Corporate America: Put your money where your mouth is on racial equality

As our country works through an identity crisis that has resulted in protests over police brutality, violence, destruction of private property and a wide-spread cancel culture that threatens even our most honorable and remarkable historic icons, we should look to businesses as partners to foster peace, increase economic opportunities and advance social change.

While corporate America has verbally articulated its support for racial equality, few tangible actions have followed. Instead, there has been a lot of virtue signaling and, even worse, marginalization of alternative views. For example, last month, Google banned Zero Hedge from its ads program citing racist content and threatened to do the same to The Federalist, a conservative online magazine. Many other executives and rank-and-file workers have been under pressure and sometimes fired simply for not publicly supporting the Black Lives Matter movement.

It’s time for a new vein of corporate social responsibility that is defined not by rhetoric and shaming, but rather by action.

According to the late Nobel Laureate Gary Becker in “The Economics of Discrimination,” competition in the marketplace discourages discrimination: The incentive to profit focuses businesses’ attention on worker characteristics that affect productivity rather than other characteristics, such as race. Indeed, economists have generally shown that this pattern holds in the data.

If corporate America feels so passionately about racial equality, they should align their verbal commitments with their pocketbooks. In particular, corporate America should step up its long-run investments in low-income and deteriorating communities through the formation of apprenticeships, mentoring opportunities and simply financial resources.

Taking these concrete steps could help make serious headway on an issue that unites people across the political spectrum: Equality of opportunity.

Critics of free markets often view the world through the lens of a binary struggle between the oppressed and the oppressors. They often justify violence by arguing that it is part of American history and that there are few alternatives for seeking justice. These arguments run counter to the non-violent protests of Martin Luther King and Mahatma Gandhi, as well as a mountain of empirical evidence about the ways that markets empower individuals to flourish.

Moreover, racial diversity quotas move us further from a solution and risk producing unintended consequences. In fact, a comprehensive review of empirical evidence suggests that affirmative action policies can create a mismatch. In fact, researchers have found that admitting students who might not be ready for a particular curriculum can backfire, leading to lower probabilities of completing college, which ultimately hurts their long-run career prospects.

Instead of mandating quotas, corporate America should begin investing more actively in the communities in which they do business. Apprenticeships are an effective vehicle for increasing economic mobility. Moreover, apprenticeships are one of the easiest places to start given their bipartisan nature. For example, even the Obama administration, together with the center-left think tank the Brookings Institution, touted the benefits of apprenticeships as a way of building a stronger middle class.

To be sure, some companies are already taking these steps. For example, the American Workforce Policy Advisory Board has brought together a wide array of companies. Similarly, the Pledge to America’s Workers has obtained commitments from even more companies to invest in employee training. These efforts are necessary steps, but companies could do even more to turn their verbal commitments into concrete action by applying the same best practices that are necessary for profitability in business, such as setting milestones and weighing returns on investment, to communities that need help.

To advance these aims towards economic mobility, President Trump recently signed an executive order that promotes hiring based on skills rather than degrees in the Federal government. This is significant given that the push towards college attainment has led to almost as many college dropouts (18 percent in 2019) than those with a bachelor’s degrees (21 percent in 2019). Corporate America could adopt a similar skills-based framework for hiring, moving away from the traditional model that focuses on college attainment.

The net effect of such policies would be an economic revival that brings improvements and optimism to areas that have faced chronic poverty.

Christos A. Makridis, Ph.D., is an assistant research professor at Arizona State University, a non-resident fellow at the Harvard Kennedy School of Government Cyber Security Initiative, a non-resident fellow at the Baylor University Institute for Studies of Religion and a senior adviser to Gallup. Follow him on Twitter @camakridis.