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AFFIRMATIVE ACTION & SMALL BUSINESSES.
Term Paper ID:20675
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Negative effects of laws on equal employment opportunity. Reasons for, economic efficiency, competition, resource allocation.... More...
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Paper Abstract:
Negative effects of laws on equal employment opportunity. Reasons for, economic efficiency, competition, resource allocation.
Paper Introduction:
THE EFFECTS OF AFFIRMATION ACTION LAWS
ON SMALL BUSINESS FIRMS
This research examines the effects on small business organizations of affirmative action laws. Affirmative action legislation in the United States at both the federal and state levels of government establish guidelines for the development and implementation of social policy with respect to equal employment opportunities and with respect to the rectification of past acts of employment discrimination against selected population groups. The importance of small business activity to the American can hardly be exaggerated. Defining a small business as one with either fewer than 100 employees, or less than one-million dollars in annual receipts, somewhat more than two-thirds (67.9 percent)
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Nappi, and J. THE EFFECTS OF AFFIRMATION ACTION LAWS ON SMALL BUSINESS FIRMS This research examines the effects on small business organizations ofaffirmative action laws. T., and Vora, J. If a regulationas written cannot provide the desired objective without creating a hardshipon small business enterprises, then government should find an alternate wayto provide the desired protection, or, if such an action is neitherpossible or feasible, government should compensate small business operatorsfor overseeing the fulfillment of a societal goal. In 1978, the then Secretary of Commerce in the Carter Administration,Juanita Kreps, said that "American business today is heavily dependent onthe society that surrounds it, on capital, labor, and customers; that is tosay that American corporations have a tremendous stake in the well-being ofAmerican society."[viii] This statement represents the position thatbusiness organizations do, indeed, have social responsibilities to thesocieties within which they function, without attempting to define eitherthe scope or the depth of that responsibility.Nobel prize winning economist Milton Friedman disagreed. Equality of opportunity for employment is one form of equalopportunity. Second, equal opportunity is promoted on thegrounds that it promotes economic efficiency. with new preface by author. Wilson Company, 1991, 7-17.Sowell, T. "The Legal Dimensions of Affirmative Action." In Altschiller, Donald. Requirements for equalitymay be legislated, and thoserequirements may be enforced with some degree of effectiveness. From this brief discussion of equal opportunity, it can be seen thatthe precise manifestation of the concept in a specific situation must bedefined, before a meaningful analysis of the equality ofopportunity/economic efficiency relationship may be made. In addition to the relationship that exists between equal opportunityand economic efficiency, there exists the very real question of whatexactly is meant by equal opportunity. Few in modernsociety would embrace this line of thought. H., and Gottfredson, L. New York: The H. Lynch, "Surviving Affirmative Action (More or Less),"Commentary, 9 (199 ): 44-47.----------------------- 13 The concept of equal opportunity often appears to defy precise definition--definitions tend to change with the perspective of the protagonist. This latter charge would be a difficult one formany equal opportunity advocates to defend, as they are often the samepeople who chastise the American government for attempting to imposeAmerican political goals on the rest of the world. This question is significant,because the relationship between two factors cannot be effectivelyanalyzed, if one has not defined one of the factors. Startz, "Private Discrimination andSocial Intervention in Competitive Labor Markets," AmericanEconomic Review, 73 (1983): 34 -347.T. If, on the other hand, one holds the position that theexisting allocation of resources within an economy is not perfectlyefficient, then the introduction of a change in resource allocation may beviewed as a means of increasing total welfare. "Surviving Affirmative Action (More or Less)." Commentary, 9 (199 ): 44-47.Nappi, A. When rules are made by government, however, their potentialeffects on small business enterprises must be considered. Lundberg, and R. Wilson Company, 1991), 7-17.A. Gottfredson, "Equality or LastingInequality?" Transaction Social Science and Modern Society, 27(199 ): 4-11.F. . certain opportunities"that are available to other individuals and groups.[iii] This lineof reasoning is usually extended to the idea that such conditions are"unfair and ought to be remedied."