National Center for Policy Analysis
MONTH IN REVIEW
Affirmative Action
June, 1996
MORE BLACKS FOUNDING BUSINESSES
A wave of black entrepreneurs is forming businesses at a record clip, according
to recent statistics, amid evidence that minority preferences in contracting
may not be playing the role they once did.
According to recent Census Bureau data:
- Between 1987 and 1992, the number of black-owned firms in the U. S.
surged 46 percent to a total of 621,000 businesses.
- This was during a time that the overall number of businesses increased
just 26 percent.
- The number of wealthier black households -- with annual incomes of
$75,000 or more -- increased from 1.7 percent in 1970 to 5.2 percent in
1993.
- Between 1972 and 1993, the number of blacks enrolled in colleges and
universities nearly doubled, to 1.4 million.
Traditionally, the most common form of black-owned business was in the service
sector -- barber or beauty shops, for example. Now the fastest growing sectors
are business services, legal services, insurance and real estate. The number
of minority-owned construction firms, which are given preferences in federal
and state contracting programs, grew by 68 percent between 1982 and 1987,
but by only 16 percent between 1987 and 1992.
Source: Laura M. Litvan, "The Changing Face of Ownership," Investor's
Business Daily, June 25, 1996.
QUANTIFYING AFFIRMATIVE ACTION RESULTS
A recent study by two Michigan State University economists attempts to measure
the results of affirmative action programs in businesses.
In a phone survey of 3,200 employers in four major U. S. cities, Harry Holzer
and David Neumark examined how women and minorities fare in firms that have
affirmative action programs compared with those in firms that do not. In
research conducted from 1992 to 1994, they looked at whether such workers
were likely to be hired, promoted, paid well or given good performance evaluations,
compared to white male co-workers.
Some of their findings:
- Minority employees hired at affirmative-action firms tended to lack
one or two years of schooling, compared to white male employees, and women
were about one-half year behind in education compared to their male counterparts.
- Performance ratings for women and minorities relative to white, male
co-workers were about the same, whether employers practiced affirmative
action or not.
- If a firm followed affirmative action policies, the probability that
a woman would be hired increased by 10 percent, that a black male would
be hired increased 20 percent -- and that a white male would be hired dropped
by 15 to 20 percent.
Women and minorities at both types of firms were paid less than white male
peers but the differences were slimmer at companies with affirmative action
policies.
Women and minorities were slightly more likely to be awarded promotions
at affirmative action firms. And Hispanic females at these companies were
much more likely to be promoted, compared with white males in the same offices.
Source: Perspective, "Minority Hiring," Investor's Business
Daily, June 28, 1996.