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A Cure for Discrimination

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A Cure for Discrimination? Affirmative Action and the Case of California Proposition 209 by Caitlin Knowles Myers September 2005 MIDDLEBURY COLLEGE ECONOMICS DISCUSSION PAPER NO. 05-25 DEPARTMENT OF ECONOMICS MIDDLEBURY COLLEGE MIDDLEBURY, VERMONT 05753 http://www.middlebury.edu/~econA Cure for Discrimination? Affirmative Action and the Case of California Proposition 209 Caitlin Knowles Myers Middlebury College and IZA Bonn Discussion Paper No. 1674 July 2005 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 Email: [email protected] Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 1674 July 2005 ABSTRACT A Cure for Discrimination? Affirmative Action and the Case of California Proposition 209∗ Proposition 209, enacted in California in 1996 and made effective the following year, ended state affirmative action programs not only in education, but also for public employment and government contracting. This paper uses CPS data and triple difference techniques to take advantage of the natural experiment presented by this change in state law to gauge the labor market impacts of ending affirmative action programs. Employment among women and minorities dropped sharply, a change that was nearly completely explained by a decline in participation rather than by increases in unemployment. This decline suggests that either affirmative action programs in California had been inefficient or that they failed to create lasting change in prejudicial attitudes. JEL Classification: J71, J78 Keywords: economics of gender and minorities, affirmative action, Proposition 209, discrimination Corresponding author: Caitlin Knowles Myers Department of Economics Middlebury College Middlebury, VT 05753 USA Email: [email protected] ∗ I wish to thank Daniel Hamermesh, Paul Wilson, Stephen Trejo, Gerald Oettinger, and Stephen Donald for their many helpful suggestions. I am also grateful to Melissa Kludjian with the California legislature for providing information on California legislation during the period in question.1 Intro ductionIntro ducing and removing affirmative action are not opposite sides of the samecoin. Proponents of affirmative action maintain that it will provide a long-termcure for discrimination by allowing victims to demonstrate their skill and worth,thus changing prejudicial attitudes. Under this scenario, if affirmative action“works,” then when it is time to get rid of the program there will be no deleteri-ous effects for minorities. Opponents of these controversial programs, however,argue that it does not address the root source of inequality and, moreover, thatit may create labor market inefficiencies and result in reverse discriminationagainst white males. Both sides, therefore, suggest that an effective affirmativeaction program would cause minority employment to rise, but they disagree onwhether this increase is efficient and whether it would be sustainable if formalaffirmative action were ended.To date, there has been little opportunity to measure the impact of removingaffirmative action programs. While federal support for enforcement has ebbedand flowed and Supreme Court rulings in the past decade have chipped away ataffirmative action, it is difficult to say whether concurrent changes in minorityoutcomes were due to affirmative action policy or other trends in inequality.A similar problem plagued attempts to measure the impact of instituting af-firmative action in earlier years. While minorities and women made gains inthe labor market in the seventies and eighties, it is not clear what portion ofthis was due to affirmative action and what was the result of other influences.Empirical studies of the impact of affirmative action on labor markets have re-lied on differences in outcomes for government contractors, who are subject tothe program, and non-contractors, who are not. While these studies have pro-vided evidence of minority gains among contracting firms, the results could bebiased because contractor status is not exogenous: firms with the lowest cost of1meeting affirmative actions requirements may be more likely to be contractors.Hence, we are left with an incomplete picture of both the impact of a contro-versial program and the potential consequences of its removal. What is needed,essentially, is a control group to which we can compare changes in outcomes forthose affected by affirmative action.The enactment of California Proposition 209 provides just such an oppor-tunity. The measure, passed in the 1996 state elections and made effective inNovember of 1997, essentially outlawed existing local and state affirmative ac-tion programs in education, public hiring, and contracting, unless supersededby federal law. This change in state policy presents a natural experiment formeasuring the labor market impact of removing of affirmative action programs.I use Current Population Survey (CPS) data to compare outcomes for minori-ties in California before and after affirmative action was removed to those sameoutcomes for white males. Then, to control for national trends in minority dif-ferentials, I compare this difference to the difference for a control group: statesnot undergoing similar changes in the law. The use of this triple differencetechnique to analyze the impact of removing affirmative action on


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