Sorting, Quotas, and the Civil Rights Act of 1991: Who Hires When it's Hard to Fire?

Abstract

The Civil Rights Act of 1991 (CRA91) was enacted after a rancorous debate about whether it was a "quota" hiring bill or a necessary means of opening labor markets. In this paper, we analyze the effects of CRA91 on the composition of firms' workforces. We consider employer behavior when firms vary exogenously in their susceptibility to discrimination suits and when firms can reduce their exposure to discrimination claims by employing more protected workers. These forces lead to a sorting effect, which causes firms that are more susceptible to discrimination litigation to substitute away from protected workers, and a quota effect, which causes firms with fewer pre-CRA91 protected workers to substitute toward these workers. We examine these effects empirically using data collected from a variety of sources. We find that trends in employment shares of protected workers changed after CRA91 in a manner consistent with the sorting effect. Whereas prior to CRA91 employment of blacks and women had been increasing in industries where they had been least represented, this trend did not continue into the post-CRA91 period. We find no evidence that CRA91 lead to widespread quota hiring and no evidence that CRA91 helped integrate industries that excluded protected workers.

Keywords: Civil Rights Act of 1991, Hiring Quotas, Employment Discrimination Litigation

JEL Classification: J71, K31