Affirmative Action Debate and Economics

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Yuching Lin
ECON 395
The Affirmative Action Debate
Affirmative Action has recently become the center of a major public debate in the United States, which has led to the emergence of numerous studies on its efficiency, costs, and benefits. The Civil Rights Act of 1964 and Equal Employment Opportunity Commission ended wage and employment discrimination based on gender and race, significantly decreasing the gap between minorities and non-minorities. Minorities made major progress from the 1960s up through the early 1970s due to Affirmative Action (Jones, Jr., 1985). However, for the past few decades, the progress that minorities have made in terms of income, employment and education has largely stagnated. California, Michigan, Nebraska, and Washington State have recently banned racial advantage in employment and college admissions, and Proposition 209 of California has disallowed the preferential treatment of minorities, with opponents of Affirmative Action lobbying for more widespread bans on similar policies while supporters argue fiercely against the removal of Affirmative Action policies. As can be seen, Affirmative Action’s status in the United States now is very dynamic due to shifting court decisions and policy plans. Additionally, returns to education have been increasing in recent decades, and as a result, income inequality has also increased – the growing demand for highly skilled workers (workers with high levels of post-secondary education) and the stagnancy of American education (with the added fact that high quality colleges have become even higher quality and even more selective while lower tier colleges have decreased in quality) has led to ever-increasing wages for the highly skilled. This “Skill Biased Technological Change” has led to a widening income gap between the rich and the poor. Naturally, this considerably affects black and Hispanic minorities, who are more likely than non-minorities to be part of the working class or below the poverty line, which raises the stakes in the debate on Affirmative Action. Today, both sides on the debate can bolster their arguments with evidence provided by economic and social research on the policies.

But there are additional questions to be answered – is Affirmative Action justified on moral grounds? Can we balance economic efficiency with equity? Is Affirmative Action the best policy for addressing racial inequalities? Do policies that increase diversity result in positive externalities such as reduced prejudice and indirect benefits beyond education and career success?

One will discover that, after thorough analysis of research concerning Affirmative Action, it is still difficult to form a definitive conclusion on the results of the policies. Nevertheless, there is much to learn from the research that has been conducted as of present, and one can now better steer research in a direction that will uncover the real benefits and shortcomings of Affirmative Action.

To begin with, the debate on the efficiency of Affirmative Action policies is still very much unsettled. Opponents claim that they actually result in several negative effects on the minorities the policies are intended to benefit, arguing that minority students admitted into overly competitive programs are more likely to drop out than mismatched non-minority students due to the increased competition, which would actually worsen the income gap since black income has been shown to decrease even more than white income after dropping out of college (Loury, 1995). A proposed “stigma hypothesis” suggests that “preferential treatment perpetuates the impression of inferiority” while simultaneously lowering incentives for high academic effort from minorities (Murray, 1994). And yet another underperformance hypothesis by Steele (1990) suggests that blacks’ academic performance suffers when they are aware that normal standards are lowered in order to accommodate them. However, there exists no research with...
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