Beginning in the 1960s, transgender people began seeking employment protections through lawsuits and legislative lobbying, largely unsuccessfully. The adoption of employer transgender workplace policies was non-existent prior to 1975, was infrequent from 1975 to 1996, began a slow but steady increase in 1997, and a rapid increase in 2001 which is continuing. What caused this trend? Is it a sudden increase in the 0.01% of employees that are visibly transgender? Is it altruism on the part of employers unaware until recently of the needs of transgender employees? Political liberalism? Political correctness? All of these social forces have their place, but none is a complete explanation. My 2003 dissertation research, involving 40 interviews with employers that had adopted transgender EEO policies, gives evidence for a different explanation.
The sudden increase in transgender EEO policies has been driven by the notion that diversity leadership will greatly enhance business efficiency in the near future. The evidence supporting this is as follows: In 2012, the U.S. Bureau of Labor Statistics predicts that there will be 1.4 million college-level entrants into the labor force and 1.4 million new college-level job openings. At the same time, if the trend in minority college graduation continues, about 30% of the entrants will be racial and ethnic minorities. Thus, for every 1000 college-level jobs, there will be 1000 college graduates, 300 of whom will be minorities. If only 64% of minority bachelor’s degree holders in 2012 are employed in college-level jobs (as they were in 2003), then about 200,000 college-level jobs will go begging. This will require higher incentives to fill those jobs. (Non-college-level jobs have similar statistics, but the need for college talent and the barriers to minority higher education make the crunch even more trenchant.)
Taken together, if these trends continue, failure to attract minority candidates will make recruitment excruciatingly difficult and require higher incentives to fill those jobs. Clearly, the ability to attract minority candidates is related to an organization's stance toward minorities. While other circumstances, such as globalization and outsourcing, may negate these projections, it is nonetheless correct to say that a growing number of large business organizations now operate under these beliefs.
The belief that the ability to attract minority candidates is important has made the business environment friendlier to sexual minorities in some organizations. In part, this is because attracting minority candidates is difficult, not the least of which is the illegality of race-based hiring under U.S. law. Therefore, in the 1990s, some large U.S. businesses began to speak broadly of "diversity" as a general good, and "diversity leadership" as essential to becoming an "employer of choice."
In the 1990s, U.S. gay and lesbian advocates, including employee groups, began to champion their cause using the language of "diversity." This achieved some success, but progress was slow. In 2001, these gay and lesbian advocates took up the cause of transgender workplace diversity. (Why they did that is a story for another day.) Partly because of the growing concern among forward-thinking employers about the coming labor crisis, both gay/lesbian and transgender workplace issues have been achieving increasing success. For those companies who consider it important to be a "diversity leader," this argument has been particularly successful. Thus, transgender diversity policies in the workplace have been driven by the notion that diversity leadership will greatly enhance business efficiency in the near future.
The "diversity" argument has had some success, but comparatively few large companies have adopted transgender diversity policies. At the time of this writing, there are only 81 Fortune 500 companies that have included "gender identity" in their EEO policy, as compared to 427 that have included "sexual orientation" in their EEO policy. In many instances, the "diversity" argument is trumped by the argument that there are too few transgender employees for such a policy to be necessary. However, I predict this argument will increasingly fail because it undercuts the idea of "diversity" that large companies have embraced. The failure to include transgender employees could be interpreted, rightly or wrongly, as demonstrating an organizational environment in which invidious discrimination is permissible as long as the group is relatively small and powerless. Top companies looking to attract top talent will not wish to take this risk, and the numbers argument will cut the other way: the number of transgender employees is so small that the cost of including them in policies is also small, while giving a big boost to inclusiveness.
The next phase of adoptions after the Fortune 500 will be smaller companies. Those companies do not have the same concerns driving the Fortune 500 transgender policies, but my guess is that once the matter becomes standard practice among the Fortune 500, those who follow the Fortune 500 will jump on board.
If you want to learn more about this, see my dissertation.