Diversity, equity and inclusion (DEI) initiatives lost steam in 2023 compared to previous years as companies increasingly shift resources due to tightening economic conditions, according to Paradigm.
The total percentage of American organizations with a DEI budget dropped 4 percentage points, from 58% in 2022 to 54% in 2023, while the number of organizations with a DEI strategy fell 9 points in that same time frame, according to a report from consulting firm Paradigm. DEI initiatives in the workplace gained huge traction following the death of George Floyd, which encouraged companies to divert resources to the practice, but now “external forces,” including tightening economic conditions as well as public and judicial pressure, are pushing back on those efforts.
“After two years of unprecedented investment sparked by 2020’s racial justice movement, this year, global momentum around DEI slowed,” according to the report from Paradigm. “There are a number of headwinds contributing to this shift: the first is economic uncertainty that not only led to reduced spending across the board, it also firmly shifted the power balance back to employers.”
Despite the decline in funding, there was a 6-point increase in the number of companies that had a senior DEI leader and an 8-point increase in organizations that had goals related to representation for women in leadership from 2022 to 2023, according to Paradigm. A total of 20% of companies in 2023 had goals related to increasing employment related to race or ethnicity, which is a 4-point increase year-over-year.
The shift follows concerns from companies that the Supreme Court could target DEI and race-based hiring in the workplace the same way it struck down race-based admissions at colleges and universities earlier this year. A pair of decisions by the Supreme Court in June involving Harvard and the University of North Carolina cumulatively ruled that using race as a factor in college admissions is not permissible under the Fourteenth Amendment of the U.S. Constitution.
“Over the past several months, we’ve heard from a number of HR leaders who are de-emphasizing data and analytics as a part of their DEI efforts, in response to the changing legal landscape and increased scrutiny on DEI efforts,” according to the report from Paradigm.
Only 26% of companies examine the final results of hiring by race or ethnicity, while 33% analyze promotions in the same manner, according to Paradigm. Around 36% of organizations measured the attrition rate of their employees by race or ethnicity.
Businesses pulled back from hiring in October, adding only 150,000 jobs for the month compared to 297,000 in September, while unemployment ticked up to 3.9% from 3.8%. The Leading Economic Index predicted that 2024 will only see 0.8% in the U.S. economy due to a possible recession.
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