Bias in Hiring Is a Bigger Problem Among Smaller Companies
Small firms are more likely than large employers to be guilty of pervasive discrimination in hiring blacks.
The inflammatory announcement came recently from Michigan State University, reporting on a study by one of its economics professors.
Firms with 14 or fewer employees hired a black person as the newest employee only 11.9% of the time, compared with 21.2% of companies with 500 or more workers, according to the study’s author, Harry Holzer.
By contrast, blacks made up 18% of the population and 30% of applicants in four cities surveyed by Holzer. At both large and small companies, “fewer blacks are being hired than their share of the applicant pool,” Holzer said.
The study is disturbing but seems to bear the earmarks of the narrow, black-white view of race relations that still grips the rest of the country, including the Midwest, where Holzer is based.
No wonder.
Blacks are the largest minority, representing 12% of the nation’s 249 million people in the 1990 U.S. census, followed by Latinos at about 9%.
For most of the country, the race-relations reality is black and white.
For California, however, the picture is different.
Latinos represent 29% of the state’s 31 million people, Asians represent 11.3% and African Americans are at 8%. We are the demographic future of the country, we repeatedly say, and boast of our diversity. Yet we follow the black-white discriminatory model here too. Other minorities simply pick it up, as we found out with a vengeance during the 1992 riots and the surfacing of Asian-African American enmity.
Holzer reached the same conclusion in his study, a survey of 3,200 companies between June 1992 and May 1994 in Detroit, Atlanta, Boston and Los Angeles. Titled “Why Do Small Establishments Hire Fewer Blacks than Large Ones?” it is part of an ongoing study of urban inequality in jobs, housing and employment.
“Los Angeles is complicated by the presence of other ethnic groups, but I don’t think it fundamentally changes the story,” he said in a phone interview.
“Part of the way in which bias occurs against blacks in small establishments is that immigrants are often preferred in places like Los Angeles, New York or Chicago,” he said.
Owners of smaller firms believe immigrants have a better work ethic, are more appreciative of a job and are willing to work for lower wages, he said. Meanwhile, shared languages and cultural ties foster some preferential hiring of immigrants in Los Angeles’ ethnic economy.
“The black versus nonblack piece is found in all four cities, regardless of whether there is a Hispanic or Asian population,” Holzer said.
“The story holds up everywhere.”
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Not surprising, say those engaged in black entrepreneurship and employment in Los Angles.
The media portrayal of African Americans as violent and involved in crime and drugs works against them, especially in small-business hiring, said Lynne Joy Rogers, director of the Ron Brown Information Technology and Business Center in Los Angeles.
“A small business has the least capacity to take risk,” Rogers said. “Those images have more of an impact on small businesses, which can’t afford to make mistakes, can’t afford to test people.”
“Most small-business owners are gut-feeling people,” added John Bryant, chief executive of Operation Hope, an economic development nonprofit agency. “There’s not a lot of outreach, they don’t publish job openings and they’re predisposed to hire folks like themselves.”
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With black-owned businesses comprising only 3% of all businesses nationwide and only 1% of all revenues, black applicants have little chance of getting hired by a small-business owner who looks like them, Rogers said.
Holzer’s study seemed to suggest as a cure yet another regulatory headache for small businesses, namely, that they follow federal Equal Employment Opportunity Commission laws. Companies with fewer than 100 employees are not required to file forms and be monitored. Those with fewer than 15 employees are exempt from EEOC laws.
Black employment and earnings would rise if small businesses were required to conform to the laws, Holzer said.
But he believes that extending federal laws to smaller businesses is unlikely to solve the problem. Small companies don’t often worry about getting sued for employment discrimination.
“They have no deep pockets to attract attorneys who might file a lawsuit against them, and it’s harder to prove complaints of discrimination against a small company than a large corporation,” Holzer said.
Chris Tilly, a University of Massachusetts researcher also working on the four-city study, believes creation of a diversity extension service might help.
Patterned after existing agricultural and manufacturing models, a diversity extension service could provide no-cost or low-cost training to businesses that can’t afford to hire diversity consultants.
But in California’s anti-affirmative-action environment, such a proposal would have about as much likelihood of getting created as Gov. Pete Wilson himself doing an about-face and becoming an affirmative-action advocate.
Rogers believes a partial answer might paradoxically arise from the increasing statewide hostility against minorities, which has prompted more unity among minority and ethnic businesses.
“I just started to notice it this year,” she said. “There is more of an outreach effort, especially on the part of Latinos.”
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Minority business groups united to lobby against Proposition 209 last year. Even though the measure to eliminate affirmative action in state government hiring and contracting was approved by 54% of the voters, the minority business groups have continued their networking and attempts to work together.
Bryant, ever the optimist, suggests that the state’s increasing diversity will force companies to reach out to minorities as they grow.
The truth is, however, that none of these ideas can create change until change first occurs in the heart of every entrepreneur. Small businesses are characterized by the personality and beliefs of their owners. For now, Los Angeles’ small businesses show little evidence that they truly embrace the diversity of which they boast.
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Times staff writer Vicki Torres can be reached at (213) 237-6553 or at vicki.torres@latimes.com
