Affirmative Action Enforcement: The Federal Contract Compliance Program

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4^th WORLD CONFERENCE ON REMEDIES FOR ECONOMICINEQUALITY                                    HUBERTHUMPHREY INSTITUTE

                                        UNIVERSITY OF MINNESOTA
                                              October 12, 2012
                  Dr. BernardE. Anderson, the Wharton School, University of Pennsylvania        AffirmativeAction Enforcement:  The Federal ContractCompliance Program 
    In the year ofour Lord 2012, this country continues to be afflicted by racial inequality inAmerican economic life.  Blackunemployment persistently remains at twice the unemployment rate of whiteworkers, black families continue to make do with $6 for every $10 enjoyed bywhite families, and black wealth, measured by net worth, hovers in theneighborhood of $5000, compared with $116 thousand for white families.
   These egregiouseconomic disparities are rooted in past and present labor marketdiscrimination. The quest to overcome employment discrimination requires the useof many tools; affirmative action is one of the most important, and effective.Government purchasing power is the foundation for federalgovernment anti-discrimination, affirmative action policy. The idea to usegovernment purchasing power to fight discrimination was first introduced in1941 by A. Philip Randolph, the great labor and civil rights leader, when hethreatened to lead a march on Washington in opposition to discrimination in thedefense industries.    Mr. Randolphmet with President Franklin D. Roosevelt and explained why Presidential actionwas necessary to assure black participation in the war effort.  When the President concluded that he couldnot sweet talk Mr. Randolph to call off the march by appealing to hispatriotism in a time of war, he issued Executive Order 8802, which establishedthe Fair Employment Practices Committee (FEPC). The Committee, with authority limited to defense industries, had only investigatorypower, and was limited to moral suasion to pierce the veil of virulentdiscrimination that was rampant at that time.                                                                                                                                    -2-  PresidentRoosevelt’s action in creating the FEPC set in motion a process that saw each succeedingchief executive issue a similar order to address employment discrimination amonggovernment contractors:·        President Truman created the Committee ongovernment contracts, and broadened coverage to all industries;·        President Eisenhower continued the TrumanCommittee, and appointed Vice President Richard Nixon chairman                              ·        In 1961, President John F. Kennedy issuedexecutive order 10925, which created the President’s Committee on EqualEmployment Opportunity (OFCCP), and named Vice President Lyndon B. Johnsonchairman.The Kennedy executive order was the first to introducethe concept of affirmative action. Previously, the enforcement policy onlyexhorted employers to practice nondiscrimination, and to act in their self-interest to hire “qualified Negroes”.  Affirmative action went beyond nondiscrimination,and called on employers to take specific steps to reach out, recruit, and hireworkers defined as members of the “protected class.”   The concept ofaffirmative action is rooted in equity, a concept pioneered by the BritishCourt of Chancery.  In the Americancontext, affirmative action is defined as public or private action, orprograms, which provide, or seek to provide opportunities or benefits topersons on the basis of their membership in a specific group.  The Kennedy order focused on employment or employmentrelated benefits, for persons identified by race, national origin, or religion   In 1965,President Lyndon B. Johnson issued Executive Order 11246, the legal enforcementauthority that remains in place today. The Johnson order shifted enforcementauthority from the White House to the Department of labor, and created the Officeof Federal Contract Compliance Programs (OFCCP).  The new agency was given authority topromulgate regulations that define affirmative action, and specify                                                                                                                              -3-employer practices that are intended to assure equalemployment opportunity in all phases of the employment process.  Initially, that included goals and timetablesfor noncompliant contractors.   The context ofPresident Johnson’s order- - - an order that included stronger enforcementauthority than previous orders, is important. There’s a causal relationshipbetween the urban unrest in 1964-68 and the implementation of affirmativeaction employment policy.  In June 1964, PresidentJohnson was the commencement speaker at Howard University.  In discussing the need for special efforts tocorrect for past discrimination, he said “You can’t keep a man in chains for400 years, remove the chains, take him to the starting line and tell him to runthe race, and think you are being fair”.    There was muchunrest associated with civil rights demonstrations at that time.  Various studies on the protests of the 60s,the black power movement, the Kerner Commission Report, and other investigationsall recognized the economic plight of the black community as a major cause ofthe unrest.  