Market structure and racial and gender discrimination : Evidence from the telecommunication industry

I Introduction Economic theory suggests that the absence of price competition extends the latitude of firms to exercise discriminatory preferences because they are better able to pass the cost of this behavior onto the customer (Becker 1958).(1) The telecommunications industry before the break up of the American Telephone and Telegraph Company (AT&T) had such an absence of price competition. In support of Becker's hypothesis on product market structure and discrimination, several studies reveal that prior to the 1970s, the exclusion of minorities in telecommunications, and the restriction of women to low paying clerical jobs, was pervasive (Anderson 1970, Oaxaca 1976, Bergmann and King 1976, and Northrup and Larson 1979). These studies related to the Employment and Equal Opportunity Act (EEO) also show tremendous employment gains by minorities and women in the professional, managerial, and craft occupations following the implementation of affirmative action policies as stipulated by the 1973 AT&T-EEO consent decree. This radical change in AT&T's employment policy is consistent with alternative theory suggesting that large firms in highly concentrated industries are more likely to alleviate internal tendencies toward discrimination under government persuasion, since they are secure enough to take such "affirmative" steps (Shepherd 1969). Research has not examined employment trends by race and gender in telecommunications following the 1979 termination of the consent decree. Such research is warranted not only to understand the effects of terminating the consent decree, but also to ascertain the effects of stepped-up product market competition in the 1980s. This study examines employment and earnings by race and gender during the implementation of the EEO consent decree, after its termination, and after the 1984 divestitures by AT&T. Current Population Survey Files are used to investigate employment and earnings trends in telecommunications covering the years from 1973 to 1991. Separate earnings equations are estimated for the three observation periods to determine the earnings effect of the termination of the EEO consent decree. These earnings equations are specified to distinguish a worker's occupation and race-gender identity. This allows for examining the influence of occupational trends on race and gender earnings differentials. Further, this analysis provides a unique opportunity to compare the effectiveness of affirmative action in a monopolistic and a more competitive product market without the need to control for industry differences encountered when using a conventional interindustry approach. II Background The 1973 AT&T-EEO consent decree set up guidelines to increase the number of minorities and women employed by the Bell system as professionals, managers and craft workers.(2) These guidelines also specified goals to increase the employment share of men as clerical workers. The proportion of minorities and women in the regional labor force and the projected number of job openings at each Bell operating company were used to determine the number of positions available to groups underrepresented in these occupations. The employment objective of this approach was for the race-sex profile of AT&T's work force to mirror that of the local pool of workers (Northrup and Larson). Meeting this goal was commonly referred to as achieving "statistical parity." AT&T used both an affirmative action override program and a "transfer and upgrade" program to attain statistical parity within a five-year time frame. The affirmative action override program allowed Bell companies to select junior qualified candidates from the targeted race-gender groups over more senior qualified workers from non-targeted groups. The less controversial transfer and upgrade program broadened the concept of seniority by specifying it as the length of service in any Bell system department (Northrup and Larson). …