See also: Ensuring Workplace Fairness Is Not Expensive by Crosby Burns and Jeff Krehely
Earlier this week, President Barack Obama forcefully made the case for an American economy that works for everyone in his annual State of the Union address before Congress. The economy, however, is not working for far too many gay and transgender workers, who continue to face staggeringly high rates of discrimination on the job or when seeking employment.*
Fully 42 percent of gay workers say they have experienced employment discrimination, while 90 percent of transgender individuals report being harassed, mistreated, or discriminated against on the job. Yet studies confirm that workplace equity for gay and transgender employees is good for the bottom line of businesses large and small.
Unfortunately there is currently no federal policy that makes it illegal for private companies to fire people simply because they are gay and transgender. That needs to change.
In the absence of federal policy, however, businesses can minimize discrimination against gay and transgender workers by instituting common-sense human resource policies. Namely, businesses can incorporate “sexual orientation” and “gender identity” into their nondiscrimination policies, which helps ensure that job applicants and employees are evaluated based on their skills and qualifications—not on characteristics completely irrelevant to job performance.
Many businesses small and large have taken this step and report no or negligible associated costs. Importantly, even when there are costs—which are minimal—they are outweighed by the significant benefits of this action, including recruiting and retaining the most qualified individuals for the position, enhancing job performance and productivity, and avoiding costly litigation. In other words these policies are a win-win—they help gay and transgender job applicants and employees, and they help businesses operate more efficiently and profitably.
This column summarizes recent research on companies of all sizes that have incorporated sexual orientation and gender identity into their employment nondiscrimination policies and their motivations for doing so. We also explain the ways in which discrimination detracts from a company’s bottom line.
Big business and workplace fairness
Not coincidentally America’s largest and most successful companies are also the most likely to prohibit discrimination against gay and transgender workers. Eighty-five percent of Fortune 500 companies have enacted nondiscrimination policies that include sexual orientation, and 49 percent include gender identity. Looking at the very top of the Fortune ladder, the proportion of companies offering employment protections in the Fortune 100 skyrockets to 93 percent for sexual orientation, and 74 percent for gender identity.
Businesses often directly attribute their gay and transgender-inclusive workplace policies as enhancing their bottom line and ability to outperform the competition:
- The Boeing Co.: After adding gender identity to its nondiscrimination policy in 2006, Global Diversity & Employee Rights Team Member Connie Jack said: “That was a major celebration for us. Diversity is itself a core business strategy of the company. It is our intent to create an inclusive environment that provides for a fully engaged workforce.”
- JPMorgan Chase & Co.: “Gender, race, sexual orientation, age, and physical ability are some of the differences that make people—employees and clients—unique. … as a global organization serving a diverse client base, building and sustaining an inclusive workforce makes economic sense. … at J.P. Morgan we see diversity as a competitive advantage. … this is why we work hard and invest in attracting and retaining a diverse workforce.”
A recent report from the Williams Institute, a UCLA-based think tank advancing sexual orientation and gender identity law and policy, confirms that the vast majority of America’s largest and most successful companies directly link workplace fairness with their profitability:
Overall, we find that almost all of the top 50 Fortune 500 companies and the top 50 federal government contractors (92 percent) state that, in general, diversity policies and generous benefit packages are good for their business. In addition, the majority (53 percent) have specifically linked policies prohibiting sexual orientation and gender identity discrimination… to improving their bottom line.
Small business and workplace fairness
Many smaller businesses also recognize that fair and inclusive workplaces are good for their bottom lines. A 2011 CAP poll of small business owners found that a majority (69 percent) already prohibit discrimination based on sexual orientation, and that a majority (61 percent) also does so on the basis of gender identity.
More importantly, most of these businesses report that there have been absolutely no costs associated with the initial inclusion of sexual orientation in their nondiscrimination policies. Sixty-seven percent said there were zero costs associated with the initial inclusion of sexual orientation within their nondiscrimination policies. Of the 25 percent of companies that said there were costs associated with implementation, 65 percent said those costs represented less than 1 percent of annual operating costs. Small businesses report comparably low-cost figures for the initial inclusion of gender identity in their nondiscrimination policy.