The uneven distribution ofjobs, the long exclusion of black workers from many occupations and some industries,not only in the segregated South but in other regions of the country generatedracial economic inequality that showed no tendency to change without governmentintervention. The Civil Rights Act of 1964 was enacted to address theseconditions.   It is importantto recall that the August, 1963 March on Washington, which brought a quartermillion people to the Washington Mall, was a march for jobs and freedom.  The juxtaposition of those words was noaccident; they reflected the view of A. Philip Randolph, the father of themarch (some 22 years delayed) that there can be no freedom or civil tranquilityin the absence of economic opportunity and economic security.    In 1969, one ofthe early affirmative action enforcement initiatives was led by ArthurFletcher, the black Republican who was appointed by President Nixon toAssistant Secretary of Labor for Employment Standards Administration. Fletcherused the Johnson executive order to attack discrimination in the constructionindustry.  After tense negotiations withlocal building trades unions, he forged an agreement named “The PhiladelphiaPlan”, which set specific goals and timetables for hiring minority workers.Similar agreements called “Home Town Plans” were negotiated in other cities.   The social andpolitical circumstances underlying the agreements were compelling.  The Johnson administration had introduced aWar on Poverty that included major funding to revitalize cities through urbanrenewal. The black unemployment rate, for youth and adults, had long been twicethe rate for white workers.  Yet, theblack                                                                                                                                     -4-unemployed watched while white construction workers in well-payingjobs proceeded to build housing, schools, and other facilities in theirneighborhood. That sparked major, often violent, demonstrations that could onlybe contained by breaking the barrier that barred black workers from employmentin the construction industry.   The organizationof the construction industry labor market poses unique difficulties foraffirmative action enforcement.  Theconstruction industry labor market is a referral system in which the union determinesthe employer’s workforce.  To get a job,the worker must be a member of the union; and as a private organization, theunion has the right to determine its membership. That undergirds discriminatorypractices.  The route toemployment in the commercial construction industry is through apprenticeshipprograms.  From the early 60s, effortshave been made to increase minority participation in apprenticeship in order toincrease minority employment in the industry. But little progress has been made, and commercial construction continuesto display wide racial disparities.OFCCP    The federalcontract compliance program is an important tool for assuring equal employmentopportunity in American industry.  About200 thousand business firms have federal contracts, valued at $ 10,000 or more,the definition of firms covered by the executive order.    Nearly one-fourthof the American workforce is employed by defense and nondefense firms withfederal contracts.     OFCCP regulationsrequire each firm to have an affirmative action program, which includes anemployer review of employment policies and practices to assure that there areno structural or institutional barriers to recruiting, hiring, evaluating,training, and promoting employees on the basis of race, gender or nationalorigin, and that compensation systems provide equal pay for equal work.   Employer complianceis monitored through about 4,000 contractor reviews each year. Noncompliantemployers are required to change their employment practices if violations arefound. Violations may result in costly penalties, including back pay. Theultimate enforcement weapon is debarment from future contract opportunities.   The goal of affirmativeaction is to assure nondiscriminatory decision making in all phases of theemployment process. In hiring, for example, the goal is to assure that all jobapplicants have an equal chance to be selected. If the process is fair, the proportion                                                                                                                                     -5-of members of the protected classes who are selected froma pool of diverse applicants should reflect the diverse composition of theapplicant pool.    For example,assume that there are 100 marbles in a bowl, and all marbles have the samesize, weight, and smoothness, and differ only in color.  Some marbles are black, others white, yellow,green, or red.  Now ask a blindfoldedselector to pick 10 marbles from the bowl. What is the likelihood that all 10will have the same color? The probability of that outcome is very low. Thereasonable conclusion is that the selection process is flawed.    In reviewinghiring outcomes, enforcement officials examine the hiring process to assurethat the selection of new hires bears a reasonable relationship to thediversity of the pool of equally qualified applicants.  