Kellogg World Alumni Magazine, Summer 2001Kellogg School of Management
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The 1991 Civil Rights Act: Boon or bust for workers?
Associate Professor Scott Schaefer investigates the impact the controversial measure has had on women, minorities and the firms that employ them

By Rebecca Lindell

Proponents of the Civil Rights Act of 1991 called the bill crucial in expanding opportunities for women and minorities. Critics called it a "quota bill."

Ten years later, Associate Professor Scott Schaefer is finding out how much of that heated rhetoric became true.

His conclusions: Fears that the law would lead to quota hiring appear unfounded. But it does appear that employers have adjusted hiring, firing, and wage policies in response to the law.

Most employment litigation arises after employees have been let go. The controversial 1991 bill, signed into law by President George Bush, amended the Civil Rights Act of 1964 and expanded the damage awards available to those who allege employment discrimination. As a result, the law may have had a big impact on the cost of dismissing employees, according to Schaefer, an associate professor in the Management and Strategy Department.

"In terms of the effects on employer behavior, there's a big difference between hiring-based lawsuits and firing-based suits," Schaefer notes. "If I fear that a minority job applicant might sue me for discriminating in a hiring decision, then I can reduce my exposure to litigation by hiring more minorities. But, if most litigation arises from firing-based suits, then I can reduce my exposure to litigation making sure I don't hire workers who might end up suing me later on."

Schaefer's research partner is Paul Oyer, a former Kellogg professor now on the faculty of the Stanford Business School. The two analyzed data from the U.S. Census and the Equal Employment Opportunity Commission for a series of articles exploring the impact of the law on firms' hiring, firing and wage-setting practices.

They found that firms that are more susceptible to discrimination litigation tend to avoid workers who are protected by the law. The increased threat of lawsuits apparently has done little to persuade these firms to hire additional women and minorities.

Now that it has become harder to fire minorities and women, the researchers theorized that companies are more likely to dismiss them through mass layoffs rather than individual firings. Indeed, their analysis showed that more black men lost their jobs through layoffs relative to white men after the law was passed.

Schaefer and Oyer also figured that the increased threat of litigation has boosted wages for older women and minorities, since it has become riskier -- and therefore more expensive -- to fire members of those groups. If that's the case, they reasoned, the women and blacks most likely to be hired are the ones employers have the most information about -- those with lengthier résumés and more job experience.

Interestingly, this hypothesis was borne out more for women than for men. "It seems men and women differ in their propensity to sue," Schaefer says. Younger women appeared to be the group most likely to go to court over alleged discrimination. Older African-American men, meanwhile, evidenced a stronger tendency to litigate than younger men.

"We're management theorists, so we didn't come to this research with a list of policy questions," Schaefer says. "We were more interested in the effects of the changes in displacement costs, and how they change the way firms manage their headcounts."

But "there are policy implications here," the professor adds. "Policy-makers should think hard about how individual firms will respond to policy changes like this, and whether these laws will have the desired effects."

©2001 Kellogg School of Management, Northwestern University