All Hands In? Making Diversity Work for All

5. Conclusion

Abstract

There are several concerns about diversity policies, and indeed ill-designed policies can do more harm than good. A crucial step in addressing public opinion concerns is to clearly communicate that diversity policies do not seek to favour one group over others. To this end, policies must be designed so that they do not primarily benefit those who are already relatively privileged

In many ways, OECD societies and their labour forces have become increasingly diverse over the past decades. How to equip countries to make the most out of this diversity and strengthen equality of opportunity is a key concern for governments, while diversity management is increasingly important for businesses. Ensuring better labour market inclusion of women; immigrants, their descendants and ethnic minorities; LGBT people; older people; and people with disabilities is not only a question of fairness – it is prerequisite for inclusive growth.

In almost one-third of OECD countries, the majority does not believe that their city or local area is a good place to live for ethnic minorities, immigrants or LGBT people in 2018. This share is remarkably stable compared to 2008. While there is cause for cautious optimism with regard to their labour market inclusion (in two out of three OECD countries, employment gaps between men and women and between prime-age and older workers decreased by at least 25% between 2007 and 2017), the pace of this decrease differs markedly across countries. With regard to the gender gap, it has decreased comparatively little in countries with particularly large differences. Furthermore, employment gaps have decreased considerably less for people with disabilities and migrants.

The economic exclusion or inactivity of large population groups evidently comes at a high cost, particularly against the backdrop of demographic ageing and an increasing share of groups that tend to be disadvantaged in the labour market, such as older workers, migrants and ethnic minorities. However, contrary to the often-assumed business case for diversity, the evidence on its impact at the firm level is not that clear-cut. A positive impact is generally found to be higher in knowledge-intensive, high-skilled, and innovation-driven sectors, yet generally, the impact remains small even in these sectors. Likewise, the overall impact of having more foreign-born in the firm or more women on boards on firm performance is small and often insignificant, similarly to the impact of having more diverse teams in the broader workforce.

At the same time, however, research has highlighted the importance of how diversity is dealt with, suggesting that a positive impact of diversity tends to be stronger in firms where diversity is better managed. The idea that diversity needs to be “well-managed” similarly applies at the societal level, where there is some evidence of a negative relationship between higher diversity on the one hand and social cohesion and preferences for redistribution on the other. The observed negative relationship between diversity and social cohesion, however, appears to be largely driven by contextual factors, such as differences in socio-economic status, the level of inequality, lack of social interaction between groups and the role of governance and institutions.

Thus, there is a clear need to strengthen inclusion and better understand under what conditions governments and employers can harness the potential of a diverse workforce more effectively. All 30 OECD countries that participated in the policy questionnaire have some form of diversity policies in place, both for the public and the private sector.

The report has taken a closer look at the effectiveness of six types of diversity policies (non-discrimination legislation, affirmative/positive action, financial incentives, outreach, anonymous applications and diversity training), both because they are widespread and because they are the focus of the existing literature. Overall, however, the evidence base on what works for which groups and why is still limited.

Non-discrimination legislation has been implemented by all OECD countries, often on a wide variety of grounds. While it is difficult to measure its direct effect on improving the labour market inclusion of women and minority groups, there is evidence that legislation can affect attitudes positively by signalling awareness of, and policy attention to, the issue, as well as a general societal shift in norms around equality and equality of opportunity. Furthermore, while the awareness around non-discrimination legislation has increased, in most countries with available data, the majority is not aware of their legal rights in case of discrimination or harassment. Strengthening awareness, along with implementing strong recourse mechanisms for potential victims of discrimination that protect them from retaliation, is therefore critical. However, there is a trade-off to consider here, as non-discrimination legislation can have adverse impacts on protected groups’ chances of being hired in the first place, as employers may fear future litigation.

