By Greg Ip

Much of Corporate America in the past decade embraced the theory that diversity, equity and inclusion policies were good for productivity and profits.

A new White House study concludes the opposite: DEI policies that encourage hiring managers on the basis of race undercut the industries that adopted them, and the broader economy.

"There is nothing inherently less productive about minority workers or minority managers," the study says. "The issue is rapidly promoting unqualified workers in order to meet racial quotas set forth by DEI."

The study is likely to add to the debate over DEI. Advocates say DEI counters implicit bias that holds back historically disadvantaged groups, helps companies better relate to their customers and unlocks hidden talent.

Opponents say DEI policies unfairly and illegally discriminate based on race and stigmatize people from targeted groups who get their jobs on merit. Since taking office last year, President Trump has sought to eradicate DEI in federal and private hiring and college admissions. He will likely draw added fodder from the study, written by economists, some on leave from academia, serving on Trump's Council of Economic Advisers. It was released Monday as part of the council's annual Economic Report of the President.

The authors write that civil-rights legislation led to "reductions in discrimination [that] served as a boon to the U.S. economy. Unfortunately, the reimposition of discriminatory practices through DEI initiatives reversed some of these gains."

Because most companies don't explicitly state how they use DEI in hiring, the authors sought to proxy such policies by tracking the representation of Black, Hispanic and indigenous people in management ranks using federal data by industry, state and year. They didn't track representation based on gender, sexual orientation or Asian origin.

They found the representation of minorities rose less than 1 percentage point between 2005 and 2015, then by four times that amount from 2015 to 2023.

The authors argue DEI is the likeliest reason for the shift in trend. They note that in early 2015, consultants McKinsey & Co. released the first of a series of widely cited studies arguing that companies with more gender and ethnic diversity outperformed financially. Major companies began discussing DEI in financial filings and earnings calls, and the number of jobs explicitly related to DEI jumped. The White House report, whose authors aren't listed as is customary, says that the "previously virtually unknown" position of chief diversity officer became the "fastest-growing C-suite executive position."

They found no correlation between minority representation and productivity through 2015, but as of 2023, productivity was 2.7% lower in industries that pursued DEI heavily, relative to those that didn't.

Extrapolating those results to the entire country, they estimate DEI policies cost the U.S. 0.34% of annual output in 2023, or an average of $1,160 per family.

Some aspects of the study could raise questions about its conclusions.

Identifying with confidence the impact of DEI would have required tracking companies that adopted such policies against a "control" group that didn't. Lacking data on who actually adopted DEI, the authors inferred the presence of such policies. That means their results may have been caused by some other factor they didn't identify. Their data categories, such as for managers, may have been too broad to tease out the effect of DEI.

The estimated $1,160 per household cost for the entire country seems unusually high for such a difficult-to-identify phenomenon. It also assumes nothing else changed when DEI came into vogue. Yet if in fact companies lost business because they adopted DEI, their competitors would have gained market share, reducing the aggregate impact.

Research that claims to find positive financial effects from DEI has its own problems. In a 2024 paper, Jeremiah Green of Texas A&M University and John Hand of the University of North Carolina sought to replicate McKinsey's results and found no correlation between diversity and financial performance. They also argued that McKinsey's results were more consistent with financial outperformance leading to more diversity in hiring, rather than the reverse.

McKinsey has said it stands by the findings of its research.

Write to Greg Ip at greg.ip@wsj.com

(END) Dow Jones Newswires

April 13, 2026 15:56 ET (19:56 GMT)

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