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National Report Card on Discrimination in America

The Role of Testing

 
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Document date: March 01, 1998
Released online: March 01, 1998

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).


Foreword

From the founding of HUD over 30 years ago to the present, there has been one major thread that has connected HUD activities: the desire to provide improved choices and opportunities to this nation's deprived and neediest populations. HUD has done this not only through its housing programs but, equally important, through the broad range of development initiatives that are a critical part of the core mission of this Department. Ever since its establishment under President Johnson, we have striven to address a wide range of community and employment development, consumer, and housing issues as they affect urban and metropolitan areas. HUD has additionally, under my leadership, focused increasingly on our ability to serve as a clearinghouse of ideas about best practices and knowledge related to urban opportunities.

It is under this broad mandate that HUD was pleased to sponsor an Urban Institute conference in March 1998, as well as this conference volume, focusing upon the use of new methodologies for creating a national report card on the state of racial discrimination in America. In this collection of essays, a group of eminent researchers and academics have presented their best assessments and recommendations on how we may advance the nation's understanding of how well our minority group neighbors, co-workers, and colleagues are being treated. The issues addressed include employment discrimination, consumer issues, business development, housing and lending, and other areas of economic life.

This collection is premised upon one indisputable fact: employment, housing, and consumer rights and opportunities are often inextricably linked and mutually dependent. One's job opportunities and prospects clearly affect one's ability to select housing, and discrimination in restaurants and other public places surely limits a family's ability to take full advantage of all the resources and benefits of life in their community. The federal government's responsibility to attack and to eliminate all forms of discrimination must therefore be comparably interwoven and multifaceted.

I therefore applaud the Urban Institute for drawing much-needed attention to the links and interdependences in research on discrimination in multiple arenas of social and economic endeavor. This volume significantly advances our understanding of how agencies, foundations, and private sector partners can best proceed as we search for new ways to measure, understand, and combat discrimination in all its forms. To advance this cause, I have recently launched a major initiative for a nationwide audit of housing discrimination that will provide a national and community-based report card on the state of housing discrimination in our country. This report card will offer fair housing agencies, HUD, and local communities an essential tool to better understand the ways in which, knowingly and unknowingly, minorities and other protected groups are denied equal treatment at a time when most Americans believe that justice is a fundamental part of the covenant of full participation in the country's future.

I commend this collection to you and trust that we all can learn to do more for a better and more just society in the 21st century.

Andrew Cuomo
Secretary of Housing and Urban Development


Executive Summary

Despite the fact that minorities have made substantial economic and social progress over the past 30 years, significant disadvantages based on race persist within the United States and serve as markers of continuing policy failures. Claims that the nation has achieved a color-blind society appear premature as a body of empirical and anecdotal evidence indicates that discrimination based on race and ethnicity lingers, and has not been eliminated by the nation's civil rights laws.

Evidence of discrimination has come from several sources, including analysis of aggregate employment, housing, and other data sets. While the regression techniques employed in these analyses have much to offer, they fail to provide the clear, direct measures and narrative power offered by paired testing. (In a paired test, two individuals are matched for all relevant characteristics other than the one that is expected to lead to discrimination. The testers apply for a job, an apartment or some other good and the outcomes and treatment they receive are closely monitored.) But despite their power, testing studies have only been sporadically mounted over the past two decades.

In March, 1998, the Urban Institute, with support from the Department of Housing and Urban Development (HUD), convened a conference that involved many of the best-known researchers working on the measurement of discrimination. The goals of the conference were to explore the feasibility and merits of creating a national report card on discrimination, assess the role that paired testing and other social science methodologies might play in its formulation, and identify the pilot research needed for the report card's full implementation.

Papers prepared for the workshop concluded that a national report card could achieve several policy goals. It could help set enforcement priorities for civil rights organizations, identify barriers to the achievement of important social objectives (such as promoting work among former welfare recipients), and reveal some of the interdependencies between discrimination in differing areas. One example is the effects of housing discrimination and segregation on employment outcomes.

The distinguished authors of the papers presented in this volume also concluded that the state-of-the-art expertise in paired testing is sufficiently advanced to conduct national-level tests in the areas of housing sales and rentals, entry-level hiring, and, perhaps, selected areas of public accommodations (taxi service, for example), and auto sales. The conferees agreed that the national report card should produce national-level estimates, as well as statistically significant results for selected metropolitan areas. They concurred that more developmental, exploratory work would be needed before testing could be broadly applied in a number of other areas, including mortgage and commercial lending, bonding, and differential access to selected social services. At the same time, certain important areas of economic life such as being hired for higher-skilled jobs and other transactions that are inherently complex may best be probed using aggregate data and regression techniques. In general, the report card on discrimination should present paired testing results, supplemented with analyses of readily available national data sets.

The balance of this executive summary briefly states the conclusions of the five authors who made presentations at the conference and who have provided chapters for this volume. In the overview chapter that follows, Michael Fix and Margery Austin Turner draw not only from these chapters, but also from the ensuing conference discussion to outline a rationale and a strategy for using testing methodologies as the core for a national report card on racial and ethnic discrimination.

Summary of Chapter Findings

Housing Discrimination

John Yinger, of Syracuse University's Maxwell School, explores the use of testing in the sales and rental of housing and the related transactions of obtaining mortgage loans and property insurance. Yinger contends that wide-scale testing has transformed the way that racial and ethnic discrimination in housing markets is viewed: from a comparatively abstract focus on housing prices and home ownership rates to concrete stories about the unequal treatment of two equal individuals. He argues that testing research has brought a transparency and narrative power not found in earlier research.

