On Sunday Gov. Greg Abbott gave his biennial state of the state address. This is a speech where the governor outlines their policy priorities and provides an update on the status of the Lone Star State.
In his 30 minute-long speech, Abbott talked about things like property taxes, immigration and reforming the state’s education system – but he also mentioned diversity, equity and inclusion, or DEI. DEI refers to a type of program or initiative aimed at giving historically marginalized groups opportunities to advance.
For supporters of these efforts, DEI is often described as good for diversity, but also good for business. But how true is that?
Bloomberg columnist and Manhattan Institute economist Allison Schrager joined Texas Standard for more analysis. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: In your latest column, you write that when it comes to DEI, it’s “hard to be agnostic on the issue.” What do you mean by that?
Allison Schrager: Well, that’s for sure. I mean, in the column, I sort of explain that proponents have always pointed to reams of evidence showing that diversity is good for business.
It was this idealistic argument – that everyone with a different ethnic background or gender has a different lived experience. So if you bring together people with different lived experiences, they will somehow make better decisions, which will be better for business.
What I argue in my column is that, ultimately, DEI comes down to values. If we’re going to continue with DEI or reform it, it should be based on values, and people should be very clear about what their values are.
And when you talk about values, are you referring to priorities within a business, or are you talking about personal values?
Well, personal values, which is why it’s so difficult at the business level.
People just need to be clear about it. On one hand, supporters of DEI see it as a way to correct historical unfairness — people being shut out of roles, and the fact that we still have a higher proportion of white men in these positions. They see that as bad, and DEI as a way to address that.
On the other hand, opponents see race- and gender-based hiring as just another form of discrimination. And I argue that both sides have a point. This makes it a thorny issue for companies in the private sector, as they are forced to take a stand one way or another.
You mention data and say that it does not support the idea that DEI is good for business. What specifically are you referring to?
Well, a lot of consulting firms, financial firms, and research institutes within universities have tried to argue that DEI increases profitability and sales. But academics with more rigorous statistical training have revisited those studies — measuring things like stock returns and profits more carefully — and found that there’s really no correlation between having a more diverse board or senior management and business performance.
Some studies even find a negative correlation, though causation is hard to determine. There’s just no strong evidence that DEI improves business performance.
That said, there’s also not great evidence that it makes business worse. This is why I argue that, in the end, it really comes down to values.
Is there a version of DEI that could provide opportunities to underrepresented groups while also benefiting businesses, as you see it?
Yes. Alex Edmans, a professor at London Business School, is one of the most vocal critics of the research claiming DEI is good for business. But he still supports DEI — just defined differently.
He argues that you can’t just say, “We have this many women or minorities on the board,” and assume that’s progress. Instead, you need to ask: Is there evidence that the workplace is truly inclusive, where people feel heard and where the environment feels fair?
There is evidence that a fair and inclusive workplace does improve profitability. In fact, race-based hiring can sometimes undermine perceptions of fairness.
But in the end, we should all strive for a workplace where everyone feels they can succeed if they are talented, work hard, and perform well.
