behavior. In all occupations except service workers we find evidence of
upgrading: black males are overrepresented in promotions.
Females exhibit more stable employment patterns than males. Table 4.9 shows
that in every occupation females share of separations is lower than their share of
stock, suggesting that their separation rate is lower than that of males.
This interpretation of the evidence suggests that establishments have had more
long-lasting success in meeting affirmative action goals for females than for black
males. They have been more successful in finding and keeping qualified females. On
the other hand, for black males in white-collar occupations, there is some evidence of
churning. In these occupations, black males are overrepresented in separations, sug-
gesting that establishments have trouble finding and keeping qualified black males. In
light of black males' high share of hires, the affirmative action goals for black males
may be inducing high search costs. However, this interpretation is problematical
since it does not control for job tenure, which we know is an important determinant of
separations.
Separations usually are concentrated among the newly hired. It is more
appropriate then to compare share of separations with hires rather than with stocks,
which leads to a different interpretation of the results in Tables 4.8 and 4.9. Think of
the new hires as the stock from which the separations come. Now in every occupation
black males' share of separations is less than or about equal to their share of hires. In
this light. black males experience relatively stable employent, and there is no
significant evidence of churning. The same finding of stability holds true of females,
except in the craft occupations, where critics have claimed the goals set by affirmative
action are too high. Under this plausible interpretation. the evidence in Tables 4.8
and 4.9 that both females and black males at reviewed contractor establishments have
- 18
low separation rates relative to other workers implies that their employment gains
won under affirmative action are not short-lived.⁶ At least in this sample, earnings ine-
quality by race or sex is not obviously due to the instability of blacks or females.
Having previously found that the demand for black males increased in the con-
tractor sector it is natural to infer that this would tend to drive their relative wage up.
absent an excess or an infinitely elastic supply of black males. While black unemploy-
ment rates are very high, this is much less the case among the skilled, where other
work shows affirmative action has increased demand the most. Even here, some might
argue that the increased demand for black males could be met out of natural turn-
over, so wages need not rise to attract new workers. But this line of reasoning ignores
the endogeneity of turnover, and has the same economic content as the statement
that since the number of oranges bought is identical to the number sold, there is no
reason for the price of oranges to change. To fully explain turnover by framing it as
an endogeous variable within a full model is well beyond the scope of the present work,
and has not been our purpose here. This work has shown in a sample of reviewed con-
tractor establishments that females and black males share of new hires is typically
greater than their share of separations. The evidence here is that reviewed establish-
ments do not run a revolving door policy.
Comparison of Flows and Stocks
In this section I develop a formal model making clear the relationship between the
flows and stocks already discussed. I shall develop conditions that must hold for con-
sistent behavior among stocks and flows, and point out a parudoxical theoretical con-
dition under which an affirmative action program that is effective in increasing pro-
tected groups' share of hires appears to be ineffective because it does not increase
the growth rate of their share of employment.
The change in stocks is equal to hires less separations, assuming no promotions
across occupations. In share form this identity is:
2566
- 19 -
(4)
where
Pₜ = Blacks' share of stock in year t.
H = Blacks' share of hires.
T = Blacks' share of separations.
a = The ratio of total hires to total end of year stock.
b = The ratio of total separations to total end of year stock.
A = 1-a+b
First I shall illustrate that the observed turnover data from establishments
reviewed in 1978 is consistent with the observed change in stocks in reviewed estab-
lishments between 1974 and 1980. For example, consider black male craftsmen. In
1978 their share of hires was .067, of separations .052, and of stock .067 (see Table
4.8). From Table 4.7 we know that in 1978 craft workers had some of the lowest turn-
over rates of any occupation, a hire rate of .18 and a termination rate of .17. Are
these flows consistent with the observed changes in stocks? The share of craft jobs
held by black males rose by .020 from .056 to.075 in non-reviewed firms, but by .013
from .048 to .061 in reviewed establishments between 1974 and 1980 in a sub-sample
of a few thousand establishments. On this basis, and judging from more stringent
regression tests 0 compliance reviews have caused neither higher levels nor growth
rates of black males' share of craft jobs. Yet from Table 4.8 we know blacks share of
hires is greater than their share of separations in this occupation, while the hire rate
is approximately equal to the termination rate. Solving the share equation recursively
we find:
(5)
Substituting into this equation taking 1978 as the starting date we find after six years
that AP = .016 and 7.AP = 33. These are close to the observed changes in reviewed
- 20 -
firms between 1974 and 1980; P = .013 and %AP = 27. This example demonstrates
that the flow statistics from compliance review reports are roughly consistent with the
stock statistics from EEO-1 forms.
Now consider whether the apparent ineffectiveness of compliance reviews on
black males' share of craft jobs might be due to relatively low turnover in the reviewed
sector. The impact of affirmative action might be masked if turnover rates were exo-
genously higher in the non-contractor or non-reviewed sector. For purposes of illus-
tration assume that in the crafts black males' share of hires increases by one percent
and their share of separations decreases by one percent at establishments that
undergo review. The change in black male employment share in reviewed establish-
ments would now be identical to that in non-reviewed establishments if turnover were
fifteen percent higher among the non-reviewed. This illustrates, but only illustrates,
that with higher turnover rates among the non-reviewed, or among the non-
contractors, the true impact of affirmative action may be understated by looking only
at protected groups' share of employment or even change in share of employment.
Section 3: Conclusions- The Impact on Racial Earnings Inequality
Those who have argued about the propriety of affirmative action have not been
quibbling over a fine point. The federal contract compliance program has substan-
tially improved employment opportunities for members of protected groups.
The
growth rates of females' and minorities' shares of employment are greater in contrac-
tor establishments obligated to undertake affirmative action than in non-contractor
establishments with no such obligation. Compliance reviews, the major enforcement
tool of the affirmative action program, while poorly targetted against discrimination,
have contributed significantly to improving the employment of members of protected
groups This evidence from employment stocks in 1974 and 1980 is corroborated with
independent data on flows in 1978 from a different source which shows that in general
members of protected groups experience more stable employment than white males
288
- 21 -
and accounted for a greater proportion of new hires than of current employment in
reviewed establishments. This flow data also suggests the possibility that since turn-
over rates may be higher in non-reviewed or non-contractor establishments, I may
understate the impact of affirmative action.
The scale of the demand shifts due to affirmative action found in this paper is not
small, but this can best be appreciated by comparing them to relative wage changes
during the same period. Between 1974 and 1980, the black male to white male ratio of
the mean earnings of full-time, full-year workers increased by 2.3 percent from .684 to
.700.7 What part of this improvement in relative black male earnings may be explained
by affirmative action?
To frame the implicatons of the demand shifts found here for the change in black
male relative earnings, consider the following simple model of the labor market, where
all variables are in logarithmic form:
(6)
Nˢ = b + W
(7)
where
ND is the logarithm of the demand for black male labor relative to white male labor.
Ns is the logarithm of relative labor supply.
W is the logarithm of the ratio of black to white male wages.
In equilibrium:
W
(8)
The logarithmic derivative of relative wages with respect to a demand shift is then:
(9)
In Table 4.3 I estimated that the relative demand for black male to white male
workers increased by 14.8 percent in the contractor sector between 1974 and 1980.
Maintaining the assumption that affirmative action has not directly shifted demand
- 22 -
curves outside the contractor sector, and assuming that roughly half of all employ-
ment is in the contractor sector, the implied relative demand shift overall is 7.4 per-
cent. For demand and supply elasticities that sum to less than six, at least half of the
improvement in black relative earnings among men may be explained by affirmative
action. Since the actual percentage increases in the ratio of median earnings, or in
the mean or median earnings of all workers were all less than 2.3 percent, affirmative
action may well have played an even greater role. The same would be true the lower
the elasticity of supply or demand. While it is not implausible to think of the elasticity
of relative labor demand being greater than one, in other work I estimate this elasti-
city of substitution of non-white for white male labor to be on the order of of .7 to 1.1.
While other factors on both the demand and the supply side of these markets have
likely also played a role, the increase in the demand for black male labor relative to
white induced by affirmative action can help account for a significant part of of the
increase in the relative earnings of black males.⁸ This view is supported by individual
wage equations estimated for the 1978 CPS sample matched with data on the percent
of employment by industry by SMSA that is in contractor establishments. These prel-
iminary estimates, to be reported fully in future work, suggest that racial earnings
inequality is reduced where affirmative action pressures are the greatest.
