Impact of Ethnic Diversity On Economic Growth
Ethnic diversity refers to a group of people or humans with differed racial, religious, gender, disability and linguistic characteristics. This paper mainly focuses on the ways these diversities affects the economic growth of a given company and also that of a country. The findings are mainly based on the employer’s institutional perspective. It is known that the growth of a given economy mainly depends on human capital and also factors such as changing climatic conditions. But of late, other factors other than these really have shown that there are still other variables which affect the economic growth.
Taking the case of Africa where there are more diverse groups of people, we can compare it with a country whose diversity is very minimal such as Japan. Africa in the last 20 years have been experiencing a negative growth rate where as Japan on the other hand has been enjoying a growth rate of above 5% as depicted by Birdsall, Kelley & Sinding (2001:106). This exactly shows that the higher the ethnic diversity the lower the economic growth. When groups of people living together differ based on their religion, race, disability or gender, there is always tension emerging as a result of their diversity.
Such people living in diverse societies usually use large amount of resources whenever they are looking for favors or support in such areas as of politics and employment. These favors can be considered as costly with negative implications on the economy. This is mainly because the favors could have been used in investment of other productive services. In the recent years diversity in various companies’ management has improved but it has not been totally eradicated (Cao, 2003).
Employing women and those from ethnic minorities not only enables a company or an organization to tap skills from these groups but also improves the image of an organization as compared to others. This would mean that a company has a balanced representation from those in the society. This will boost the confidence of those in the society towards such a company and thus helping it to overcome competition from the rest of the players. Studies have indicated that employers of various firms have contributed immensely to the negative impacts of ethnic diversity on the growth of economy (Ellis, 2001).
Managers in very many occasions do not give chances to women and those workers from different communities and religion. Even if most of them are very much qualified to perform skilled jobs, they are usually forced to low payment jobs which requires less skills or none at all. The education and skills they had acquired in school and colleges which could have been used to spur economic growth comes to waste at the end. Other employers have devised a way of ensuring that the employees who work for them do not cause any fracas pertaining to issues of ethnicity. (Konvitz, 1994).
Such employers ensure that during recruitment, they make sure that they only employ those with the same religious and ethnic beliefs. By so doing, they discriminate the larger pool of job seekers in whom they could have found the best employee with the required qualification. Employers who display such attitude down grades the abilities of other people and thus the organizations or the companies they are heading might experience negative or slow economic growth due to unavailability of the correct qualified and skilled personnel to run the company in the correct path.
Employers who encourage discrimination in the work place might also end up, losing their employees. This might lead to serious repercussions on the development of the company because those employees who were very much gifted with skills and experience in contributing and running the company’s affairs might end up being the victims of circumstances (Coakley, 2003). This can also lead to company spending more in the recruitment of new employees and also in training them so as to take positions of those who have left.
Such extra expenditure results to negative implications and reduces the growth of the company. On the other hand, if the managers and company employees in general view the ethnic diversity in a broader perspective and begin to accept it, most of the employees will be happy including those from the ethnic minority and therefore no talent will be lost. Talented employees with tremendous amount of experience and skills will be attracted to the company thus leading to economic growth as the company will expand creating more jobs for the jobless.
Different talents will then be tapped into the company of which they will be very much useful when exploring other avenues for investment especially abroad where diverse and different communities of people exist and live together (Hagen, 1962:217). Such move will at the end increase and improve the efficiency and the growth of the organization. Various organizations dealing with trade and industry have done research and found out that those organizations and companies who employ the diverse groups of people are more likely to withstand challenges relating to competition more than those who do not.
Therefore such organization will always do better than their competitors. More research has also been done in the USA whereby at least 100 chief executives concluded that there was need to increase and to employ people from diverse origin since the talent from the respective employees will be tapped and used accordingly. Crain & Lee (1999:8) explained that by diversifying the human capital there would be a great understanding on issues relating to the marketing of the products.
This is so because employees who have knowledge on the preferences and tastes of different ethnic communities becomes useful especially when the company is operating in different parts whose inhabitants consist of diverse range of people. Such employees can also become a good asset especially when dealing with the generation of the new products in the market. By diversifying the human capital in the work place, there will be an increased coordination and understanding in issues pertaining to the rights and treatment of employees.