Affirmative action plans are intended toassure nondiscriminatory practices in outreach to assure a diverse applicantpool, and nondiscriminatory systems for training, performance evaluation,promotion, and compensation that treat all employees equally, regardless ofdifferences in their immutable characteristics.    The enforcementstandards applied by the Department of Labor are influenced by legal challengesto affirmative action in other domains. For example, United Steelworkers v. Weber (1971) a title VII case, andFullilove v. Klutznick, a Department of Commerce minority contracting case setthe framework for permissible actions a firm could take to expand minority and femaleemployment opportunities.  Congressionaloversight also plays an important role. In 1995, Senate Robert Dole, then Senate Majority leader, challenged theaffirmative action program for federal employees. In response, PresidentClinton launched a government-wide review of affirmative action.  The review was led by Christopher Edley then Assistantto the President, and now Dean of the University of California Berkeley LawSchool; and Joseph Stiglitz, the Nobel Laureate economist, who was thenChairman of the White House Council of Economic Advisors.    The reviewrevealed that while there were some shortcomings in the management ofaffirmative action in a few agencies, the great weight of evidence showed thatthe federal government’s protection of EEO was greatly enhanced by affirmativeaction.    President Clintonannounced his verdict on the reviews in July 1996 in a speech at the NationalArchives.  After summarizing the evidenceon racial economic disparities, the history of slavery and segregation after Emancipation,and the adoption of the Civil Rights Act of 1964, President Clinton declaredthat in the matter of affirmative action, we should: “Mend it , Don’t End It”.                                                                                                                                -6-  Over the last twodecades, two developments have framed the context for the enforcement ofaffirmative action by OFCCP.  The first isthe decline in the use of the term affirmative action, and the emergence of themore felicitous term “diversity”.  MostFortune 500 companies now have senior executives with the title “Director orVice President of Diversity”, and departments that specialize in diversitymanagement.  The focus of their concernis how to integrate employees with different backgrounds into a collaborativeworkforce where each can develop his or her individual talents to help maximizecorporate performance.   The emphasis ondiversity management may divert attention from the implementation of policiesand practices that promote hiring and equal compensation for minorities andwomen.    Diversity management is nosubstitute for affirmative action.  Employers must continue to be alert to thenecessity to recruit, hire, train, and promote racial minorities and women innumbers commensurate with their presence in the applicant pool. Affirmativeaction does not mean quotas; quota hiring is unlawful.  But numbers are not insignificant indetermining the effectiveness of affirmative action.   The otherimportant development is the increasing number of well-prepared minorities andwomen in the applicant pool seeking private sector jobs. The number of racialminority and female college graduates has grown steadily over the past twodecades. Employers can no longer say that they’d like to hire a minority orfemale employee, but can’t find one. Thirty years of compliance assistance, coupledwith sophisticated electronic information systems opened the door to efficientrecruitment systems that facilitate targeting on employee groups that wereoverlooked in the past.  The partnershipof OFCCP with enlightened employer groups, like the Industry Liaison Group,also contributes to a higher level of compliance with affirmative action.Conclusion   Progress hasbeen made over the last four decades in widening the doors of employment opportunityfor racial minorities and women in American industry.  Gone are the days when the Bell Telephonesystem had separate employment offices for men and women, black workers weresystematically denied employment in personal contact jobs, and a straight Ablack college graduate seeking a job as a management intern   would be told by an employment recruitingfirm that no business client would hire him because he was a Negro.  Affirmative action is responsible for much of theprogress that eliminated those practices from the workplace.  But few who are acquainted with corporatebusiness practices, and follow industry employment trends will argue thatdiscrimination no longer exists.  Forexample, the gap in the black/white unemployment rate for college graduatesnarrowed                                                                                                                                   - significantly between 1977 and 2007.  But it widened noticeably after the rapidrise in layoffs in the midst of the 2007-2009 recession.  It’s important to assure that the pattern oflayoff and recall during the business cycle does not reflect discriminatorydecision-making. Vigorous enforcement of affirmative action can secure thatoutcome. Affirmative action is a sine qua non for eliminating racial inequalityin American economic life.