White House study says DEI policies cost US economy by promoting unqualified managers

The White House released a study on Monday that found diversity, equity and inclusion (DEI) policies hinder productivity by leading to inefficient management that undercuts economic growth.

The authors of the report used federal data broken down by industry, state and year to track the representation of Black, Hispanic and indigenous people in management roles – though its analysis didn’t cover gender, sexual orientation or Asian representation. The Wall Street Journal first reported on the study.

It found that the representation of those minority groups covered by the study increased less than 1% from 2005 to 2015, but went on to jump by nearly four times that amount from 2015 to 2023. 

Further, it found that industries which pursued DEI heavily by promoting minority managers were about 2.7% less productive than those which did not as of 2023. By contrast, the uptick among minority nonmanagers throughout the study period showed the productivity impact wasn’t significantly different from zero.

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“A natural takeaway from these two figures is that there is nothing inherently less productive about minority workers or minority managers. The issue is rapidly promoting unqualified workers in order to meet racial quotas set forth by DEI,” the authors wrote.

“There are clearly many qualified minority managers; the nonnegative effect of the minority manager share on productivity before 2017 attests to this,” the report explained. 

It added that it’s “worth observing that DEI actually does a disservice to these qualified minority managers, as they may experience a stigma if they are viewed as being DEI hires,” which the report noted was a phenomenon studied in a 1993 report.

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“These estimates imply that DEI promotion has led to inefficient management, raising the cost of doing business. These costs lead the companies practicing DEI to hire fewer people and pay their workers less. In the aggregate, this implies meaningfully reduced gross domestic product (GDP) in recent years, because a reduction in output per hour implies a reduction in aggregate output,” the study said.

It estimates that compared to a counterfactual with no DEI, U.S. GDP in 2023 was $94 billion or 0.34% lower than it otherwise would have been. That amounts to an average drag of about $1,160 in 2023 alone for a household with two working adults, according to the report.

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The White House’s report noted those findings are similar to those of other studies that showed the reduction in labor market discrimination under the Civil Rights Act significantly increased productivity and GDP by improving the ability of employers to match workers to jobs that best suit their abilities.

“In this way, reductions in discrimination served as a boon to the U.S. economy. Unfortunately, the reimposition of discriminatory practices through DEI initiatives reversed some of these gains,” the study explained.

The report noted that the Trump administration’s efforts to push companies to rollback DEI requirements and companies have referenced DEI less frequently in regulatory filings and earnings calls. Some of that decline was attributed to the risk of litigation over DEI policies.

“In sum, American corporations have increasingly begun to roll back their DEI programs in response to the revival of American meritocracy under the leadership of the Trump administration, curtailing DEI and the economic losses that came with it,” the White House study concluded.