This is because leaders will be well versed with how each and every individual requires to be treated and handled the way their culture requires to. When workers are treated in a good way in which they expected they are happy and motivated (Kourvetaris & Moschonas, 1996). This then leads to an increase in their output. They will also be comfortable working in such an environment and thus there will be reduced cases of absenteeism. In essence, there will be less or no loss of an employee since they will be happy working in the same organization for long.
This will save the company extra cost which they could have spent in the replacement of their employees and also that which is used for training them after such recruitment. This then will benefit the company and the economy of the country in general. Further research has shown that diversity also takes centre stage when matters of allocating resources to groups are dealt with (Gupta, 1990). The findings shows that incase a member of the group comes from the same ethnic community with the group leader or the manager of the group, they have an upper hand in accessing and obtaining the group’s resources e.
g. loans. The report also states that the group members who come from different ethnic backgrounds tend to specialize on a single assignment rather than spreading their wings and exploring other avenues in which they can deal with a particular task (Iggers, 1995, p: 280). The same behavior is also replicated whenever the members of the same community access group resources such as loans. Here, the members of the same homogeneous group usually are found to use well their loans and therefore they are likely to invest and repay it in time.
But incase the same loan is offered to group members from different heterogeneous groups, there will be a misuse of funds and the group will find it hard to repay the loan in time. The summary of this research finding therefore is that, so long as the group members are cohesively joined together, it is easier to understand one another and therefore it will be easier to come to terms and support one useful idea. Incase of a divergent community, it will always be hard to come to a common ground because each and every individual will be having a different opinion which might not be pleasing to the others.
Therefore to come to terms on policy matters is very difficult. Whenever these ethnic groups compete in issues related to the economy, each and every group hooks up in the arguments rather than coming to an agreement that will be very much helpful to the rest of the community and the growth of the country. There is also evidence that bigger ethnic diversities usually leads to the fragmentation of governments into smaller inter-governmental units which represent the respective ethnic groups (Miwa, 2004:Pg23). Larger and diverse inter-governmental societies like these usually lead to a bigger spending by the government.
This is so because the government is forced to look for ways in which they can bring the different ethnic factions together. The government might also be forced to spend much in the provision of education and also in the construction of roads. Research have also shown that many leaders takes the advantage of ethnic diversity to form illegal gangs or rebel groups like that which was headed and funded by the Liberia’s Charles Taylor. Such rebel groups used their ethnic dominance and country’s natural resources to fund themselves in the expense of the country’s development projects.
In the case of Liberia, Charles Taylor exported the country’s only precious mineral, diamond in order to fund the group. Such groups pose a great danger to the country’s resources, citizens and also the neighboring countries because it might drive the country to civil war (Singh, 2001, Pg: 27). Civil war as everyone knows can destroy a given economy which has been constructed for very many years within a span of hours. But the formation of ethnic dominance which can lead to all these can be broken down incase a country or a community is made up of a diverse groups of people.
This will reduce the dictatorial styles of leadership such as those of people like Charles Taylor. The diverse ethnic groups reduce cohesion among people of the same ethnic groups and therefore there is no dominance of one community against the other. This then reduces the chances of the emergence of rebellious groups of which it may run down or consume country’s resources. Ethnic diversity has also been known to be the solution of very many problems affecting each and everyone of us in our daily lives.
Many diverse groups of people who have migrated from one country to another have produced great ideas on their second country which have won them great prices. For example the minority groups in America have produced various Nobel Laureates and various awards including that of the best film directors (Little, & Triest, 2002: Pg 10). Also there have been numerous contributions by the ethnic minority in the work place over the years. Therefore ethnic diversity has been known to be the origin and development of great and creative minds. This is therefore a plus to the economic growth.
It has also been noted that incase the minority group has been an immigrant from another country, his/her country of origin will be economically beneficial because the immigrants will be working and sending some of his/her earnings to their families back at home. He/she can also provide beneficial ideas to his/her family at home mainly on issues like adaptation to the current technology. This clearly illustrates that ethnic diversity is very much useful especially when the ethnic minority is an immigrant as the two countries are going to benefit.