Even fewer of these small businesses cited costs associated with maintaining their company’s sexual orientation nondiscrimination policy in the medium and long term. Eighty percent said there were no costs associated with maintaining their policy prohibiting discrimination against gay workers. Only 12 percent said there were costs associated with its maintenance. Looking at just this 12 percent, 68 percent said those costs represented less than 1 percent of annual operating costs. Small businesses report comparably low-cost figures associated with maintaining gender identity in their nondiscrimination policy.
Implementing nondiscrimination policies
- Sixty-seven percent of businesses with sexual orientation nondiscrimination policies said there were no costs associated with implementing those policies.
- Only 25 percent said there were costs, of which most (65 percent) said those costs represented less than 1 percent of annual operating costs. Nine percent did not know either way.
Maintaining nondiscrimination policies
- Eighty percent of businesses with sexual orientation nondiscrimination policies said there were no costs associated with maintaining those policies.
- Only 12 percent said there were costs, of which most (68 percent) said those costs represented less than 1 percent of annual operating costs. Eight percent did not know either way.
But what about those small businesses that do not have these policies on their books? Of those small businesses that do not prohibit discrimination based on sexual orientation, only 2 percent said costs deterred them from offering protections to gay employees. Only 4 percent cited costs as a deterrent to prohibiting discrimination on the basis of gender identity. Most of these businesses said that they simply never thought to adopt these policies or that they did not have gay or transgender employees currently in their workplace.
The real costs lie in discrimination, not nondiscrimination
The small costs that a few businesses do incur when implementing these policies—updating human resource guidelines and training materials—are essentially erased when the high price of discrimination is factored into the equation. Consider the following examples:
- Recruitment: Discrimination needlessly excludes qualified gay and transgender candidates from employment. These inefficient hiring practices result in a substandard workforce in an economic climate where talent is increasingly essential to outperforming the competition.
- Retention: Discrimination needlessly forces qualified employees out of the workforce and into the ranks of the unemployed. Employers must then devote significant company resources to replacing that lost employee. One study calculated the recruiting and staffing costs to replace a departing employee are somewhere between $5,000 and $10,000 for an hourly worker and between $75,000 and $211,000 for an executive who makes $100,000 per year.
- Job productivity:Discrimination and hostility in the workplace prevents employees from performing their core functions on the job. Moreover, it introduces unnecessary costs by increasing absenteeism, lowering productivity, and fostering a less motivated, less entrepreneurial, and less committed workforce.
- Litigation: Workplacediscrimination exposes firms to potentially costly lawsuits. In 2010 the top 10 private plaintiff employment discrimination lawsuits cost firms more than $346 million.
Alternatively businesses that weed out discrimination based on sexual orientation and gender identity reap the significant financial benefits of recruiting a qualified workforce, decreasing retention rates and turnover costs, bolstering productivity, and avoiding lengthy and embarrassing discrimination lawsuits. These benefits certainly outweigh the minimal costs that a minority of companies have experienced when adding “sexual orientation” and “gender identity” to their nondiscrimination policies.
Businesses small and large in America agree: When it comes to profitability, discrimination is costly and fairness brings economic benefits. But despite the commonsense steps that many companies have taken to establish gay- and transgender-inclusive workplaces, federal policy is needed to ensure that all Americans have a fair shot at succeeding in the workplace. It is time for policymakers to show leadership on this issue, and implement policies that end discrimination against gay and transgender employees, and boost the efficiency of our nation’s businesses.
Crosby Burns is Special Assistant for LGBT Progress at American Progress. Jeff Krehely is the Director of the LGBT Research and Communications Project at American Progress.
*We use “gay” as an umbrella term to include people that identify as lesbian, gay, or bisexual.