Commentary: Diversity Is About to Get More Elusive, Not Less

Smart companies have seen the future -- and it isn't lily-white. The Census Bureau predicts that between 2000 and 2020, the number of hispanics, african americans, asians, and native americans in the U.S. will grow by 42 million. in contrast, caucasians will rise by a mere 10 million.

The message in this data is clear: the majority of corporate america's new customers and workers are going to be minorities. That's why the business community vigorously defended the University of Michigan's affirmative-action programs in 2003. "It's a business need, not a legal need," says Jay A. Redman, vice-president for service, selling, and training at Saks Fifth Avenue (SKS ). Saks boosted minority recruitment and held racial-sensitivity training sessions in 2001, he says, after focus groups said "our brand was not welcoming" to nonwhites.

Like many executives, Redman felt relief when the U.S. Supreme Court upheld the fundamental legality of the University of Michigan Law School's affirmative-action program in Grutter v. Bollinger. But while companies that value diversity have won a big battle, they may still lose the broader war. The Grutter ruling does nothing to reverse long-term economic trends that price many low-income minority students out of college. And the high court's companion decision in Gratz v. Bollinger, which overturned a points-based undergraduate affirmative-action program, is likely to make it much harder for some big state schools to get large numbers of blacks and hispanics on campus. "Corporate America will have a more difficult time getting the workforce it needs," warns Thomas G. MOrtenson, Director of Postsecondary Education Opportunity in Oskaloosa, Iowa.

Despite the attention given to the Supreme Court decision, the reality is that economics plays a more important role than admission policies in determining who goes to college and who graduates. Fewer than 3% of the nation's minority college students attend the 150 or so selective four-year colleges that were most affected by the court's rulings, says Anthony P. Carnevale, a vice-president at Educational Testing Service. Most minority students attend community colleges and regional state schools, whose budgets are being hit as the states deal with the worst fiscal crisis they've faced since World War II. That's forcing state schools to cut classes. Many have jacked up tuition 10% or more for this fall -- after a 9%-plus hike last year.

At the same time, financial aid for the neediest students isn't keeping pace. the pell grant, the core federal program for poor students, covered 84% of the cost of attending a four-year public university a generation ago. In the academic year now ending, the grant covered just 42%. While the cash crunch affects whites and nonwhites alike, the impact is greater in minority communities, which are more likely to be low-income. Tuition hikes "at the state level will affect the lives of a lot more college students and their families than the supreme court's decision," warns Patrick M. Callan, president of the National Center for Public Policy & Higher Education.

The court's ruling on michigan's undergraduate admissions process also threatens to crimp the minority-talent pipeline that corporations depend on. The justices said schools must make a laborious, case-by-case analysis of each applicant, in which race is a "plus" factor rather than a decisive determinant. This will force big state schools, such as Michigan, Ohio State, and Penn State, to hire more admissions officers if they want to continue to aim for diversity.

There's little doubt that many of these institutions remain committed to affirmative action, but the impact will vary enormously among the states. Michigan, for one, insists it will spend whatever it takes to comply. But in California, a voter-approved ban on affirmative-action admissions will block state schools from taking race into account. The cost of compliance, combined with political opposition to affirmative action in states such as Florida and Georgia, will limit the extent to which other schools pursue diversity.

That's why businesses plan to lean hard on schools to maintain diversity. For its part, Kellogg (K ) Co. says it will limit its support of campuses that don't continue to enroll and graduate growing numbers of ethnic minorities. As part of that effort, CEO Carlos M. Gutierrez says Kellogg won't let execs speak at student functions, attend recruiting programs, or offer scholarship money to schools that skimp on affirmative action. "We'll continue to apply pressure on schools and universities to have an active diversity program," he says.

Threats probably won't be enough. Companies already spend plenty on minority outreach via internships, scholarships, ad campaigns, and recruiting staffs. Chicago-based Bank One Corp., for example, helped raise $1.2 million at a recent dinner benefiting the United Negro College Fund Inc. And the lender is helping predominantly black Chicago State University raise as much as $1 million a year for a program that pairs students with business mentors. Faced with a diminishing flow of nonwhite applicants, though, corporations may have little choice but to do a lot more -- or put their very futures at risk.

By Mike France and William C. Symonds

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