This paper has presented significant large sample evidence with detailed controls
at the establishment level that minority and female employment has increased faster
at contractor establishments that bear the affirmative action obligation. It has also
suggested that while compliance reviews have not been directly targetted against
establishments with the lowest representation of non-whites, these reviews have been
an effective enforcement tool. The demand shift is large, and does not appear tran-
sient. Correcting for broad occupation in a new sample of reviewed establishments
this study also found that females and black males experience relatively stable
employment. In sum, amidst vigorous contention a affirmative action has played a
093
- 23 -
major role in improving the economic position of minorities.
- 24
Appendix: Data
Two rich, detailed and disaggregated data sets are used in the empirical tests:
establishment level EEO-1 reports on more than sixteen million employees for 1974
and 1980, and establishment level affirmative action compliance review reports for the
period 1973 to 1981.
Under Title VII of the Civil Rights Act of 1964, the Equal Employment Opportunity
Commission requires annual reports on workforce demographics from all private
employers with 100 or more employees, or 50 or more employers and a federal con-
tract or first-tier subcontract worth $50,000 or more. In the case of multi-plant
EEO!
employers, all establishments with more than 24 employees that belong to firms
fulfilling the above conditions must report individually. In 1978, 39,000 employers with
more than 165,000 establishments filed reports covering 36 million employees. more
than half of all private non-farm employees The EEO sample is extensive, covering
three-quarters of all manufacturing employment as reported by the B.L.S. Employers
with small workforce establishments such as construction, trade and agriculture are
underrepresented. Construction and agriculture are also underrepresented because
temporary or casual employees are not counted as employees for the purposes of
reporting requirements [EEOC Report 1978, p.xi].
Firms have an obvious incentive to discover that their white male employees are
really minority females when it comes to filling out their EEO-1 forms. This need raise
no problem for the current study if such "inflation" is uniform across sectors as is
likely if liability to Title VII litigation is percieved as the primary threat. Under Title
VII pressure moreover, firms will be more concerned with inflating minority and female
employment levels than growth rates. However, if this lying does extend subtly to
growth rates, then to the extent that such behavior is greater among contractor
establishments, all studies including the one at hand, that rely on comparisons of con-
tractor and non-contractor EEO-1 forms will overestimate the true impact of
262
- 25 - -
affirmative action. In contrast to a firm filling out an EEO-1 form, a white male filling
out a Census of Population form has no such incentive to claim upon deep introspec-
tion that he is afterall a minority female. A rough comparison with the Census of
Population reveals no flagrant exaggeration of female or black male employment
!
shares in the EEO sample.
From samples of roughly 160,000 establishments in 1980 and 100,000 establish-
ments in 1974 I found 68,690 establishments that filed identifiable reports in both
years. The empirical tests comparing contractors with non-contractors are based on
these 68,690 establishments with more than sixteen million employees from the
matched sample.
An establishment is considered a contractor if the company or any of its estab-
lishments are prime government contractors or first-tier subcontractors with a con-
tract, subcontract or purchase order of $50,000 or more. This study identifies any
such establishment as a contractor, whether or not the establishment so identified
itself. Note that the sub-contractor clause vastly extends the compass of affirmative
action regulation. To the extent that I label as contractors some establishments that
are not aware that they are under the affirmative action obligation, I mix the sin of
ignorance together with the greater sin of willful volition. If affirmative action were
found to be ineffective, it would be useful to separate these two causes.
Contractor status changers, particulary entrants, between 1974 and 1980 are
surprisingly common. Eleven percent of all 1974 contractors establishments were
non-contractors in 1980, while twenty-seven percent of all 1974 non-contractors were
identified as contractors in 1980. consituting seventeen percent of all 1980 contrac-
tors. This suggests contractors have become better labelled over time. Whether these
status changes are true, or just an artifact of more accurate reporting. my results will
be biased against finding any affirmative action effect when I test according to 1974
status only. In other words, I underestimate the effect of being a contractor because I
- 26 -
include among the non-contractors some establishments that became or really were
contractors, and I include among the contractors some establishments that became or
really were non-contractors.
To compare demographic changes across reviewed and non-reviewed establish-
ments I merged the matched 1974 and 1980 EEO-1 establishment demographic data
with data on OFFCP compliance reviews. OFCCP administrative records contain data
on 27,000 compliance reviews at 11,000 identifiable establishments, between 1973 and
1981. Before 1978, I have data almost exclusively on reviews conducted by the Depart-
ment of Defense, but these accounted for nearly half of all compliance reviews.
Reviews completed prior to 1973 or after 1979 are underrepresented, and due to gen-
eral under-reporting some establishments that were reviewed will be included among
the non-reviewed, biasing my tests against finding an impact of compliance reviews. I
labelled as reviewed any establishments that had a record of at least one compliance
review between 1975 and 1979 inclusive. Multiple reviews are not rare, but are not
controlled for in my tests. Since I expect decreasing returns to multiple reviews, this
will bias against finding any review effect in the case of establishments reviewed prior
to 1974. In other cases I will simply be measuring the cumulative effect of reviews.
Since the mode year of review completion in the sample is 1975, while demographic
changes are measured between 1974 and 1980, there is little potential for underes-
timating review effects due to lags in response. Finally. turnover data comes from a
sample of 2240 establishments that completed compliance reviews in 1978.
- 27 -
NOTES
1. Affirmative action in this study refers narrowly to the obligation borne by federal
contractors under Executive Order 11246, and not to other forms of voluntary of
court ordered affirmative action.
2. See for example the cases of Legal Aid Society of Alameda County V. Brennan,
Women's Equity Action League V. Department of Labor. and Washington Area Con-
struction industry Task Force V. Marshall.
3. Table 4.1 shows that affirmative action has been effective at the average establish-
ment, not for the average worker. To draw inferences regarding wages, changes
in employment share must be weighted by establishment size. This comparison
shows smaller differences between sectors, suggesting that affirmative action has
produced greater changes at smaller establishments.
4. Other regressions show some evidence that affirmative action has been more
effective at smaller establishments, and that affirmative action for black males
has been more effective at male intensive establishments.
5. This is derived as twelve times the average monthly rate from Table 83, Handbook
of Labor Statistics, 1980.
6. Previous studies of turnover by race and sex have centered on the analysis of
quit rates in aggregate industry data and have found conflicting results. These
studies are briefly summarized by Blau and Kahn. who find in the NLS dataset that
once individual and job characteristics are controlled for. the quit rates of young
men and women are roughly equal, and those of young blacks less than those of
young whites. In a similar study based on the Michigan PSID data, Viscusi finds
that while women have higher quit rates within major occupational groups than
do men, half of this difference is explained by differences in job characteristics
and regional economic conditions. The present study is the first to examine total
turnover data at the establishment level. In contrast to previous studies, I find
- 28 -
that just controlling for broad occupation, females have lower separation rates
than males, and blacks have lower rates than whites. This strong result may well
be due to the unrepresentative nature of the sample or to behaviour endogenous
to the review process. Nevertheless, it is in accord with previous findings that
racial and sexual differentials in quits in aggregate industry statistics overstate
behavioral differences.
7. Earnings of full-time workers employed 50-52 weeks from U.S. Bureau of the
Census, Current Population Reports, Series P-60, "Money Income in 1974 of Fami-
lies and Persons in the U.S.", no. 101, January,1976 Table 61, p.127. and from
U.S. Bureau of the Census, Current Population Reports, Series P-60, "Money
Income in 1974 of Households, Families, and Persons in the U.S.", no. 132, July,
1982, Table 59, p.213,214.
B. For a discussion of these issues, see Charles Brown, "Black/White Earnings Ratios
Since the Civil Rights Act of 1964: The Importance of Labor Market Drop-Outs"
National Bureau of Economic Research Working Paper #617. January, 1981. and
Richard Butler and James Heckman, "The Government's Impact on the Labor
Market Status of Black Americans: A Critical Review" in Leonard J. Hausman et.
al., eds., Equal Rights and Industrial Relations, (Madison, Wi : Industrial Relations
Research Association, 1977). pp. 235-281.