Diversity management has also benefited those countries with aging citizens. This is because they can import immigrant from abroad with different ethnic, cultural and religious beliefs. These immigrants will be very much useful in that, they will be replacing the older generation and contributing to the development of their new countries (Williams Jr, 1994). Societies and countries in which ethnic cohesiveness is not emphasized much faces fragmentation. Such fragmentation can negatively influence institutions that could have been used to promote economic development.
(Mott, 1997: Pg 237) Whenever there is a gap between ethnic communities living together, it becomes very difficult to structure and to develop an institution which will unite the communities. This then becomes a blow to a country because it will mean that the economic growth will be at stand still. Such countries usually face hard time especially from their neighbors who might be developing at a lightening speed. Therefore good institutions should be encouraged in areas mostly occupied by different ethnicities.
Such institutions will be very much useful when dealing with issues such as resource allocation and also when developing paradigms for economic growth. Like in the case of Africa, it is not always obvious that whenever there is ethnic diversities living in a given country there would be conflicts. Studies have indicated that such conflicts usually occur whenever there are few ethnic communities living in a given area and not when there are many ethnicities (Oucho, 2002 Pg: 3). This has been proved well by using data collected from African countries.
The findings shows that there is a high chances of conflicts occurring in countries whose population consist of a large and dominant group of ethnic community i. e. 50%-90% of the total community population. In such countries, the dominant community might turn into dictatorship whereby the lesser ethnic community could be denied access or ownership of the country’s resources (Schiff, 1998 Pg: 18). These may then lead to violence as each one of them tries to out do the other so as to own a share of the country’s resources. Such things results to violence or even civil war which in turn reduces the economic growth of the country.
But in situations where there are institutions, they can help to handle such like cases especially by ensuring that the right to ownership is strictly adhered to. By protecting these rights, each and every individual will be able to own some property which will be very much useful in the development of a country. In commercial institutions and organizations, diversity plays a key role in the marketing of their products. Communities who will feel left out by a company incase they do not meet their cultural preferences faces being sidelined.
But incase all the ethnic diversities are represented and also their requirements met by a given company, the company revenues will rise steadily because each and everyone will be happy in buying products from such a company. This then will mean more investment for the company and also more jobs for the citizens. Companies whose organizational structure is mainly made up of superior and dominant groups risks collapsing (Salvatore, 1988:Pg12). This is so because they will lose trust from ‘they would have been their consumers’.
Most of the communities especially from the minority group will see the company as discriminatory and therefore avoids buying products from them. The company might also experience problems abroad when trying to market their products because the external consumers who might be coming from a different ethnical community might as well feel discriminated due to the discriminatory notions of the company. But incase the organizational structure of the company favors all the ethnic diversities, most of the minority groups will be represented and therefore their rights, recruitment, payments and even their working conditions will be dealt with.
The employee will therefore be happy and they will work with one heart. This will also boost the real picture of the company locally and also abroad. Their products will get a good market and also there would be numerous varieties of products to choose from. This will automatically boost the company to greater heights where they will be thinking of opening various branches so as to satisfy their customers better. This will then lead to creation of more jobs which is an asset to the development of the economy. Conclusion:
It is obvious that those companies and organizations who have recruited their employees regardless of their ethnicity, religion, gender and disability are going to reap maximum profits. In order to manage diversity successfully, it requires the support of the public institutions, private ones and also the citizens not to fall prey to the challenges leading to ethnicities. The government should make sure that whoever has obtained skills and willing to contribute to the workforce obtains the work they have been trained for and they should also be paid commensurate with the amount of work they are doing (Moore Jr, 1998:Pg 82).
Employers should also ensure that they recruit their employees fairly despite of their ethnicity, religion, disability and gender. They should spread their choices to majority of the job seekers and use the correct procedures of recruitment. They should also make use of all the talents from the employees they have recruited, by ensuring that the ethnic minority, female employees, and the disabled enjoy equal rights like the rest of the employees.
Employers should know that diversifying their employees help them in creating new ideas, developing new products and also it will display a clean picture of the company for everyone to see (Osterfeld, 1992: Pg19). The company will then be able to satisfy everyone in terms of goods, services and also its structure. Such company will be able to make super profits which will propel it to the next and even higher level. The company will not only benefit itself and its employees, but it will also benefit the whole country as it will be an asset for economic development.
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