Yinger goes on to discuss some of the clear advantages of testing, noting that it minimizes the differences in treatment caused by variables that can go unobserved by studies employing other forms of quantitative analysis, such as multiple regression. He states that testing sheds light not just on the incidence and severity of discrimination, but the circumstances in which it occurs. Further, testing makes it possible to examine the multiple, complex forms that discrimination can take by observing many types of individual/agent behavior.

Yinger highlights several limits of testing in housing as well as other fields. One notable example is the fact that testing does not provide evidence of discrimination in general, but only the discrimination that occurs within the realm defined by the sampling frame (housing units advertised in newspapers, for example). Further, some forms of discrimination may remain concealed even from testing: for example, the processing of documents for a loan where the filing of false applications is arguably illegal.

Yinger concludes by emphasizing the need for another national testing study of discrimination in the sale and rental of housing, one that would document for the first time the shifts in discrimination levels that have occurred since the 1988 Fair Housing Act was implemented. He also calls for small-scale applications of testing in new exploratory areas, focussing on the study of discrimination in mortgage loan approvals.

Employment Discrimination

Marc Bendick, Jr., of Bendick and Egan Economic Consultants, Inc., examines past and potential uses of testing in the area of employment. Bendick argues that testing is uniquely able to bridge individuals' intuitive and research-based understandings of the prevalence of discrimination. But despite this strength, he points out that only a modest body of employment testing studies have been conducted and that those tests have been limited in their demographic and geographic ranges. For example, half of all employment testing studies have been conducted in the Washington, D.C., labor market.

Bendick concludes by proposing an annual national report card on discrimination in employment. The report card would include the results of random national hiring audits, coupled with aggregate data broken down by race, ethnicity, and gender on earnings, unemployment rates, representation within differing occupations, the acquisition of employment credentials, and the number and character of discrimination disputes.

Public Accommodations and Everyday Commercial Transactions

Peter Siegelman, an economist and lecturer at the University of Connecticut Law School, addresses the idea of extending testing methods beyond housing and employment discrimination to everyday commercial transactions. Siegelman draws a distinction between transactions where discrimination takes the form of higher prices (car buying and TV repair) and those taking the form of the denial or degradation of services (hailing a taxi, being served in a restaurant). Siegelman suggests that the initial experiments in car buying could be replicated in other cities and that tests be supplemented with analyses of tax records of purchases.

In public accommodations, Siegelman refers to a 1997 Gallup Poll finding that 45 percent of blacks believed they had been discriminated against at least once in the past 30 days: 30 percent while shopping, 21 percent while dining out. Siegelman contends that audits are a necessary, but not sufficient, technique for determining whether and how often discrimination occurs in this type of transaction. Auditing is necessary, he believes, because it is the only objective means of detecting discriminatory treatment. At the same time, he identifies several challenges to the use of tests. One is the "low incidence/high frequency problem," as the occurrence of discrimination in routine transactions may be low but the fact that people engage in them frequently means that discrimination is commonly experienced. As a result, a larger number of tests may be needed than in the housing or employment contexts in order to generate statistically significant results. Siegelman suggests that testing in public accommodations be accompanied by surveys that are carefully designed to document the extent of perceived discrimination as well as the behaviors that minorities engage in to avoid discriminatory behavior (such as not shopping in some suburban malls).

Barriers to Minority Firm Formation and Development

Wayne State University Professor Timothy Bates explores the application of testing to an area of economic life where it has yet to be attempted: measuring discriminatory barriers to minority firm formation and development. Discrimination within this context can take a number of forms, including differential access to commercial credit, supplier credit, bonding, and markets dominated by firms or higher-income customers.

Bates concludes that testing approaches hold the most potential in probing small business' access to finance. Because a firm's creditworthiness is shaped by the multiple attributes of the business (its age, location, industry, liquidity) as well as its owner (education credentials, experience, skills) there are too many variables to permit paired testing on the part of loan applicants. Rather, Bates suggests drawing two samples of small, comparatively new, single-owner firms. Pilot studies could then be conducted of the differing results that white- and black-owned firms obtain at the pre-application stage of commercial loans: whether they are discouraged from applying or steered to government-guaranteed forms of credit. These testing results would be supplemented by econometric techniques to develop measures of differential treatment. Similar analytic techniques could also be applied to compare loan approvals by samples of bona fide applicants: exploring the black/white differential in loan approvals, and, where appropriate, loan amounts, interest rates, maturity, and collateral requirements.

Expanding and Potential Uses of Testing

In the volume's concluding chapter, Roderick Boggs, the Executive Director of the Washington Lawyers' Committee for Civil Rights Under the Law, reviews the ways in which enforcement and research testing were expanded and institutionalized during the 1990s as well as the policy areas where testing might be employed in the future. Potential new directions in employment include an expansion of efforts now underway within several federal agencies that are working in cooperation with private agencies, such as Chicago's Legal Assistance Foundation, in carrying out tests of race, national origin, and discrimination against noncitizens.

In the area of housing, Boggs points not only to the expansion of HUD's Fair Housing Initiatives Program, but the reliance on testing by the Housing Section of the Justice Department's Civil Rights Division. Looking to the future, Boggs notes that testing could be more fully introduced in the Section 8 voucher program, as well as the Department of Agriculture's rural home loan program. Other policy domains that Boggs sees as logical candidates for both research and enforcement testing include access to government-supported health and hospital services, the provision of federal loans to small farmers, small business' access to financial assistance, and differential treatment within job referral and placement programs.

Note: This report is available in its entirety in the Portable Document Format (PDF).



Topics/Tags: | Housing | Immigrants | Race/Ethnicity/Gender


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