Affirmative action policies (or positive action in the European context) are relatively widespread, either by setting voluntary targets or mandatory quotas. Notably, there has been a proliferation of gender quotas in the European context over the past decade. While such quotas have increased the share of women in executive positions, overall the impact of setting voluntary targets is less clear. They appear to have had a positive impact in the United States, but there is lack of similar evidence for European countries. Furthermore, affirmative action impacts groups differently; evidence from the United States shows that affirmative action in the labour market has benefited white women more strongly than ethnic minorities.

Given that the business case at the firm level is not always clear-cut, financial incentives to hire disadvantaged groups can be a means to strengthen the business case for employers. Evidence suggests that this can be an effective strategy, but only under certain conditions. However, evidence on their impact also shows that getting incentives ‘right’ is difficult and that such measures must be well-targeted, closely monitored and phased out unless the issues are persistent. Furthermore, public procurement regulations that promote diversity within supplier firms can be an important policy tool to strengthen the business case for diversity and are, in fact, comparatively widespread in OECD countries.

Outreach activities to under-represented groups are another approach that is critical to increase the pool of diverse candidates. Given that groups traditionally disadvantaged in the labour market often lack the necessary professional networks, targeted outreach campaigns should be the first step in a comprehensive diversity strategy. Efforts in this area have notably been made in the public sector.

In addition, there have been a number of pilots assessing the impact of anonymous job applications, redacting, for example, the candidate’s name, gender or address. Evidence shows that such anonymous hiring can be an effective tool in some settings, but is impractical for small companies and can be counterproductive in a context where employers actively seek to diversify their workforce.

Lastly, diversity training appears to be the most common diversity practice in the private sector. Yet, for training to be effective it needs to be implemented in a way that avoids backlash – for example, evidence suggests that training should not be framed as a legal obligation imposed on a firm. What is more, positive effects on attitudes dissipate rather quickly. Thus, as a one-time, standalone measure, diversity training is unlikely to have a substantial effect. Instead, it could be seen as a means to get the conversation on existing bias started, but then be combined with other, more structural measures.

Considerable challenges remain in strengthening the impact of diversity policies, both public and private. First of all, data on diversity in the workplace or on the measures taken is limited, which renders policy evaluation difficult and hampers a better understanding of what actually works for which groups and under which circumstances. In addition, finding the right balance between incentivising voluntary commitment by employers and creating policy frameworks that regulate firm action is challenging. This not only requires the ‘right mix’ of bottom-up and top-down approaches, but also needs to take into account that mandatory policies may have different impacts depending on the type of diversity measure and the group concerned.

Although specific diversity policies are crucial, they often remain stand-alone measures refined to the area of employment or education. Similar to the approach of gender mainstreaming, applying a ‘diversity lens’ to the preparation and design of policies could therefore ensure that the needs of all groups are addressed in the policy-making process.

Furthermore, there is a risk that diversity policies are adopted as a means for image management and branding, but with little intentions to actually enhance diversity at the workplace. Besides being ineffective, such ‘empty shell’ policies can actually have a detrimental impact on women and minorities by concealing actual discriminatory practices.

Moreover, implementing comprehensive diversity policies is more common for large companies and the public administration, as they have larger recruitment needs and HR departments. For smaller companies, however, this capacity may not be a given and the (perceived) costs of implementing diversity policies may be too high. Thus, ‘getting SMEs on board’ is a critical challenge, given that they employ the majority of workers in the OECD.

Lastly, diversity policies are often subject to heated discussion. While there is a large majority of people in the EU agreeing that more should be done to foster diversity at work, only around one in three would be supportive of concrete measures at their own workplace. This indicates that – aside from questions of effectiveness and feasibility – policy makers and employers have to anticipate and manage negative reactions towards diversity policies.

A crucial step in addressing such concerns is to clearly communicate that diversity policies do not seek to favour one group over others. To this end, policies must be designed so that they do not primarily benefit those who are already relatively privileged. Likewise, policy-makers must address the danger that disadvantaged individuals who do not happen to fall into the category of “diverse group” feel left behind. Ultimately, diversity policies can only be one part of a broader package of policies to promote equal opportunities among all members of society.