Affirmative Action vs Fair Lending


The term “affirmative action” was originally created by John F. Kennedy in 1961, in the context of the employment of government contractors. But affirmative action has been very unpopular in the US, and was backed into a corner until it came to only refer to university admissions. Prior to the recent Supreme Court decision against affirmative action, the idea was already only hanging by a thread.

Now that the thread has been cut, I encourage people to imagine other possibilities. Previously, we could only ever talk about affirmative action in elite universities, because that was the only politically viable option. Now, none of the options are politically viable, so we might as well talk about the possibilities we forgot.

What if we had affirmative action… in hiring? Salaries? Political representation? Affirmative action tax breaks! If you’re outside the US, help me out here, what sort of affirmative action do they have in your country?

Not saying these are good ideas, but I want people to imagine them. Because, frankly, there are way more radical ideas than optional affirmative action only in the context of university admissions, and only for universities that are selective enough for it to matter, only to increase diversity, not to address racial injustice, and only as part of a “holistic” evaluation without quotas.

And it’s the “optional” part that I want to focus on here.  Even without affirmative action, if Harvard really wanted it, they could increase diversity by getting rid of the 43% of White students admitted on non-merit-based grounds (athletes, donors, legacies, etc.). But obviously they won’t do that, because relying on the good will of universities is and always has been weak policy.

In the spirit of imagining new possibilities, I would like to contrast with US fair lending policy, a subject I introduced in a recent post.  I distinguished between two kinds of discrimination: disparate treatment and disparate impact. Disparate treatment is the kind of discrimination we usually imagine, where people are treated differently because of their race/gender/etc. Disparate impact is the kind of discrimination where a policy that looks neutral on the surface has a different impact on different groups.

One way to describe affirmative action is: a policy where disparate treatment is used as a tool to offset disparate impact. For example, because Black people are systematically disadvantaged in their earlier education, they may perform worse in merit-based admissions. Or, in the case of Harvard, their non-merit-based admissions favor people who are wealthy enough to donate, or to learn sports like skiing or water polo–and those people are systematically White. So to partially offset the disparate impact, universities were applying disparate treatment to people of different ethnicities.

In fair lending, disparate treatment is illegal, which implies that affirmative action is illegal. As for disparate impact, lenders are legally required to minimize disparate impact to that justified by business necessity.  Similar policies are also in place with regard to employment discrimination.

As applied to university admissions, affirmative action was optional, merely a permitted practice (until recently). In contrast, fair lending is mandatory–not merely an option to be exercised by progressively-minded lenders, but a requirement among all lenders.

While I don’t think fair lending is necessarily a model policy, I think people’s (warranted) suspicion of finance has pushed us to create relatively strong regulations in the space, with relatively strong enforcement.  I think similar policies should be implemented in university admissions.  And there should be more work done to more precisely define and restrict disparate impact so that the policies are easier to enforce, in universities, in lending, and in employment.

While I think disparate treatment could be used to limit disparate impact, clearly that’s an approach that many US voters find difficult to stomach, and I think there’s a lot more low-hanging fruit focusing on directly restricting disparate impact.

Comments

  1. Pierce R. Butler says

    … people’s (warranted) suspicion of finance has pushed us to create relatively strong regulations in the space, with relatively strong enforcement.

    Uhh – how many financial-corp CEOs went to Hotel Graybar for the Bush Recession?

  2. says

    @Pierce R. Butler,
    I think a lot of the stronger enforcement comes from the creation of the CFPB, which postdates that. (Specifically, it comes from the Dodd-Frank act in 2010.)

  3. Pierce R. Butler says

    Siggy @ # 2 – Good point.

    CPFB’s “Enforcement/Actions” section shows 14 pages, with some Big Names shown on the first (most recent) page.

    Thank you, Senator Warren! If the elections next year turn out right – that is, left – maybe some of the remaining work in this area will get done.

  4. GerrardOfTitanServer says

    I want to throw out some alternative ideas that can be pursued concurrently (aka not exclusive plans). Basically, if the core problem is that racial minorities tend to be poorer because of historical and ongoing disadvantages, then why don’t we at least target this? We don’t need to target race to target this problem. We can target the problem of poverty. We can implement real meaningful reforms to move money from the rich to the poor.

    For example, school funding should be done by the US State, with each student receiving equal / fair distribution of all State tax money, and additional contributions by local taxes should be banned. Local donations and bake sales should be banned too. Also ban school vouchers and similar schemes that divert money away from public schools. (Also get rid of “no child left behind” because of the corrosive effect it has on public schools.) Instead of band-aiding the problem of why some minority students have worse academic success in primary and secondary school by giving them bonuses to university admissions, let’s focus on finding out and fixing the problems with their worse academic success in primary and secondary schools.

    For example, guaranteed minimum income, higher taxes on the rich, and lower taxes on the poor.

    I don’t know if this could fix all racial disparities on its own over the long term, but it would be a big help, and it’s facially neutral w.r.t. race — which is a good thing at least because it’s not unconstitutional, unlike affirmative action.

  5. says

    @GerrardOfTitanServer
    Agree.

    school funding should be done by the US State, with each student receiving equal / fair distribution of all State tax money, and additional contributions by local taxes should be banned.

    Local tax funding is a huge source of inequality. People already tend to self-segregate by class, and it’s awful that we materially incentivize it by basing school funding on neighborhood wealth.

Leave a Reply

Your email address will not be published. Required fields are marked *