Chay, K. (1998). The impact of federal civil rights policy on black economic progress: Evidence from the Equal Employment Opportunity Act of 1972. Industrial and Labor Relations Review, 51(4), 608-632.
- The study’s objective was to examine the impact of the 1972 Equal Employment Opportunity Act (EEOA) on employment, earnings, and occupational outcomes of African American men.
- The study used a non-experimental design that used regression analysis for impact evaluation. The author used data from the 1968–1980 Current Population Survey (CPS).
- This study found that the 1972 EEOA had positive impacts on the employment, earnings, and occupational status of African American men in the South in industries with more than 50 percent of workers employed in small establishments covered by the law.
- The quality of causal evidence presented in this study is moderate because it was based on a strong non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the 1972 EEOA, but other factors might also have contributed.
The 1972 Equal Employment Opportunity Act
Features of the Intervention
Under Title VII of the Civil Rights Act of 1964, employers are forbidden from discriminating against their employees on the basis of race, sex, color, religion, or national origin. The law prohibited discrimination in terms, compensation, working conditions, and other aspects of employment, mandates enforcement by courts, rather than juries, and provides civil penalties for violations, including mandatory remedial hiring policies for employers and reinstatement with back pay awards to victims. It also created the Equal Employment Opportunity Commission to bring class action litigation against employers for discrimination. The 1972 EEOA extended the coverage of federal civil rights laws under Title VII from employers with 25 or more employees to employers with 15 to 24 employees. More restrictive state laws could have applied to firms with fewer than 25 employees.
Features of the Study
The author aimed to identify the effects of the 1972 EEOA by examining men who were likely working for small establishments (that is, establishments with 25 or fewer employees) in 14 mostly Southern states that did not have state fair employment practice laws covering employers in small establishments in 1972. The author compared this group with men likely working in larger establishments in these 14 states and men likely working for small establishments in other states, none of whom would be affected by the EEOA’s passage. These other states typically had existing fair employment practice laws covering employers with fewer employees than those covered by the EEOA. Because employers’ size could not be directly observed, the author created three industry groupings based on the percentages of employees in each industry working in small establishments affected by the law. Men who were likely working for small establishments were defined as men employed in industries in which more than half of the workers were in private sector establishments with 25 or fewer employees. Men who were likely working for small establishments in the 14 intervention states were newly covered by civil rights protections in 1972.
The study estimated difference-in-differences (DD) models and difference-in-difference-in-differences (DDD) models using data from the March, May, and October monthly CPS surveys from 1968 to 1980. Study participants were male workers ages 16 to 65. The DD and DDD models contrasted men working in industries with higher and lower employment in small establishments before and after 1972. The DDD model additionally compared differences between the 14 Southern states and other states. Study outcomes included African American male employment share, African American–white male relative annual earnings, and African American–white male relative employment in broad occupational groups. The employment models controlled for region-specific industry effects, region-specific year effects, African American–white relative demographic characteristics, and pre-policy time trends in each industry group by region. The earnings gap equation controlled for education, potential labor market experience, marital status, full- or part-time status, veteran status, central city residence, and metropolitan residence.
- The study found that African American male employment shares in affected industries and states increased by 0.5 to 1.1 percentage points more per year than in the comparison group.
- The ratio of African American to white earnings narrowed by 10 to 17 percentage points in affected industries and states relative to previously covered industries and states.
- African American men experienced statistically significant gains in occupational status as a result of the 1972 EEOA: a greater share of African American men than comparable white men gained employment in clerical, sales, craft, and operative occupations after the law’s passage.
Considerations for Interpreting the Findings
The study was a well-conducted non-experimental design, but there are shortcomings to using 1979 CPS data for defining the treatment and control groups. For instance, the data reported only establishment size categories, so workers employed in establishments with fewer than 15 employees (who were not covered by the 1972 EEOA) were not distinguished in the data from those employed in establishments with 15 to 24 employees (who were covered). Thus, the comparisons conducted in the study were between industries that were more and less covered before the 1972 EEOA.
Evidence produced by non-experimental studies is not as strong as that produced by an experimental design because subjects are not randomly assigned to treatment and comparison groups. In this study, individuals could have self-selected into employment at larger and smaller employers based on unobservable characteristics that are related to their labor market outcomes. Similarly, there might be self-selection of states in the passage of their fair employment practice laws and self-selection of establishments in their size, both of which could potentially reduce the comparability of the treatment and comparison groups.
Causal Evidence Rating
The quality of causal evidence presented in this report is moderate because it was based on a strong non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the 1972 EEOA, but other factors might also have contributed.