ABLE / DIAL Preconference

Sampling the Flavor:
California's Ethnic Marketplace

MULTICULTURAL marketing efforts have become increasingly important for firms doing business in California. Marketers can no longer afford to ignore this significant market. According to Market Segment Research, African-American spending power totals $489 billion, Hispanics control $348 billion, and Asian Americans have an annual purchasing power of $107 billion. Marketing professors at our universities are asking students to write up marketing plans targeting specific ethnic groups. We asked researchers on the subject and business managers to share their experience with us, so that we can better serve our patrons in their research.
Professor Cecilia Conrad (Pomona College) presented an overview of her research of the past few years on affirmative action and its impact on the economy--specifically California's economy. She analyzed the implication of affirmative action by focusing on the costs vs. benefits aspect of employment and on university ad-mission policies at the UC and Cal State systems.

How much does affirmative action cost the nation, and what do we get for the price?

These questions are addressed in studies by economists Andrew Brimmer and Cecilia Conrad and women's policy experts Heidi Hartmann and M. V. Lee Badgett. Brimmer, a former member of the Federal Reserve Board, derives an economic cost to the nation of racial discrimination. Conrad takes a close look at the cost to private businesses of carrying out their own affirmative action programs and also examines the impact this regulation has on productivity in a number of industries.
In a February 15, 1993 Forbes article--"When Quotas Replace Merit, Everybody Suffers" 151(4):80-102--authors Peter Brimelow and Leslie Spencer argued that affirmative action is very expensive. The use of quotas may have reduced gross product by 4%. They further argued that affirmative action forces companies to hire underqualified minorities, resulting in lower productivity and proficiency. This being true, then it presupposes that affirmative action is a bad form of economic regulation, and the market would function better without it.
Doubts about the accuracy of these figures prompted Dr. Conrad to "deconstruct" assertions made in the article. Prof. Conrad came up with her own "worst case" estimate--that less than half of 1% of gross product has been affected--and THAT is assuming that any relationship exists in the first place between affirmative action/quotas and GNP/GDP.

If the presupposition is true, then what is the trade-off?

Using Bureau of Labor Statistics productivity data, Prof. Conrad found that there is no relationship whatsoever between growth or change of productivity and the percentage of the workforce that is minority. Badgett and Hartmann conclude that affirmative action has had a measurable effect in improving employment opportunity without harming the employment of white men.
Professor Conrad then went on and looked at the flip side to this argument: what are the benefits to the firms? Proposition 209--the "California Civil Rights Initiative"-- does not affect the private sector, which tends to be highly positive about its own affirmative action programs. One reason for this is that positive relationships between a firm's profitability and its diversity programs have been found. For example, the textile industry's government contract to make uniforms bas transformed the industry dramatically after affirmative action was implemented to hire African-American workers. Almost no African-Americans were employed before affirmative action programs were instituted. Another example would be that CIA brought in minority students to work, since they had misinterpreted world views.

RE: University Admissions

Prof. Conrad worked on a study of this issue for the California Policy Seminar and found that, under Prop 209, students would be redistributed, NOT reduced in number (i.e., minority students would still attend college, but they might not be able to attend their preferred institutions). All students wanted to go to only a few universities. But does it pay to go to a selective college? The answer is yes, and for the following reasons:

    Information networking effect -- more important for people outside of the mainstream.

    Spillover effect -- overall quality of education may suffer vs. overall quality of education may improve as people learn from each other as evidenced in medical school programs that there is the cultural exchange effect.

    Community effect -- there ARE benefits to the community at large; corporations want to have a diverse student body to choose from for hiring.
So, the benefits of affirmative action PROBABLY outweigh the costs.

