Affirmative Action Is Good for State’s Economy

The California Supreme Court proved that sometimes you can win the battle but lose the war. Proposition 209, the 1996 anti-affirmative action initiative, was just unanimously upheld in the courts. This is a victory for the California electorate that stridently fought to ban racial and gender considerations in education, procurement, hiring and other government opportunities. Yet it defeats California’s efforts to maintain a competitive edge in a larger global struggle for jobs and economic growth.

The state Supreme Court denied the city of San Jose the right to recruit women and minorities into its contracting and procurement process in favor of a lawsuit filed by Hi-Voltage Wire Works. The court’s strict interpretation of the state Constitution demonstrates a myopia ill-suited for the 21st century. The broad-based attack by Justice Janice Rogers Brown on affirmative action is particularly unfortunate. She suggests that affirmative action seeks “entitlement based on group representation” in violation of “individuals’ rights of equal opportunity.” This grossly distorts the fact that the Civil Rights Act of 1964 and subsequent programs were designed to bring excluded members of society into the mainstream. Even Chief Justice Ronald M. George and Justice Kathryn Mickle Werdegar, while upholding the overall decision, opined that Justice Brown ignored the circumstances in which affirmative action has been used to benefit society as a whole. Clearly, California’s demographics make diversity in California’s civic, political and economic life imperative.

The consequences of arguing for individual rights without regard to the greater public good is that California now risks its own economic future. According to a recent study of minority businesses in Los Angeles and Orange counties, Southern California is home to the largest base of multi-ethnic entrepreneurs in the country. Their assets are considerable. They are well-educated; 75% have some college and graduate-school education. They are well established; close to two-thirds have been in business longer than 10 years. Close to half realized positive sales growth within the past year, and 50% project growth over the next year. The fact that most of these entrepreneurs are foreign-born also suggests that they provide a gateway to the global economy.

Minority entrepreneurs persevere despite the odds. They are in business without substantial conventional or government financing; only 33% use bank financing and only 5% get government money. They start and operate their businesses with the support of family and friends, using credit cards and other high-cost, self-financing mechanisms.

Despite their strengths, minority businesses hit the limits of the glass ceiling. Their businesses are largely locked into ethnic and geographic enclaves. They are grossly underrepresented in high-value growth sectors. They lack connections to the mainstream business and civic networks where information and opportunities circulate.

Are these patterns of segregation and isolation indicative of business preference or racial discrimination? Perhaps both.

About 40% of all businesses indicate satisfaction with their current business operations. At the same time, while not framed as affirmative action, minority businesses across all racial-ethnic groups are resolute in their quest for new market opportunities. Many, especially African American and Latino businesses, explicitly cite discrimination as barriers to success. Others, particularly in the Asian Pacific Islander community, cite culture and language as barriers to being mainstreamed.

There is strong evidence that the continued exclusion of minority businesses from mainstream opportunities threatens the Southern California economy. Minority businesses that are connected to broader market opportunities contribute more jobs, revenue and, consequently, taxes to the region’s economy than those that are not connected.

Putting a premium on individual rights comes at a cost to our public welfare. The inclusion of minorities in all aspects of California’s private and public life is essential to our prosperity. Access to government opportunities is especially catalytic to the growth of our most precious economic assets. Winning the battle against affirmative action defeats our long-term prospects for a healthy economy and vibrant civil society.