[iv] Equal opportunity is advocated for two reasons. Small business operators are not opposed to workerprotection, environmental protection, equal opportunity, or any other kindof protection. J., and Startz, R. If restrictions areapplied to the offending imported products, charges may be effectivelylodged against the United States for either attempting to protect anuncompetitive industry, or attempting to enforce American social goals onthe rest of the world. J. Thus, it wouldbe both economically inefficient and socially pointless to provide anindividual an opportunity to program a computer, if the individual wereunable to master a much simpler skill such as multiplication. (White Plains, New York:International Arts and Science Press, 1989), 247.Ibid.Klappholz, 248.H. Department of Commerce, Bureau of the Census,Enterprise Statistics (Washington: U.S. In actualpractice, the required number of similarly qualified females and non-Anglomales has not been available to firms to which affirmative action ordershave been applied.[xiii] Thus, affirmative action orders often havedetrimental impacts on the productivity and the profitability of individualfirms, as well as on the quality of output, total output, and productivityof the American economy. Sowell, "'Affirmative Action': A Worldwide Disaster,"Commentary, 88 (1989): 21-41.J. Providing equal opportunity to minority groups within a society ismore a social issue than it is a legal issue. Klappholz, "Equality of Opportunity, Fairness andEfficiency," in M. This definition of economic efficiency is derived from thePareto Criterion, which holds that an increase in total welfare occurs whensomeone is made better off, while no one is made worse off. M. In 1983, a study found that firms wouldenjoy increased profitability as a result of the elimination ofcompensation differentials based upon sex or upon racial or ethnicbackground.[xi] This study assumed, however, that the distribution ofabilities and motivations to learn, knowledge bases, and skill levels weresimilar in all racial and ethnic groups, and in both men and women.Proceeding from these assumptions, the researchers further assumed thatemployment policies based upon performance or potential performance wouldresult in an integrated workforce, in which a firm would acquire and retainonly the most efficient workers. In theory, employment discrimination regulation has a sound basis.In practice, however, the proponents of such legislation, having found thatthe elimination of discrimination on the basis of sex, racial or ethnicbackground, religious preference, or age would not result in therepresentation of individuals with these characteristics in all types andlevels of employment and in all compensation levels in the same proportionsas such individuals are found in the general population, began to demand anequality of outcome, as opposed to an equality of opportunity.[xiv] Theequality of outcome concept, as opposed to the equality of opportunityconcept, will have adverse impacts on both the short-run, and on the long-run profitability of business and industry, as well as on the economic andthe social health of the country.[xv] considering the importance of small business activity to Americansociety, it is surprising that government--federal and state--in thiscountry seem to go out of their way not just to make life difficult for thesmall business operator, but often to all but assure that small businesscannot survive. Endnotes BibliographyBilts, J. Equal opportunity of this type, however, may mean thatpersons must be given an opportunity to demonstrate that they are asproductive in a specific function as another person. "Toward A Real Restoration of Civil Rights." Commentary, 88 (1989): 25-29.Friedman, M. "'Affirmative Action': A Worldwide Disaster." Commentary, 88 (1989): 21-41.U.S. A modification of a productive process to accommodate the specialneeds of potential employees might cause a firm's products to becomeuncompetitive with respect to similar products produced in another countrywhere equally enlightened social legislation is not enforced. . W. Although it mayappear to be an unfair inference, this same argument of economic efficiencycould be used to hold that freedom from slavery should be a function of theindividuals ability to contribute to the total welfare. If this latter contentionwere widely accepted in society, it is likely that instances of employmentdiscrimination would drop dramatically. Department of Commerce, Bureau of the Census. (5th ptg). Social responsibility is imposed on business and industry in theinterest area of employment discrimination in the contexts of hiring,promotion, retention, and compensation. If norestrictions are placed on the unfairly competitive imports, the firm willgo out of business, and neither people with special needs nor those with nosuch needs will be able to be employed by the firm. . White Plains, New York: International Arts and Science Press, 1989, 246-289.Kreps, J. Washington: U.S. have a 'social responsibility' that goes beyond the interest of their stockholders . Government Printing Office, 1991.