Commentary: New rule could help ease black unemployment

September 11, 2011

President Obama unveiled some ambitious ideas last week to create jobs, a plan that may have little chance of becoming reality any time soon given the $447 billion price tag and the current animus between the president and Congress. But about four weeks ago, Obama signed a little-publicized executive order that may go far in addressing a crisis exacerbated by the economic downturn: the rising unemployment rate and the diminishing wealth of African Americans.

On Aug. 18, the White House issued an executive order “to promote the federal workplace as a model of equal opportunity, diversity and inclusion.” This follows on the heels of Section 342 of the Dodd-Frank financial reform law, which created offices to monitor and encourage efforts by federal financial agencies such as the Treasury Department and the Federal Deposit Insurance Corp. as well as banks and contractors to diversify their ranks with minorities and women. Obama’s order is aimed at putting that law on the fast track and extending the requirements to all federal agencies.

Vendors who fail to make a “good faith effort” to hire minorities and women can face termination of their contracts with the government.

This is welcome news for minorities, who have been hit harder than others in the recession.

The unemployment rate for blacks hit 16.7 percent in August, up from 15.9 percent in July. White unemployment actually fell to 8.0 percent in August from 8.1 percent in July.

Moreover, black wealth declined by 53 percent from 2005 to 2009, compared with a decline of 16 percent for whites. Loss of personal wealth more adversely impacts black busi­ness­peo­ple because in general they are more heavily reliant on home equity.

The order will help address the very damaging differential between black and white employment, especially in the federal government where only 6.7 percent of African Americans are in senior pay levels. Monitoring the diversity of employees and contractors working for the federal financial agencies will ensure that hiring practices are fair. Federal contractors will be put on notice that their main client is actively seeking to expand employment opportunities for African Americans and other minorities, prompting them to review their employment practices.

And this may lead to an increase in black employment.

The order will be a boon for black small business vendors who will get more opportunities to sell their goods and services to the federal government. This should further boost black employment, as black firms are more likely to hire black workers.

An added benefit is that it could help spur the establishment of many new minority contracting firms. The new opportunities are especially important now, given that the Standard & Poor’s downgrade of the nation’s credit rating may make private lending more costly and the impending federal cuts may reduce the amount of Small Business Administration funding available to minority busi­ness­peo­ple.

All this should, over time, lead to an increase in black wealth, as these firms become successful.

With this new executive order, the administration has shown that it is committed to doing what it can to address the very serious unemployment situation in the African American community. The Aug. 18 executive order and last Thursday’s jobs speech are attempts by the White House to try, while limited by severe and unreasonable political constraints, to use powers unique to the executive office to help the country.

William Michael Cunningham is a social investing adviser with Creative Investment Research in Washington.

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