- 29 -
REFERENCES
Ashenfelter, Orley and Heckman, James. "Measuring the Effect of an Anti-
discrimination Program" in Orley Ashenfelter and James Blum. eds., Evaluating
the Labor Market Effects of Social Programs, (Princeton: Industrial Relations Sec-
tion, Princeton University. 1976). pp. 46-84.
Blau, Francine and Kahn. Lawrence. "Race and Sex Differences in Quits by Young
Workers". Industrial and Labor Relations Review, vol. 34. no. 4. July 1981, PP. 563-
577.
Brown, Charles. "Black/White Earnings Ratios Since the Civil Rights Act of 1964: The
Importance of Labor Market Dropouts," National Bureau of Economic Research.
Working Paper no. 617, January, 1981.
Burman, George. The Economics of Discrimination: The Impact of Public Policy,
unpublished Ph.D. thesis, Graduate School of Business, University of Chicago,
1973.
Flanagan. Robert J. "Actual Versus Potential Impact of Government Anti-
discrimination Programs," Industrial and Labor Relations Review. vol. 29, no. 4,
July 1976, pp. 486-507.
Freeman, Richard B. "Changes in the Labor Market for Black Americans, 1948-1972."
Brookings Papers on Economic Activity, 1973, pp. 67-131.
Goldstein, Morris and Smith, Robert S. "The Estimated Impact of the Anti-
discrimination Program Aimed at Federal Contractors." Industrial and Labor
Relations Review, vol. 29. no. 4. July 1976. pp. 523-543.
Heckman, James J. and Butler, Richard. "The Government's Impact on the Labor
Market Status of Black Americans: A Critical Review," in Leonard Hausman et. al.
ed., Equal Rights and Industrial Relations, (Madison: Industrial Relations
Research Association, 1977).
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Heckman. James J. and Wolpin, Kenneth 1. "Does the Contract Compliance Program
Work? An Analysis of Chicago Data," Industrial and Labor Relations Review, vol.
29. no. 4, July 1976, pp. 544-564.
Johnson, George and Welch, Finis. "The Labor Market Implications of an Economy-wide
Affirmative Action Program" Industrial and Labor Relations Review, vol. 29, no. 4.
pp. 508-522.
U.S. Commission on Civil Rights, 1961 Report: Employment. Book 3, (Washington:
Government Printing Office, 1962).
U.S. Commission on Civil Rights, The Federal Civil Rights Enforcement Budget - 1983,
(Washington: Government Printing Office, 1982).
U.S. Commission on Civil Rights, The Federal Civil Rights Enforcement Effort - 1974.
volume 5, "To Eliminate Employment Discrimination" (Washington: Government
Printing Office, July 1975).
U.S. Civil Rights Commission, The Federal Civil Rights Enforcement Effort - 1977. "To
Eliminate Employment Discrimination: A Sequel" (Washington: Government Print-
ing Office, December, 1977).
U.S. Department of Labor, Bureau of Labor Statistics, Handbook of Labor Statistics,
1979, Bulletin 2070, (Washington: Government Printing Office, December, 1980).
U.S. Department of Labor, Office of Federal Contract Compliance Programs, Freedom of
Information Act Index, June 1980 and April 1981.
U.S. Equal Employment Opportunity Commission. EEOC Report: Minorities and Women
in Private Industry, Annual Volumes.
U.S. General Accounting Office, "The Equal Employment Opportunity Program for
Federal Nonconstruction Contractors Can Be Improved." April 29, 1975, p. 30.
U.S. General Accounting Office, "Further Improvements Needed in EEOC Enforcement
Activities," April 9. 1981.
Viscusi, Kip. "Sex Differences in Worker Quiting". The Review of Economics and Statis-
2888
- 31 -
tics, vol. 62, no. 3, August 1980. pp. 388-398.
- 32 -
Table 4.1: Proportion of all Employees
Demographic
Contractor
1974
1980
Line
Group
Status
Number
Mean
o
Mean
σ
MeanA
Mean%A
1
Black
N
27432
.053
.10
.059
.10
.006
28
2
Males
Y
41258
.058
.10
.067
.10
.008
33
3
(6.0)
(9.4)
(6.5)
(3.6)
4
Other
N
.034
.10
.046
.10
.012
52
5
Minority
Y
.035
.08
.048
.09
.013
58
6
Males
(1.6)
(2.1)
(1.2)
(2.1)
7
White
N
.448
.27
.413
.26
-.034
-2
B
Males
Y
.584
.26
.533
.25
-.047
-4
9
(66.7)
(66.5)
(16.4)
(2.0)
10
Black
N
.047
.10
.059
.11
.012
47
11
Females
Y
.030
.07
.045
.08
.015
77
12
(24.0)
(19.2)
(5.7)
(10.8)
13
Other
N
.024
.08
.036
.08
.012
65
14
Minority
Y
.016
.05
.028
.06
.012
77
15
Females
(14.8)
(13.0)
(1.1)
(3.2)
16
White
N
.394
.27
.400
.26
.006
17
17
Females
Y
.276
.23
.288
.23
.012
30
18
(59.7)
(57.8)
(7.8)
(11.9)
19
Total
N
186
286
209
341
23
17
20
Y
271
728
276
720 5
21
21
(21.2)
(16.2)
(10.7)
(3.3)
Note: T-Tests across means in parentheses, on every third line. In
every case, F-tests reject equality of variances across contractors and
non-contractors, with more than 99% confidence. The last column is
the mean of percentage changes, not the percentage of change in
means.
N = non-contractor in 1974.
Y= contractor in 1974.
270
- 33 -
Table 4.2: Variable Definitions, Means, and Standard Deviations
N = 68690
Variable
Standard
Name
Mean
Deviation
Definition
C74
.601
.49
= 1 if establishment was part of a
contractor company in 1974
STAYC
.533
50
= 1 if establishment was part of a
contractor company in 1974 and in 1980
LEAVEC
.068
.25
= 1 if establishment was par i of a
contractor company in 1974 but not
in 1980.
ENTERC .109
.31
= 1 if establishment was part of a
contractor company in 1980 but not
in 1974.
R
.041
.20
= 1 if establishment completed a
compliance review between 1974 and
1980 exclusive.
SIZE
237
594
Total number of employees in 1974.
GROWTH
.197
1.67
Rate of growth of total employment
from 1974 to 1980.
SINGLE
.183
.39
= 1 if establishment was not part of
a multi-establishment company.
PWC
.381
.31
Proportion of all employees who are
officials, managers, professionals,
technicians and sales people.
- 34 -
Table 4.3: Log-Odds Equations of the Effect of Contractor and Re-
view Status on Employment by Demographic Group.
N = 68690
Demographic
White
Black
Other
White
Black
Group
Males
Males
Males
Females
Females
Equation:
1
2
3
4
5
C74
-.300
.816
,207
.242
.310
-.012
.136
.046
.011
.062
(.005)
(.009)
(.009)
(.006)
(.009)
R
-1.43
1.03
-.234
1.34
.660
-.057
.171
-.052
.061
.132
(.012)
(.021)
(.022)
(.015)
(.021)
P74*
115
56.5
46.0
110.0
53.8
4.60
9.41
10.21
4.92
10.76
(.010)
(.042)
(.050)
(.013)
(.050)
SIZE
.0002
.0002
-.00063
-.0026
-.00027
.000008
.000033
-.00014
-.00012
-.00043
(.000004)
(.000007)
(.000007)
(.000005)
(.000007)
GROWTH
-.475
.138
.117
.163
.130
-,019
.023
.026
.007
.026
(.001)
(.002)
(.002)
(.001)
(.0023)
SINGLE
.050
-1.27
-.851
-.792
-1.53
.002
-.212
-.189
-.036
-.305
(.007)
(.012)
(.012)
(.008)
(.012)
PWC
-4.43
-.324
.887
10.41
.66
-.177
-.054
.197
.471
.131
(.009)
(.016)
(.0017)
(.011)
(.016)
R²
.837
.545
.519
.796
.536
MSE
.343
.992
1.116
.485
1.017
Note: The first line is 100(dP/dX) evaluated at mean P. The second is the
coefficient from the log-odds equation. The third is the standard error. All
equations include 27 industry and 4 region dummies.
