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Affirmative action refers to policies that attempt to make up for historic oppression, particularly racism and sexism, and for other circumstances which caused a minority to be disadvantaged, such as disabilities. A more neutral term for it might be minority- or underclass-preferential selection/hiring. These policies are most prevalent in the United States, due to its history of slavery and difficulty in getting over it.
In its crudest forms, affirmative action would mean giving some sort of benefit to a person of a historically oppressed group over that of a historically advantaged group, all other things being equal. Employers using racial quotas are an example of this.
Affirmative action was seen as a good thing when it was first started, as there was no way for most blacks or women to compete with white males on an even footing, due to the inability of blacks and women to get the jobs or educational opportunities open to white males. In essence, if a black person or a woman was able to compete with a white man for a job, then it was obvious that they had worked harder and against more obstacles than the white man, and were thus a better candidate.
However, it has come under attack in modern times for being a form of reverse bias against whites, males, and white males, with many people stating that advantages should only be given on the basis of social class (poor neighborhoods for instance), rather than race or gender, and that only monetary assistance, rather than quotas or the like, should be used (due to the fact that not all minorities or women are poor or without advantage, and not all white males are rich or even middle class). Some states have since banned affirmative action policies.
A good deal of opposition to affirmative action is based on the misconception that it imposes hard quotas that require employers to hire unqualified minorities. This is false and the Supreme Court has ruled against any policies doing so. Employers simply need only to make a good faith attempt to hire qualified minorities. Affirmative action laws vary widely by state and many of the programs are enforced voluntarily.