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November 26, 2024 | PIONLINE.COM
Commentary: Time for a more inclusive definition of diversity — why we should leverage socioeconomic data in hiring decision-making
By Grace Reyes and Thomas Brigandi
The diversity, equity and inclusion movement finds itself at a crucial moment. In July 2023, two weeks after the Supreme Court struck down college race-based admissions policies, 13 Republican state attorneys general sent a letter to the CEOs of Fortune 100 companies effectively calling for an end to race-based employment policies. Other efforts to undercut the consideration of race in DEI programs, such as the Fearless Fund case, have also gathered significant momentum since the summer of 2023.
Grace Reyes and Thomas Brigandi
Taken altogether, this might appear as a setback to those of us — including The Investment Diversity Exchange (TIDE) — who deeply care about the positive role that DEI policies play in fostering advancement. But this setback does not need to be a retreat; instead, it represents an opportunity to forge a more durable approach to DEI in this new environment. The financial services industry should broaden its standard DEI metrics to take into account certain other socioeconomic factors. In other words, it is time for a more inclusive definition of diversity.
There will be increased DEI-related scrutiny in a second Trump administration. As a result, we have an obligation to show that DEI is good for business. A significant body of academic research supports the notion that diverse teams tend to perform better than homogenous ones.
But we know that we can’t pursue DEI measures as we did before because businesses won’t act when they fear the threat of litigation or governmental legal action. That’s why we believe the financial services industry should incorporate socioeconomic measures into any and all selection processes. Doing so could dramatically reduce the threat of legal action for firms because socioeconomic characteristics are not linked to any provision set forth in not only the landmark Civil Rights Act of 1964 — the key legislation outlawing employment discrimination based on race, color, religion, sex and national origin, but also the Civil Rights Act of 1866, which prohibits discrimination on the basis of race in the making or enforcement of contracts.
This raises the inevitable question though: What socioeconomic metrics merit consideration? Our view is that since roles in the financial services industry generally require an undergraduate degree, the answer might come from examining common characteristics across the student population we’ve helped in the past. In fact, the leaders of both TIDE and the Thomas R. Brigandi Foundation have collectively mentored hundreds of business, accounting, economics and finance undergraduate students.
First and foremost, Pell Grant status should be universally adopted as a DEI factor because it is a verifiable and significant data point. The U.S. government’s National Center for Education Statistics (NCES) has published Pell Grant data by race every four years from the 1999-2000 academic year to the 2019–2020 academic year. During this time, the percentage of students who received Pell Grants was highest for African American students, ranging between 60% and 75%. Considering whether a student received a Pell Grant can foster pro-DEI outcomes that firms are committed to, but crucially without race being a primary or explicit factor.
The need for clear, well-documented, and reliable information further bolsters our argument to focus on Pell Grant status. It is a government-verified data point that demonstrates exceptional financial need for college students. It also goes back decades, applying to the vast majority of current college students and college graduates in the low-income bracket since the early 1970s. This is especially helpful because it is a uniform measure that covers effectively everyone in the workforce today, and furnishing a Pell Grant status record to a potential employer is as simple as the applicant logging in to StudentAid.gov and making a request.
Moreover, there is one other socioeconomic-related metric that might merit exploration — first-generation college-graduate status. Studies have shown that students with college-educated parents are less likely to be socioeconomically disadvantaged so logically, the inverse should apply to those with parents who have not received tertiary education. In this new reality, DEI efforts in the financial services industry have to take a different approach. But this doesn’t mean that we should dispense with their larger goals. Instead, we have to look at this current challenge as an opportunity — an opportunity to redefine diversity in a way that is lasting, insulated from legal challenge and more inclusive. Embracing socioeconomic factors such as Pell Grant status in decision-making is one method worth pursuing. Let’s do it as soon as possible.
Grace Reyes is the CEO and founder of The Investment Diversity Exchange (TIDE). She is based in Austin. Thomas Brigandi is managing director, investment research and relationship management, at RisCura Solutions (U.S.A.) LLC. He is based in New York. This content represents the views of the authors. It was submitted and edited under Pensions & Investments guidelines but is not a product of P&I’s editorial team.