-----------------------Clarence M. . "Equality or Lasting Inequality?" Transaction Social Science and Modern Society, 27 (199 ): 4-11.Eastland, T. Vora, "Small Business Eligibility: ADefinitional Issue," Journal of Small Business Management(198 ): 24; U.S. These distortions are exacerbated, when employmentdiscrimination regulations are intended to rectify the effects of pastdiscrimination--affirmative action goal compliance.[xii] Whenrectification is the intent of employment discrimination regulations,government regulators and courts often direct firms to hire, promote, orretain females and non-Anglo males in numbers disproportionate to theirrepresentation in the general population. Onetheorist concluded that most assessments asserting that equality ofopportunity is absent are actually saying that "certainindividuals, or groups, do not have . Defining a small business as one witheither fewer than 1 employees, or less than one-million dollars in annualreceipts, somewhat more than two-thirds (67.9 percent) of all businessenterprises in the United States are classified as small.[ii] These firms,in turn, account for 4 .8 percent of non-government and non-farmemployment, 35.8 percent of sales revenues, and 32 percent of the country'sgross national product. Johnson, Money Trade and Economic Growth, 7th ed.(London: Allen and Unwin, 1991), 156.Klappholz, 249.J. (Ed.). T. While the likelihood that such an eventuality will evercome to pass for most Americans is quite low, the continued presence of thedream--the mere possibility--is important psychologically. Neither, however, does he think that society has any rightto officially prohibit such discrimination.[x] Rather, Friedman believesthat offenders should be persuaded to mend their ways. Pendleton, and Douglas Huron, "The Legal Dimensionsof Affirmative Action," in Donald Altschiller, (Ed.),Affirmative Action (New York: The H. The fact that small businesses employ 4 percent of the Americanworkforce illustrates the magnitude of their activity on society. Some proponents ofaffirmative action contend further, however, that such a definition alsomeans that potential employers must accommodate their facilities andproductive processes for the needs of people who may not be productiveotherwise. Chicago: The University of Chicago Press, 1982.Johnson, H. "Private Discrimination and Social Intervention in Competitive Labor Markets." American Economic Review, 73 (1983): 34 -347.Lynch, F. R. Enterprise Statistics. S. with new prefaceby author (Chicago: The University of Chicago Press, 1982), 133.Ibid., 11 .S. . H. If that interpretation is allowed to stand, then real costs foremployers are associated with affirmative action in relation to somepersons. "Small Business Eligibility: A Definitional Issue." Journal of Small Business Management (198 ): 23-3 .Pendleton, Clarence M., and Huron, Douglas. Affirmative Action. G. Equal opportunity and fair employment practices legislation has beenenacted and enforced (with varying degrees of vigor, depending upon thephilosophical stance of the administration in power) since the early 196 s. Capitalism and Freedom, ed. Further, it isalso evident that the many facets of each change in resource allocationmust be considered in any analysis of the equal opportunity/economicefficiency relationship. Thus, if onecontends that economic efficiency exists within an economy, then theintroduction of a change in resource allocation to provide for equality ofopportunity will be viewed as one that requires a tradeoff between equalityand efficiency. Economic efficiency is defined as an allocation of resources in sucha way that it is not possible to change the allocation is such a way thatsomeone is made better off without anyone being made worse off. Bilts, and L. Conversely,those who hold that improvements in equal opportunity must be gainedthrough losses to others in the economy are stating, in effect, thatexisting resource allocations are economically efficient, and that gains inequal opportunity must involve tradeoffs with economic efficiency, and mustbe provided at the expense of someone else. Peston, and B. Friedman, Capitalism and Freedom, ed. . Government PrintingOffice, 1991), 44.K. . "Equality of Opportunity, Fairness and Efficiency." In Peston, M., and Corry, B. R. Apartfrom this concrete impact, small business also has an abstract impact onAmerican society. In this context,he said that the view has been gaining widespread acceptance that corporate officials . London: Allen and Unwin, 1991.Klappholz, K. In the everyday world, however, suchassumptions are seldom valid. By thisdefinition, if such a reallocation were possible, then the existingallocation could not be economicallyefficient. This contention, however, is notuniversally accepted by either employees, employers, or economists. In such an economy, there is one and only one social responsibility of business--to use its resources and to engage in activities designed to increase its profits so long as it stays within the rules of the game . Corry, (Eds.), Essays inHonour of Lord Robbins, 5th ptg. In order for such actions tohave no detrimental economic impacts on the firms affected, it would benecessary for females and non-Anglo males with the same qualifications asavailable Anglo males to be available in sufficient numbers. Opponents of equal opportunity legislation contend that the directprovision of benefits to those individuals and groups without access tothose benefits conflicts with the concept of economic efficiency.