E C O N O M I C R E P O R T O F T H E P R E S I D E N T

Box 4-1. The Role of Government Policy in Improving theEconomic Status of African AmericansThe Federal Government has led the way in extending opportunitiesto all Americans. Title VII of the 1964 Civil Rights Act outlawedemployment discrimination on the basis of race, color, religion, sex,or national origin and established the Equal Employment OpportunityCommission (EEOC) to monitor compliance with the law andenforce its statutes. These statutes covered employers with at least100 employees beginning July 1965; the threshold was lowered to 25employees 3 years later. In September 1963, Executive Order 11246prohibited employment discrimination by Federal contractors. TheEqual Employment Opportunity Act of 1972 extended civil rightscoverage to employers with 15 to 24 employees and expanded theenforcement power of the EEOC.Measurement of the effects of civil rights legislation has beendifficult, since the timing of the legislation coincided with many othersignificant changes in the U.S. labor market. Despite improvementsin employment and wages for African Americans since the mid-1960s,it is sometimes difficult to identify a single cause for each change, orto measure the extent to which Federal policy (as opposed to otherfactors such as economic conditions or local sentiment) played arole. Nonetheless, researchers have documented a link between theenactment of Federal antidiscrimination policy and evidence offurther opportunities for minorities and reduced discrimination.An alternative argument is that these policies came about in part asa result of demand from employers. In a tight labor market, discriminationbecomes costly, and it is possible that the passage of Title VIIand subsequent legislation provided a justification for what wouldhave occurred anyway. Nonetheless, it appears that governmentpolicy played a role and achieved its intended effect of openingopportunities and increasing the share of African Americanemployment.Some have argued that, rather than providing net economy-widegains, Title VII and its amendments merely shifted African Americanemployment from small to large employers. To isolate the true effectof the legislation, a recent study compared the growth in employmentshare across large firms with the growth across small firmsnewly bound by the 1972 expansion of the EEOC. The study foundthat there were gains in the employment share and pay of AfricanAmericans in the industries most affected by the 1972 legislation.The timing of these gains provides evidence that the Federal policypositively affected the labor market status of African Americans.142 | Economic Report of the President