213
- 35 -
Table 4.4: Demand Shifts Induced by the Contract Compliance Pro-
gram: A Summary of Table 4.3.
Demographic
White
Black
Other
White
Black
Group:
Males
Males
Males
Females
Females
Equation:
1
2
3
4
5
FE
1. Contractor
Effect
-.30*
.82**
.21**
.24
31**
2. Review
Effect
-1.43**
1.03**
-.23*
1.34**
.66**
3. Total
Effect
-.55
1.00
.17
.47
.42
4. Initial
Share in
Contractor
Sector
59.8
7.3
3.2
24.4
3.8
5. Proportionate
Shift in
Contractor
Sector
-.01
.14
.05
.02
.11
6. Proportionate
Market Demand
Shift
-.01
.10
.03
.01
.08
Note: The contractor and reviewer effects are the change
in proportion as estimated in Table 4.3 evaluated at the sample
mean. The initial shares are means across establishments
weighted by establishment size, or, in other words, the ratio of
means in the contractor sector. Significance levels are indicat-
ed in rows 1 and 2 only.
+ = Significant at the .05 level.
** = Significant at the .01 level.
- 36 -
Table 4.5: Log-Odds Equations of the Effect of Contractor and Re-
view Status on Employment by Demographic Group,
Status Changers.
N = 68690
Demographic
White
Black
Other
White
Black
Group:
Males
Males
Males
Females
Females
Equation:
1
2
3
4
5
STAYC
-.375
.876
.230
.506
.240
-.015
.146
.051
.023
.048
(.006)
(.010)
(.011)
(.007)
(.010)
LEAVEC
-1.025
.786
.333
.748
.825
-.041
.131
.074
.034
.165
(.010)
(017)
(.018)
(.012)
(.017)
ENTERC
-.575
.150
.113
.968
.050
-.023
.025
.025
.044
.010
(.008)
(.014)
(.015)
(.010)
(.014)
R
-1.45
1.02
-.230
1.34
.700
-.058
.169
-.051
.061
.140
(.012)
(.021)
(.022)
(.015)
(.021)
P74
115
56.5
46.0
110.0
53.8
4.60
9.41
10.21
4.92
10.74
(.010)
(.042)
(.050)
(.013)
(.050)
SIZE
.0002
.0002
-.00063
-.00026
.00027
.000008
.000032
-.00014
-.000012
.000042
(.000004)
(.000007)
(.000007)
(.000005)
(.0000007)
GROWTH
-.475
.138
.117
.163
.130
-.019
.023
.026
.0074
.026
(.001)
(.002)
(.002)
(.00016)
(.0023)
SINGLE
.002
-1.25
-.837
-.682
-1.55
.0001
-.208
-.186
-.031
-.309
(.007)
(.012)
(.012)
(.008)
(.012)
PWC
4.43
-.336
.887
10.36
.69
-.177
-.056
.197
.471
.137
(.009)
(.016)
(.0017)
(.011)
(.016)
R²
.837
.545
.519
.796
.536
MSE
.343
.992
1.116
.485
1.016
Note: The first line is 100(dP/dX) evaluated at mean P. The second is the
coefficient from the log-odds equation. The third is the standard error. All
equations include 27 industry and 4 region dummies.
274
- 37 -
Table 4.6: Logit Estimates of Simultaneity: the Effect of Estab-
lishment Demographics on Contractor Status in
1980.
N = 68690
Asymptotic
dP
(P)(1-P)
Beta
Standard Error
"
dr
Proportion White Male,
1974
.079
.344
.13
Proportion Black Male,
1974
-.032
-.138
.15
Proportion Non-Black Male,
1974
-.086
-.376
.18
Proportion White Female,
1974
-.205
-.891
.13
Proportion Black Female,
1974
-.200
-.871
.17
A Proportion White Male,
1980-1974
-.552
-2.40
.18
A Proportion Black Male,
1980-1974
-.543
-2.36
.23
Д Proportion Non-Black Minority,
1980-1974
-.727
-3.16
.25
Д Proportion White Female,
1980-1974
-.499
-2.17
.17
AProportion Black Female,
1980-1974
-.511
-2.22
.23
SIZE
.0011
.0047
.0043
GROWTH
-.453
-1.97
.021
SINGLE
.00009
.00039
.00013
27 Industry and
4 Region Dummies
Yes
MSE
.189
Mean of Dependent Variable
.641
- 38 -
Table 4.7: Mean Employment Stocks and Annual Flows by Occupa-
tion, 1978.
Hires Per
Line No.
Occupation
N
Stock
Hires
Stock
1.
Officials &
2235
94.6
7.6
.08
Managers
2.
Professionals
1975
155.3
31.3
.20
3.
Technicians
1913
70.5
20.5
.29
4.
Sales
951
36.7
12.7
.41
5.
Clerical
2214
105.5
33.5
.32
6.
Craft
1919
146.7
25.7
.18
7.
Operators
1943
264.5
109.3
.41
8.
Laborers
1218
79.8
71.6
.90
9.
Service
1521
26.1
17.5
.67
10.
Total
-
974
330
.34
Terminations
Pro-
Promotions
Line No.
Occupation
Terminations
Per Stock
motions
Per Stock
1.
Officials &
9.5
.10
19.1
.20
Managers
2.
Professionals
21.7
.14
32.2
.21
3.
Technicians
14.2
.20
17.5
.25
4.
Sales
9.7
.32
6.9
.22
5.
Clerical
25.3
.24
25.5
.24
6.
Craft
25.2
.17
30.6
.21
7.
Operators
80.6
.30
57.6
.22
8.
Laborers
46.7
.59
28.5
.36
9.
Service
13.7
.52
7.3
.28
10.
Total
247
.25
225
.23
923
- 39 -
Table 4.8: Percent Black Male by Occupation, in Stock and Flows-
1978.
Line
Occupation
N
Stock
Hires
Terminations
Promotions
1.
Officials &
2235
.026
.042
.021
.047
Managers
(.06)
(.14)
(.09)
(.15)
2.
Professionals
1975
.016
.032
.024
.025
(.05)
(.09)
(.08)
(.09)
3.
Technicians
1913
.039
.053
.055
.050
(.08)
(.13)
(.14)
(.14)
4.
Sales
951
.018
.056
.026
.037
(.07)
(.12)
(.11)
(.14)
5.
Clerical
2214
.019
.022
.023
.028
(.05)
(.07)
(.08)
(.09)
6.
Craft
1919
.067
.067
.052
.101
(.12)
(.15)
(.12)
(.21)
7.
Operatives
1943
.103
.099
.100
.119
(.16)
(.16)
(.15)
(.20)
B.
Laborers
1218
.162
.173
.155
.170
(.22)
(.23)
(.23)
(.27)
9.
Service
1521
.184
.188
.173
.154
(.26)
(.28)
(.28)
(.28)
- 40 -
Table 4.9: Percent Female by Occupation, in Stock and Flows-1978.
Line
Occupation
N
Stock
Hires
Terminations
1.
Officials &
2235
.094
.080
.077
Managers
(.19)
(.19)
(.17)
2.
Professionals
1975
.153
.175
.151
(.19)
(.25)
(.24)
3.
Technicians
1913
.209
.203
.185
(.24)
(.27)
(.27)
4.
Sales
951
.136
.162
.123
(.23)
(.28)
(.25)
5.
Clerical
2214
.799
.825
.789
(.18)
(.21)
(.25)
6.
Craft
1919
.102
.068
.083
(.19)
(.18)
(20)
7.
Operatives
1943
.372
.361
.347
(.34)
(.33)
(.33)
B.
Laborers
1218
.227
.203
.195
(.28)
(.27)
(.27)
9.