[v] onesupporting argument is that rates of return on equal opportunityexpenditures will not be equal to rates of return on other assets.[vi]Another argument holds that, if investment in equal opportunity weregoverned by the same criteria as investment in machines, the optimalinvestment in any person would be determined by the person's productivityin the task for which he or she was employed.[vii] This argument seems tosay that some in society are more equal than are others. Realequality of opportunity will not occur, however, until such time as thegreat majority of individuals and organizations within a societyvoluntarily behave in a socially responsible manner. In theory, government regulation designed to eliminate employmentdiscrimination should have no adverse impacts on business and industry,for, in theory, discrimination between individuals in relation to hiring,promotion, retention, and compensation would be based only upon performanceor upon performance potential. W. The regulation of business andindustry in these contexts is intended to eliminate overt discrimination onthe basis of gender, racial or ethnic background, religious preference, orage,, and, in many instances, as stated above, such regulation is alsointended to rectify the effects of past discrimination based upon thesesame characteristics. G. Essays in honour of Lord Robbins. In actual practice, for whatever reasons (the lingering effects ofpast discrimination, societal imposed roles, the presence of discriminationin contemporary society, the distribution of abilities and motivations tolearn, or other factors), knowledge bases, and skill levels are notcomparable between all racial and ethnic groups, or between men and women.Thus, when government regulators assume that discrimination is presentwithin a firm when sexes, racial groups, and ethnic groups are notrepresented in the firm in the same proportions in which they arerepresented in the general population (or even by the 8 /2 formula), theapplication of non-discriminatory employment policies by a firm will notinsure that the firm's workforce will be composed of the most productiveindividuals available. Eastland, "Toward A Real Restoration of Civil Rights,"Commentary, 88 (1989): 25-29.T. Kreps, "Abridged Statement to the House Committee onAppropriations," Public Relations Journal, 6 (June 1978): 1 -11.M. Certainly, however, validarguments can be advanced in the name of economic efficiency to state thatadditional expenditures on equal opportunity should not be made forindividuals beyond the points of demonstrated competence. Those who promote equal opportunity on the grounds that economicefficiency will be promoted at the same time are stating, in effect, thatexisting resource allocations are not economically efficient. S. This view shows a fundamental misconception of the character and nature of a free economy. "Abridged Statement to the House Committee on Appropriations." Public Relations Journal, 6 (June 1978): 1 -11.Lundberg, S. . The very presence of the small business sector supportsthe dreams of individuals that they can, someday, be independent of largeorganizations. M. (Eds.). Thus, employers are tempted to continuepractices that have the effect of defeating affirmative action goals. In practice, the greatest emphasis is placed ondiscrimination which is based on either on sex or on racial or ethnicbackground. Affirmative action legislation in the UnitedStates at both the federal and state levels of government establishguidelines for the development and implementation of social policy withrespect to equal employment opportunities and with respect to therectification of past acts of employment discrimination against selectedpopulation groups.[i] The importance of small business activity to theAmerican can hardly be exaggerated. Few trends could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.[ix] Friedman does not believe in nor countenance any of form ofdiscrimination. First, equalopportunity promotes distributive justice--the unfairness of an existingsituation would be remedied. Money Trade and Economic Growth, 7th ed. Income distributionobjectives, laws prohibiting social discrimination, and, in some instances,policies intended to rectify the effects of past discrimination--affirmative action goals--have all become a part of "the rules of the game"for American business.
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