All Commentary
Thursday, June 1, 1995

Affirmative Action

False Labor Doctrines Victimize American Workers

In the strange world of politics and power, one agency of government inflicts economic harm on the public, another seeks to alleviate it. One raises the costs of construction through labor laws or zoning restrictions, another seeks to offset the raises through construction grants, low-interest loans, and subsidized rents. Federal legislation erects employment barriers for minorities, such as the Davis-Bacon Act and minimum wage laws, other programs seek to give assistance to the victims. The Federal Reserve System depreciates the dollar through inflation and credit expansion, other departments mean to rescue it by regulating and controlling the people.

Affirmative action does both; it inflicts economic harm and then seeks to alleviate it. It professes to promote the economic conditions and opportunities of so-called underprivileged minorities and simultaneously erects new, formidable barriers for the people it sets out to benefit. It bestows special favors through the apparatus of politics but also handicaps its beneficiaries through economic restrictions and mandates.

The civil rights legislation of the 1960s launched the affirmative action program. The Civil Rights Act of 1964 granted protected status according to race and sex; the Age Discrimination in Employment Act of 1967 extended the protection to the elderly. Later amendments to the act further broadened government authority in all matters of discrimination. The 1964 act created the Equal Employment Opportunity Commission (EEOC) and charged it with investigating complaints. The commission cannot enforce its findings, but can ask the Department of Justice to sue a discriminating individual or firm. It receives and analyzes many thousands of complaints every year.

The EEOC budget is rising steadily, now exceeding $250 million a year. The rise can have only two explanations: either discrimination has grown worse since Affirmative Action was launched or the Commission is making a show of discrimination in order to justify its own bureaucratic growth. Whatever it may be, the agents of EEOC are personally interested in an aggravation of discrimination.

Commission guidelines aim to ensure that every employer hire a proper percentage of minority people that comprise the labor force in the community. Where the population is preponderantly black, a company is expected to employ a corresponding percentage of blacks; in a Spanish-speaking locale it must engage the proper percentage of Hispanic workers.

EEOC policies accomplish the very opposite of what they set out to achieve. By forcing employers to hire workers according to ethnicity rather than productivity EEOC created an exodus of business from the inner cities. After all, there are few skilled workers in the inner cities but many uneducated and untrained minority workers subsisting on public assistance. To escape from EEOC mandates, many companies promptly located new plants and stores in largely white communities. Companies with inner-city facilities quickly close them as soon as they suffer losses, blaming old equipment or foreign competition. Every observer knows full well that they are escaping the labor mandates of EEOC.

The commission inflicts immeasurable economic harm also on women while it professes to defend and promote their interests. It spearheads the movement of “comparable worth,” which merely is a new version of the “just price” doctrine of ages past. Rejecting most market considerations of income, it elaborates rights and privileges defined and granted by legislators and regulators.

In the labor market a house painter or plumber may have a higher income than a librarian with a Master’s degree. In the judgment of consumers, they render more valuable services than the librarian. But, according to EEOC, this is sexual discrimination! The commission ranks jobs and income according to a complicated point system based on years of schooling and training, the number of academic degrees, hours of work, etc. The points then are run through a computer which invariably arrives at sexual discrimination and employer greed and guilt.

EEOC policies obviously rest on an old elitist contempt for manual labor, especially dirty and dangerous labor, and an astonishing bias for college degrees. The economic world of individual freedom and the private property order actually does not pay for academic degrees, it only rewards services rendered. Whenever education makes a person more productive in rendering marketable services, it tends to yield higher personal incomes. After many years of training, the heart surgeon is likely to earn a good income. Whenever education does not impart productivity and usefulness, it may make a person learned and wise, but does not assure a high income. The brilliant scholar of Sanskrit or the astronomer studying the Aurora Borealis may not improve his earnings capacity. In a free society he is free to pursue his interests to his heart’s content, but he cannot command an income similar to that of the surgeon who is saving human lives.

Many scholars and scientists who choose and love their lifestyles covet the incomes of others. Envy and covetousness make them join the enemies of the market order and call for redistribution of other people’s income by political force. Lamenting the “unfair” distribution of incomes, some readily condemn the enterprise system while they extol the virtues of the political command system.

Affirmative action inflicts harm on the elderly. The Employment Retirement Income Security Act of 1974 (ERISA) meant to make it easier for elderly people to qualify for pensions. Unfortunately, as in all cases of political interference in economic life, the act brought about the very opposite of what it meant to achieve. Its costly funding requirements immediately caused the liquidation of nearly 30 percent of all private pension plans and prevented the launching of countless others. ERISA rules make employers think twice before they launch a pension program. After all, pension funds now may seize up to 30 percent of a company’s net worth to satisfy employee claims. Pension liabilities have the same status as tax liens: they are senior to all other claims.

As ERISA mandates raise the cost of labor, they tend to depress take-home pay and fringe benefits.. If these are rigid and cost adjustments are resisted or prevented for any reason, the ERISA mandates actually cause unemployment. For many elderly workers ERISA actually erected another barrier to employment, the very springhead of pensions.

False labor doctrines have given rise to the affirmative action program. Millions of Americans whom it was supposed to benefit are its primary victims. Their suffering manifests anew that political power wrings much evil. It pollutes whatever it touches.

  • Hans F. Sennholz (1922-2007) was Ludwig von Mises' first PhD student in the United States. He taught economics at Grove City College, 1956–1992, having been hired as department chair upon arrival. After he retired, he became president of the Foundation for Economic Education, 1992–1997.