Service
1521
.334
.178
.145
(.33)
(.28)
(.26)
823
the
17.14
DRAFT
A Review of the Effect of Executive Order 11246
and the Federal Contract Compliance Program
on the Employment Opportunities of Minorities and Women
A Report of
The Office of Federal Contract Compliance Programs
Employment Standards Administration
U.S. Department of Labor
April, 1983
DRAFT
TABLE OF CONTENTS
Foreword
Introduction
1
Background
2
Methodology
4
Summary of Findings
7
Federal Contractors - Historical Perspective
11
Employment Patterns of Minorities and Women
17
Performance of Contractors and Noncontractors Compared
17
Minorities
17
Women
21
Reviewed and Unreviewed Contractor Establishments Compared
24
Minorities
26
Women
29
Minorities, Women and White Males
31
Conclusion
33
Charts and Tables
Appendix
I
Source and Reliability of the Data
Appendix II
Glossary
Appendix III
DRAFT
INTRODUCTION
The effect of affirmative action on the employment opportunities
of minorities and women has been debated since it first was made
a requirement of Federal contractors by President John F.
Kennedy in Executive Order 10925 on March 6, 1961. Throughout
most of the intervening period, the debate has been waged in
the absence of any factual documentation of the impact of such
Federally-mandated programs, at least on a national scale.
Beginning in September, 1981, the Director of the Office of
Federal Contract Compliance Programs, Ellen M. Shong, caused
the present study to be made. The study was conducted by
J. Griffin Crump, Special Assistant to the Director. Its
objective was to determine whether the impact of the Federal
contract compliance program could be measured; that is, whether
there was any significant difference between the employment
and advancement of minorities and women in the work forces
of Federal contractors and subcontractors and those of employers
not covered by the Federal compliance program, and if so, whether
the difference was attributable to the compliance program.
The study has shown the answers to both of the above questions
to be "yes."
DRAFT
- 2 -
Background
The Office of Federal Contract Compliance Programs (OFCCP) is the
Federal agency charged with enforcing the requirements of the
Executive Order. Executive Order 10925 was superseded by
Executive Order 11246, which was issued by President Lyndon B.
Johnson on September 24, 1964 and later amended by him on
October 13, 1967, through Executive Order 11375, to include
women. Executive Order 11246, as amended, prohibits discrimination
by Federal contractors against employees and applicants for employ-
ment because of race, creed, color, sex or national origin, and,
in addition, requires the contractor to take affirmative action
to ensure nondiscrimination. By regulation, all contractors having
contracts of $10,000 or more are required to take such action. That
action is described in the Order as including "employment, upgrad-
ing, demotion, or transfer; recruitment or recruitment advertising;
layoff or termination; rates of pay or other forms of compen-
sation; and selection for training, including apprenticeship."
In addition, by regulation, contractors having 50 or more employees
and a contract of $50,000 or more have been required to maintain
written affirmative action programs that analyze their work forces
and employment practices and establish goals and timetables for
the hiring and promotion of women and minorities where they are
shown to be underutilized relative to their availability.
Special
DRAFT
- 3 -
attention is to be paid to six categories 1/ of jobs for
minorities and six for women. 2/
Special Emphasis Categories
Minorities
Women
Officials and Managers
Officials and Managers
Professionals
Professionals
Technicians
Technicians
Sales
Sales
Office and Clerical
Skilled
Skilled
Semi-skilled
From its inception in 1965 until October, 1978, the compliance
program was implemented by the major contracting agencies of
government (such as the Department of Defense, the Gereral
Services Administration, etc.) while policy was established by
OFCCP's predecessor, the Office of Federal Contract Compliance
(OFCC). Since October, 1978, policy-making and implemention
have been consolidated in OFCCP.
1/ See "EEO-1 Job Categories" in Glossary.
2/ OFCCP's regulations, at 41 CFR 60-2.11, state: "Based upon the
Government's experience with compliance reviews under the
Executive Order program and the contractor reporting system,
minority groups are most likely to be underutilized in
departments and jobs within departments that fall within the
following Employer's Information Report (EEO-1) designations:
Officials and managers, professionals, technicians, sales
workers, office and clerical and craftsmen (skilled). As
categorized by the EEO-1 designations, women are likely to be
underutilized in departments and jobs within departments as
follows: Officials and managers, professionals, technicians,
sales workers (except over-the-counter sales in certain retail
establishments), craftsmen (skilled and semi-skilled). Therefore,
the contractor shall direct special attention to such jobs in its
analysis and goal setting for minorities and women."
- 4 -
DRAFT
Methodology
OFCCP carries out its Executive Order 11246 program primarily
through a system of compliance reviews of covered Federal
contractors. The study's basic hypothesis was that if the
compliance program is effective, Federal contractor establish-
ments as a group should, over a period of time, show higher
performance in employment and advancement of minorities and
women than noncon' actor establishments. Further, reviewed
establishments as a group might be expected to exceed the
accomplishments of unreviewed establishments. 1/
In order to test these hypotheses, a number of things were needed.
These included the availability of relevant employment data over
a sufficiently long period to observe change; selection of a
large enough sample of employers to ensure representative
indicators/patterns; the ability to identify and separate Federal
contractors' work forces from other employers'; the ability to
identify contractor establishments which had experienced compliance
reviews, and the use of a select group of establishments which
by its makeup would tend to eliminate certain variables, such as
expansion and contraction of the contractor universe, Title VII
?
influence, etc. Fortunately, all of these elements either
were found to exist or could be produced.
1/ It was also considered that a "spill-over" effect between
reviewed and unreviewed establishments of the same contractor
might tend to blur such a pattern. ("Spill-over" meaning that
beneficial employment decisions resulting from a compliance
review or reviews of some of a contractor's establishments
would be applied in more of its establishments, thus also
improving results in those unreviewed establishment.)
DRAFT
- 5 -
It was decided that the performance of Federal contractors subject
?
to the compliance program would be compared to that of non-
contractors for the period 1974-1980. This particular period was
chosen because it utilized the most reliable current data (1980
EEO-1 reports) and coincided with the period of implementation of
two major aspects of the compliance program, i.e., the requirement
of written affirmative action programs, which began in 1971, and
implementation of compliance activity regarding equal opportunity
for women, which began in 1972. 1/
Since the universe of Federal contractors is constantly changing,
with firms entering and/or leaving such status during any given
period, an attempt to measure the performance of all Federal
contractors over that long a period would not be possible. In
order to overcome this problem OFCCP selected for study those
?
establishments which filed reports both in 1974 and 1980. Using
the EEO-1 master files for 1974 and 1980 supplied by the Equal
Employment Opportunity Commission (EEOC), all of those employer
1/ Written affirmative action programs were required by Revised
Order No. 4, issued by OFCCP's predecessor, the Office of
Federal Contract Compliance (OFCC), on December 4, 1971.
Although Executive Order 11246 was amended in 1967 to cover
sex discrimination, the establishment of goals and timetables
for hiring and promotion of women was not required of
Federal contractors until April, 1972. Since contractors'
affirmative action programs ordinarily have been established
for a period of one year, programs beginning after April, 1972
would have concluded after April, 1973. And, since employers
file their EEO-1 reporting forms (see Glossary) during the first
quarter of the calendar year, the first data likely to show
the effect of Federal compliance action on behalf of women would
be the EEO-1 filing of 1974.
DRAFT
- 6 -
establishments which filed EEO-1 reports in both years were
identified. 1/ By excluding those reporting in one year but
not in the other, establishments which came into being or went
!
out of business during the period were eliminated, and a
select group of 77,098 establishments with (in 1980) 20,406,128
employees was developed. (Tables A and B). This group was
disaggregated into two major groups - 48,981 contractor establish-
ments and 28,117 noncontractor establishments, thus permitting
comparison of all such establishments reporting in the two years.
Of 113,500 Federal contractor establishments filing reports in
1980, 43 percent were identified for use in this study, and the
in
number of noncontractor establishments studied represented just
under half the total of such firms that filed EEO-1 reports in
1980. By selecting these two groups for comparison, the per-
formance of establishments subject to the provisions both of
the Executive Order and of Title VII of the 1964 Civil Rights
Act (i.e., Federal contractors) could be compared to those
1/ Not included in this study are institutions of higher learning,
which report their employment data in a different format (EEO-6
forms), and construction contractors whose permanent work forces
number less than 50 employees, who also report employment under
a different system.
DRAFT
- 7 -
subject only to Title VII (noncontractors). 1/ The percentages
that minorities and women comprised of the major occupational
categories in those two sets of establishments for the years 1974
and 1980 were then compared in a number of ways.