Benefits of Minority Contract Programs

Professor Conrad enumerated "Obstacles to Employment for Residents of Low-Income Communities:" 1) rising demand for skilled workers at all levels in hi-tech areas; 2) geography tends to be less of an obstacle; 3) [inadequacy, or lack of] information and employment networks; blacks, in particular, are often totally out of these networks, and employers have negative attitudes; and 4) discrimination; for example, the audit studies done by the Urban Institute showed evidence of persistent or reverse discrimination.
Do minority-owned firms offer better prospects to minority applicants? Essentially, yes. From her interviews with minority business owners, she has found that they are FAR more likely to employ minorities in all employment categories. Distribution of black-owned businesses tend to be concentrated in services, followed by retail trade and construction. Construction and Transportation reflect the impact of government contracts.
Employment growth in Hispanic-owned firms in all industry areas changed dramatically from 75% to 130% including FRE, transportation, wholesale trade, all services, manufacturing, construction, and retail trade.
Minority-owned businesses also go out much further and wider to recruit, especially from schools and community agencies. They do so because they feel a commitment, or obligation, to their communities.
Dr. Viviane Doche-Boulos, Forecasting Manager for SCAG--the Southern California Association of Governments, was the next speaker. SCAG serves as the Metropolitan Planning Organization for six counties: Los Angeles, Orange, San Bernardino, Riverside, Venture, and Imperial. The region encompasses a population of over 16 million persons, and covers more than 38,000 square miles. Dr. Doche Boulos discussed how and why SCAG does what it does--the tools it uses to make its projections and how the results are interpreted, i. e. what we can expect in the future in terms of economic growth.
The 14 "subregions" SCAG analyzes comprise 48% of California. The purpose is to produce transportation plan for the region. Somewhat astonishingly, only 5% of all the land in Southern California is developed! The rest is deserts, marshes, military-owned, etc.
SCAG Uses the "Demogaphic Cohort Component Model" for forecasting population rates developed for residence status, ethnicity, age groups, and gender. The 2020 population forecast is based on: 1990 population + births + immigration (legal + undocumented) + domestic migration (in-migrants minus out-migrants) minus deaths.
SCAG uniquely estimates, or projects, the relationship between the demographic model and the economic model, such as working age (ages 16-64), population, and the amount of jobs available. The two curve upward together.
The following components go into SCAG economic forecasts: Bureau of Labor Statistics' labor force and employment projections; California's share of US jobs and California jobs projection; SCAG's share of California basic industry jobs + economic base multipliers; SCAG's job projection; comparison of jobs to labor force [the implied unemployment rate]; and civilian labor force. She observed: "Everybody wants jobs, but no one wants people."
The following are SCAG's Regional Baseline Projection Assumptions:

    --Fertility: high, but decreases over time
    --Legal Immigration: reduced after 2000
    --Illegal immigration: reduced after 2000
    --Net Domestic Migration: remains negative over time
    (this is a very conservative assumption)
"Birth minus death = Natural Increase"--THIS is what accounts for up to 80% of the region's population growth--NOT IMMIGRANTS!!! "Natural Increase is by far the most important component of growth." The total will go down, as fertility is dropping fast.
SCAG projects that by 2020 there will be 22.4 million people, 10.6 million jobs, and 7.3 million households for the region. SCAG Region Projections of Population Distribution by Ethnicity:

    --Nonhispanic White: 2020=32% (1990=50%)
    --Hispanic: 2020=48% (1990 33%)
    --Nonhispanic Asian: 2020 = 13% (1990 = 9%)
    --Nonhispanic Black: 2020 = 7% (1990 = 8%)
Growth is due to childbirth, particularly among minorities. The 1990 median age was 30.6 years--for 2020, 31.7 is projected. California is a lot "younger" than the rest of the United States; 24% will be age 15 or less, 64% age 15 to 64, and 13% age 65 and over.
Other California trends:

    --As a group, the 65 and older segment will grow FASTER than any other segment will.
    --the population is young and diverse
    --the population tends to prefer self-employment
SCAG Region Projections for Distribution of Employment, By Sector:

    --"Other": 2020 = 50% (1990 = 57%)
    --Manufacturing: 2020 = 9% (1990 = 18%)
    --Services: 2020 = 41% (1990 = 25%) [Services encompasses everything from hamburger flippers to brain surgeons]
In Southern California, there are 30% minority-owned businesses and 13% non-Hispanic, Asian-owned businesses. Asian Americans have a higher rate of business ownership than any other ethnic group in the U. S.
Dr. Doche-Boulos also urged the audience to contact Javier Minjares (at 213-236-1893, or about obtaining SCAG publications. This information, and an extensive publications list, is also available at the SCAG Web site.
Both Professor Conrad and Dr. Doche-Boulos presented some basic understanding of issues and possible contributory factors to the growth of California economy and the importance of California's ethnic markets. We missed our third speaker, Ms. Lupe Barraza, from Sears, Roebuck, who was to present the "Hispanic Evolution in California" and to cite the success story of the Sears store in East Los Angles. The East Los Angeles store has topped all other Sears store in the country in sales due to the targeting of Hispanic customers in the area.
Special thanks are due to Teresa Omidsalar (JFK Memorial Library of California State University, Los Angeles) and Kimberly Franklin (Honnold/Mudd Library of the Claremont Colleges) for inviting our two wonderful speakers. Finally, particular thanks go to Sara B. Sluss (California State University, Long Beach) for preparing "Marketing to Ethnic Groups: Selected Resources for Research," an excellent bibliography on this topic.

Michael Oppenheim
University of California at Los Angeles

Simone Yu
California State University, Fullerton

Annual Conference Highlights