Summary of Findings
The results of the analyses show that establishments covered
by the Executive Order have posted significantly greater gains
in the employment and advancement of minorities and women
than those not covered and have done so in all of the categories
to which special attention was to have been directed. Further,
in those establishments covered by the Executive Order where
compliance reviews have taken place, greater progress has been
made by minorities and women in the majority of special-attention
categories, as well as the majority of all categories.
1/ Given that the main objective in selection of the sample was
to obtain as large a body of establishments for comparison as
possible, the similarity of proportion represented by the
different industries in the contractor and noncontractor
groups is remarkable (Chart 1). In eight of the ten industry
groups represented, there is a difference of no more than 3.5
percent in the proportions which any industry's establish-
ments comprise among the contractor and noncontractor groups.
Nonetheless, some disproportion exists, i.e., durable manu-
facturing accounts for 18.5 percent of the contractors'
establishments, versus 12.5 percent of the noncontractors',
and service industries represent 19.5 percent of the non-
contractor establishments, versus 9.4 persent of the
contractors'. There was no notable dissimilarity in total
employment growth between contractor and noncontractor
establishments in the service industries. However, in durable
manufacturing, contractor establishments experienced a decline
of nearly 8 percent of total employment whereas noncontractor
establishments' total employment increased by 31 percent.
Noteworthy differences also occurred in some industries where
the proportions were quite similar. Where such occurred,
they are noted in the text.
- 8 -
DRAFT
Contractors versus Noncontractors
Although the study shows that the participation of minorities and
women has increased in virtually all of the nine major occupational
categories of both reviewed and unreviewed contractors as well as
noncontractors, Federal contractor establishments have experienced
a far greater growth in the percentage of jobs held by minorities
and women than noncontractor establishments during this 1974 - 1980
period.
Minority participation in the contractors' work forces grew by
20.1 percent while total employment in those same establishments
increased only 3.0 percent; whereas total employment in noncon-
tractors' work forces went up by 8.2 percent, but only a 12.3
percent gain for minorities was recorded. (See Charts 3 and 4.)
Women's participation in the contractors' work forces grew by 15.2
percent, as opposed to 2.2 percent in noncontractors' work forces. 1/
(See Charts 6 and 7.)
1/ The net increase of minorities in contractors' es ablishments
was 496,506, or 23.7 percent, versus 216,524, or 21.5 percent,
in the noncontractors'. Women employed in contractor establish-
ments increased by 783,468, an 18.7 percent gain, versus 312,205,
or 10.5 percent, in noncontracto. establishments. It should be
noted here that net increases, while intrinsically important and
also useful in comparing utilization of opportunities, are not
as good indicators of success as is the growth of participation
rates, since the latter show the proportion of jobs held by
those whose opportunities are to be enhanced. For example, if
a contractor establishment were able to retain its minority
employees while its overall employment fell, that success would
be registered by growth of the minority participation rate
(percentage of jobs held) even though no net increase of
minorities occurred. (The same phenomenon can occur in con-
junction with growth, but is more easily illustrated in the
foregoing example.)
DRAFT
- 9 -
Reviewed versus Unreviewed Establishments
The comparison of reviewed and unreviewed contractor establishments
shows an overall greater growth of minority participation rates 1/
in reviewed establishments than in unreviewed, 22 percent vs. 19.4
percent (see Chart 16), and greater growth of participation in all
but one of the occupational categories in the reviewed establish-
ments, including five of the six special-attention categories.
These minority gains in reviewed establishments occurred despite
a .01 percent total employment growth in those same, establishments.
Unreviewed contractor establishments experienced a 4.2 percent
growth in total employment. (See Chart 17.)
Reviewed contractor establishments showed greater participation
gains for women in all white-collar categories and service work.
Women in unreviewed establishments made greater gains in the
blue-collar categories of skilled, semi-skilled and unskilled.
Because of the large numbers involved in the increases in the
latter categories, overall participation rates for women increased
15.4 percent in unreviewed establishments, compared to 14.2 percent
1/ The term "participation rate" (see Glossary) is used in this
study as it is commonly applied and understood in the com-
pliance program and the working field of equal employment
opportunity.
2/ (For the statistical significance of these and all other
differences cited, see Tables E and F.)
DRAFT
- 10 -
in reviewed. In all, women in reviewed establishments made
greater gains in six of the nine categories, including four of
the six in the special-attention group. (See Chart 19.)
Redistribution
In addition to the rising levels of employment of minorities
and women, the study shows significant changes in the more
complex area of distribution of minorities and women within the
work forces compared. The distribution of minorities and women
in establishments covered by the Executive Order has shifted
from service worker and lower-skilled blue-collar jobs to white-
collar and higher-skilled blue-collar jobs in greater percentages
than in establishments not covered by the Order, and a similar
contrast is found between the reviewed and unreviewed contractor
establishments. While there has been a redistribution of jobs
in general of the sort described above, the greater shift has
been among the Federal contractor establishments and the reviewed
establishments within that group. Minorities and women have
shared in that redistribution in proportions and patterns
consonant with the objectives of the compliance program, as
subsequent discussion will detail.
DRAFT
- 11 -
It should be noted that both the covered establishments and the
reviewed establishments accomplished the greater levels of
achievement noted above despite a smaller total employment
growth than that experienced by the establishment groups with
which they were compared. (See previous pages and Tables B and D.)
Taking into account the socio-economic developments dur ng the
studied period which are cited in the following pages, and having
controlled for the major variable of Title VII influence, we
believe that the superior performance in employment and advance-
ment of minorities and women found in the establishments of the
Federal contractors are attributable to the good-faith efforts
of Federal contractors to comply with their contractual obli-
gations of affirmative action. In short, affirmative action
efforts by Federal contractors and enforcement of the Executive
Order by OFCCP have had greater impact on equal employment
opportunities for women and minorities than has mere non-
discrimination, which is the only obligation of non-Federal
contractors.
Federal Contractors - Historical Perspective
In order to appreciate more fully the progress made by minorities
and women in Federal contractor establishments during the period
covered by this study, it is necessary to refer briefly to the
- 12 -
DRAFT
history of Federal compliance efforts preceding and
subsequent to issuance of Executive Order 11246.
The relatively poor EEO profile of Federal contractors seen
in 1974, i.e., the smaller proportions of minorities and women
found in their work forces than in those of noncontractors,
is a manifestation of the effects of discriminatory practices
that antedate the establishment of the compliance program.
These practices were prevalent before World War II, and became
the focus of government concern in wartime because of their
deleterious effect on the defense effort. Federal con-
tractor establishments typically comprised the best-paying
jobs, and competition for those jobs was most intense. It was
also in those establishments that some of the most jealously
guarded systems of preference for white males were prevalent.
Where minorities were employed, they were found almost entirely
in the so-called "3-H" jobs--hard, hot and heavy. Women were
concentrated in clerical occupations in business and industry in
general, and in low-paying semi-skilled jobs in women-intensive
industries such as garment manufacturing and food processing.
Federal contractors were also heavily unionized, at a time
when union contracts often contained discriminatory features
regarding women and minorities. Discriminatory practices by
many unions, particularly in the skilled trades, were the rule,
- 13 -
DRAFT
rather than the exception. As war drew near, under pressure
from black leadership and war-related production demands,
President Franklin D. Roosevelt issued Executive Order 8802,
banning discrimination in the Federal Government and in war
industries based on race, color, creed and national origin.
When the war began, minorities and women continued to be
excluded from many contractors' general work forces even
when production schedules were failing for lack of workers.
Because most major U.S. corporations that were not yet
Federal contractors became such during the war, Government
efforts to eradicate racial discrimination in war industries
had important short-term benefits for growth of non-white
employment. But some contractors, notably those with sole
source situations, resisted all government efforts to bring
about compliance and persisted for the duration in exclusion
of minority workers. A list of 37 plants described by the
President's Fair Employment Practice Committee in its first
wartime report as among those "in which resistance to the
hiring of non-whites was most stubborn" 1/ included 20 whose
parent companies were ranked in the first Fortune 500 list a
decade later. 2/ As the war drew to a close, minority and
1/ Fair Employment Practice Committee, First Report,
July 1943-December 1944, U.S. Government Printing
Office, Washington: 1945, page 66.
2/ Future, Supplement, July 1955, Fortune Directory
of the 500 Largest U.S. Industrial Corporations.
- 14 -
DRAFT
female employment in war industries plummeted. Returning
veterans reclaimed their jobs and pre-war practices of race and
sex discrimination blossomed anew. The Federal contractor
monitoring agency of the day, the Fair Employment Practices
Committee, reported in June, 1946, that "The wartime gains of
Negro, Mexican-American and Jewish workers are being lost
through an unchecked revival of discriminatory practices." 1/
In January, 1953, the FEPC's successor, the President's
Committee on Government Contract Compliance, reported:
"The Committee found the nondiscrimination provision
(in Government contacts) almost forgotten, dead and
buried under thousands of words of standard legal
and technical language in Government procurement
contracts.
"A few contractors have assumed their full obligation
under the clause and have opened their employment
rolls to all persons gualified for jobs. The
majority of contractors, however, have viewed the
provision as just another contractual clause of
relatively minor importance and have made little,
if any, attempt to adhere to its standards."
Government itself was not exempt from blame in the situation.
The Committee continued, "Government contracting officers in
1/ Fair Employment Practice Committee, Final Report,
June 26, 1946, U.S. Government Printing Office,
Washington: 1947, page VIII.
DRAFT
- 15 -
most agencies have lacked proper machinery to enforce this
clause. In many cases even the will has been absent to
require contractors to meet their obligations under it." 1/
The pattern continued for the next decade, despite new
Federal initiatives such as the President's Committee on
Equal Employment Opportunity, which reported in November,
1963, that in establishments filing compliance reports
Negroes held only 6.3 percent of reported jobs and only
1.3 percent of reported white-collar jobs. 2/ In this same
year, non-whites accounted for 10.5 percent of total U.S.
employment and 4.3 percent of all white-collar jobs nationally. 3/
The phenomenon of the largest Government contractors having
relatively poor EEO profiles in their communities was
notable enough for the United States Civil Rights Commission
to attempt to elicit testimony from a number of such firms
and their employee unions in hearings conducted in various
parts of the country in 1962 and 1963. While the Commission
was successful in eliciting testimony, some firms refused
to provide employment statistics. 4/
1/ The President's Committee on Government Contract Compliance,
Equal Economic Opportunity, Washington, D.C., January 16,
1953, page 3.
2/ The President's Committee on Equal Employment Opportunity,
Report to the President, November 26, 1963, page 19.
3/ Source: U.S. Department of Labor, Employment and Earnings
Vol. 10, No. 8, February, 1964.
4/ Report of the United States Commission on Civil Rights, 1963.
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In 1961, Vice President Lyndon Johnson called a meeting of the
presidents of the 50 largest Government contractors and signed
up most of them in a program to promote equal opportunity
called "Plans for Progress." It was a program of voluntary
effort for EEO. Although attempts were made to expand the
membership in the program to noncontractors as well, the
membership remained predominantly Government contractors.
In 1968, after studying the employment of minorities by 100
major corporations headquartered in New York, the Equal
Employment Opportunity Commission (EEOC) reported that in
"a comparison of firms which had joined 'Plans for Progress'
and similar non-member firms the 'Plans for Progress'
firms showed consistently poorer records in white collar
minority employment, particularly at the higher levels where
they were supposedly focusing special attention on the
problem." 1/
This, then, is the background against which the relative
employment levels of minorities and women in contractor
and non-contractor establishments both at the beginning of
the study period in 1974 and at its end in 1980 must be
viewed.
1/ See Help Wanted
Or Is It? U.S. Equal Employment
Opportunity Commission U.S. Government Printing Office,
1968, page 14.
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Employment Patterns of Minorities and Women
Before commenting on the changes which have occurred during
the studied period, it is well to note that employment
practices of both contractors and noncontractors have
impacted differently upon minorities than upon women.
A glance at the employment patterns seen on Charts 2 and 5
will illustrate the difference. It can be seen immediately
that the patterns of utilization of minorities are quite
similar in both contractor and noncontractor establishments,
whereas the patterns of utilization of women are very different
between the two. That difference is accounted for by the larger
presence of women-intensive industry establishments, such as
health services, in the noncontractor group. Because of this
difference in employment patterns, changes that might indicate
progress for minorities might not indicate the same for women,
and vice-versa. As noted above, OFCCP's regulations have taken
this difference into account in establishing objectives for
effecting change, and this study treats the observable results
accordingly.
PERFORMANCE OF CONTRACTORS AND NONCONTRACTORS COMPARED
Minorities
The pattern of minority employment following World War II,
whether in contractor or noncontractor work forces, was one of
concentration in lower-skilled blue collar and service occupations.
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DRAFT
In the work forces of Federal contractors reporting in 1962,
for instance, 94.9 percent of black men and 80.8 percent of
black women were employed in blue-collar jobs. Within those
blue-collar categories, 90.7 percent of the black men and
95.2 percent of the black women worked in semi-skilled,
unskilled and service occupations. 1/ An objective of the
compliance program has been to increase the proportion of
minorities in skilled and white-collar jobs.
Although contractor establishments, in 1974, were employing
proportionately fewer minorities than noncontractors" in all but
three of the nine EEO-1 categories, i.e., clerical, semi-skilled
and service workers, by 1980 they had overtaken and passed noncon-
tractor establishments in the professional and sales categories
(Chart 2.) The relative growth of minorities' participation
rates in each of the EEO-1 job categories is shown on Chart 3.
In addition to leading noncontractor establishments in the
employment of minorities in five of the nine EEO-1 categories,
contractor establishments in 1980 were almost even with noncon-
tractors in employment of minorities as officials and managers;
they also had narrowed the gap very significantly in the technicians
category and were within one percentage point in overall employ-
ment. Contractor establishments have effected these greater
1/ For a tabular comparison of occupational groupings by race
and sex in 1962, see Report to the President, President's
Committee on Equal Employment Opportunity, Washington, D.C.,
November 26, 1963, pages 17 ff.
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DRAFT
gains in minority employment even though they experienced less
total employment growth. Net changes in total employment (in
each EEO-1 category (yellow bar)) compared with net changes in
minority employment are graphically illustrated in Chart 4.
In the professional category, for example, contractor establish-
ments, with an overall employment increase of 23.9 percent,
effected a minority net increase of 94.7 percent; whereas noncon-
tractor establishments, though having a 47.5 percent overall
increase, effected only a 65 percent net increase of minorities.
Distribution of Minority Workers
During the period of the study an important shift in minority
distribution took place in the contractor establishments (Chart 8)
Along with the rising participation rates of minorities in con-
tractors' work forces overall, the proportion of minority workers
found in skilled and white-collar jobs rose from 37.9 percent in
1974 to 47.4 percent in 1980 - a shift of 9.5 percentage points
and a growth of 25 percent. 1/ The growth in noncontractors'
establishments was considerably smaller (from 35.9 percent to
39.1 percent) - a shift of 3.2 percentage points, and a growth
of 8.9 percent. In charting redistribution of the employment of
a race or sex group over time, one is tracking movement of the
group, not of individuals. The ratio of hires to promotions
involved in the change cannot be ascertained from the presently
1/ Charts 8-10 and 21-23 indicate the degrees of movement in
shifts of percentage points.
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DRAFT
available data. However, it can be stated from compliance program
experience that virtually all minority entry into the skilled
trades has followed the path of formal apprenticeship or even
longer alternate training routes in certain companies. Also, a
substantial proportion of the minority increase seen in officials
and managers results from selection of minority individuals from
the ranks of skilled and semi-skilled workers, a traditional source
of new supervisors in most of industry, but a route of career
progression in which minorities until recently did not share.
The results of contractors' employment practices appear even more
favorable when one compares the proportion of minority workers
still found in the unskilled and service worker jobs in 1980.
In noncontractors' establishments, 39 percent of minority workers
were still found in the two categories, versus 22 percent in those
categories in contractor establishments.
While minorities in contractor establishments were moving into
officials and managers and sales categories in substantial pro-
portions, they declined by 19.0 percent in the sales category in
noncontractor establishments (See Chart 4.)
Comparison With National Labor Force
In 1974, minorities accounted for 16 percent of the U.S. labor
force. At that time minorities were underrepresented in all the
white-collar job categories in both contractor and noncontractor
establishments (Chart 11). They were overrepresented in unskilled
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DRAFT
and service worker employment. By 1980, minorities accounted
for 17.8 percent of the labor force. Of particular interest
is the attainment by minorities of a participation level in the
office and clerical category in contractor establishments that
is comparable to their proportion in the labor force. For the
first time, minorities in 1980 were participating in a white
collar activity proportionately to their representation in the
labor force. However, there were no white collar job categories
where they had attained proportionate representation in the
noncontractor establishments.
Women
The difference in performance between Federal contractors and
noncontractors in employment of women during the period studied
is even greater than that for minorities. Although Federal
contractors trailed noncontractors in women's employment in
all of the major job categories in 1980 as well as in 1974
(Chart 5), the growth of women's participation rates in con-
tractor establishments exceeded that in noncontractor
establishments in all EEO-1 categories (Chart 6.) This
resulted in contractor establishments improving their
position vis a vis noncontractor establishments in every
category, so that by 1980 the gap between contractor and
noncontractor employment of women narrowed by 3.6 per-
centage points (Chart 5). The patterns seen in Chart 5
reflect, in part, the high concentration of women in pro-
fessional and technical occupations in industries such as
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- 23 -
Distribution of Women Workers
Women have been concentrated in office and clerical positions
in both contractor and noncontractor establishments (see Chart 9.)
During the period under study, women in contractor establishments
shifted into the other white-collar categories and skilled
occupations at a notably higher rate than did women in non-
contractor establishments. Also, women's employment in con-
tractor establishments shifted from lower-skilled blue-collar
jobs by 3.9 percentage points*, resulting in a 5.8 percent growth
in the poportion of the female work force found in skilled and
white-collar jobs. In non-contractor establishments, the shift
was 2.4 percentage points and the growth in skilled and white
collar was 3.7 percent.
Women were not concentrated in the lower-skilled blue-collar
and service jobs to the extent that minorities were, however,
and thus it was a compliance program objective to increase
female participation in semi-skilled jobs as well as in
skilled jobs, as has been noted earlier. This in fact did
occur, with women's participation in contractors' semi-skilled
jobs increasing more than four percentage points, while in
noncontractors' establishments they fell almost four (Charts 5
and 12).
*The corresponding figure on Chart 9 should read 3.9, rather
than 3.8.
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Comparison With National Labor Force
In 1974, women comprised 39.4 percent of the national labor force,
and in 1980 they accounted for 42.6 percent. The proportion of
women employed in noncontractor establishments was over those
percentages in both 1974 and 1980, whereas women in contractor
establishments were employed below those percentages in both
years (Chart 12). In 1980, in noncontractor establishments,
women were concentrated in clerical, technical, professional,
service work and sales jobs - in all of which they exceeded
their proportion of the labor force by more than 10 percent. In
contractor establishments women exceeded that proportion by more
than 10 percent only in clerical jobs. 1/
REVIEWED AND UNREVIEWED CONTRACTOR ESTABLISHMENTS COMPARED
All employers who are awarded Federal contracts of $10,000
or more are obligated to take affirmative action to prevent
discrimination. Establishments of these contractors are
subject to review by the Federal Government to determine
whether their policies and practices are in compliance with
1/ As noted earlier, the specific occupations in which women are
concentrated within the broad categories of the noncontractors'
work forces often compare unfavorably in earnings with occupa-
tions in the same broad skilled category which predominate in
the contractors' work forces -- e.g., nurses vs engineers,
health technicians vs computer technicians, sales clerks VS
product line salespersons, etc. Thus, while women's presence
below their national work force percentage in certain cate-
gories of the ontract rs' work forces indicates a need for
improvement, their presence above that level in various
categories of the non-contractors' work forces is not
necessarily a favorable situation.
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their contractual obligations to ensure equal opportunity.
Currently, firms having contracts of $50,000 and 50 or more
employees must develop and maintain written programs of
affirmative action. Because of the very large number of all
contractors' establishments (there are currently about 114,000)
compared to compliance program resources, only a fraction of
the covered establishments are actually reviewed. Many Federal
contractors are multi-establishment firms, while others are
single-establishment only. Whatever the number of their establish-
ments however, Federal contractors are aware that any of their
establishments may be reviewed at any time.
During the period studied, it was the general policy of
compliance agencies to schedule for review those establish-
ments which appeared to offer the greatest opportunities for
employment and advancement of minorities and women. Such
criteria as size, location with regard to centers of minority
population, turnover rate and "EEO profile" (proportions of
minorities and women reported in the establishment's work
force) were considered in selecting establishments to be
reviewed. The regulatory requirement of a preaward review
whenever a contract of $1 million or more was to be awarded
combined with other factors to ensure a wide-ranging mix of
size and location of establishments.
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As used in this study, the term "reviewed establishment" means
a Federal contractor establishment which has experienced one or
more compliance reviews by OFCCP or its predecessor agencies at
any time.
Contractors whose establishments are to be reviewed are provided
a 30-day notice of the impending review, except in the case of
pre-award reviews or complaint investigations, in which cases
the notification interval may be shorter. Since the data for
this study are taken from EEO-1 reports filed annually by the
contractors, and over a period of years, rather than from figures
obtained during compliance reviews, it is unlikely that the data
reported here reflect in any way the contractors' foreknowledge
of any specific reviews.
The objective of this part of the study was to determine whether
different patterns of minority and female employment were dis-
cernable in establishments which had experienced compliance
reviews and in those which had not.
Minorities
Patterns of utilization of minorities were very similar between
reviewed and unreviewed contractor establishments in 1974,
with reviewed establishments lagging behind unreviewed in
most categories except skilled workers, where utilization was
essentially identical, and semi-skilled and unskilled, where
reviewed establishments were ahead (Chart 14). The growth of
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minority participation rates in reviewed contractor establishments
exceeded that in unreviewed establishments in eight of the nine
EEO-1 job categories between 1974 and 1980 (Chart 15). By 1980,
reviewed establishments were leading unreviewed by a full per-
centage point in skilled, and the lead in semi-skilled and
unskilled had increased further. In total employment of minori-
ties, reviewed establishments had pulled even with unreviewed,
and the margin had been narrowed in all other categories except
sales workers, where about 75 percent of the increase in
unreviewed establishments was in retail sales establishments.
Reviewed led unreviewed establishments in growth of minority
participation in all white-collar categories except sales,
as well as in all blue-collar categories. Growth of minority
participation rates in reviewed establishments varied from 3.0
percentage points higher for unskilled workers to 16.1 per-
centage points higher for technicians than the same categories in
unnreviewed establishments (see Chart 16.)
Both reviewed and unreviewed establishments suffered declines
of total employment in their blue-collar work forces during
the studied period (Chart 17), but reviewed establishments
suffered heavier declines, as well as net losses in skilled
and service workers, whereas unreviewed establishment gained
in total employment in those two categories. Despite these
1/ Retail sales positions, it should be noted, are relatively
low-paying, whereas sales positions in industry are among
the highest-paying jobs.
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hospitals and other health services which are not typically
Federal contractors. The high proportion of women seen as
skilled and semi-skilled in noncontractor establishments
may reflect their employment in women-intensive industries
which do not sell directly to the Federal government and
thus have not been classified as Federal contractors. Overall,
contractor establishments increased their female participation
rates by 15.2 percent compared to only 2.2 percent for
noncontractors. 1/
Chart 7 illustrates the fact that contractor establishments
not only accomplished much larger net increases of women
than did noncontractors in all categories except unskilled,
but did so despite relatively smaller growth of total employ-
ment, and, in semi-skilled, despite a total employment decrease
of more than 10 percent.
A partial explanation for the greater increase of women service
workers in contractors' establishments may be the increasing
employment of women in protective services, the largest of
which are Federal contractors, and in the guard forces of
Federal contractors. This must be inferred from compliance
program experience, since the data cannot be further refined.
1/ The notable decline in women's participation rates in the
noncontractors' semi-skilled occupations seen on Chart 6
is the result of a 17 percent decline in semi-skilled
employment in nondurable manufacturing. Women accounted
for 69 percent (48,735) of that decline. The net decrease
of women in the noncontractors' sales category (chart 7) is
attributable almost wholly to a drop of 127,000 employees in
the retail sales industry, of which women were nearly half.