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Another Strike Against The Unemployed

Posted on Tuesday, 16th August 2011 @ 02:47 AM by Text Size A | A | A

By Aaron Johnson

In the July 25th, 2011 edition of the New York Times, Catherine Rampell reported that there are hundreds of employers that would either only consider or strongly prefer applicants that are already employed.  That does not bode well for the unemployed, and especially those who have been out of work for a long period of time.  Specifically, there are help wanted ads that require applicants to be employed in order to be considered for any position.

That leads me to these three questions:

  • Should we prohibit this practice?
  • Is there a legal basis for overturning this practice?
  • If this practice continues, what can the unemployed do?

Private sector firms would argue that eliminating this practice would be overly burdensome.  There are opportunity costs involved in filtering through applications, especially during economically challenging times where more applications.  By having to go through more stacks of files, that means less time that they could devote to another business activity.  By limiting the number of applications, firms would have more time to devote to regular business.

By not allowing firms more flexibility in making hiring decisions, it could lead to more hiring mistakes.   It can be reasonably assumed that employed applicants generally make better candidates than unemployed applicants.  Even during downward business cycles when businesses cut staff, they are more likely to lay off underproductive workers than more productive workers.  It would not make intuitive sense for profit-seeking firms to rid themselves of highly valued workers and keep less valued ones.  With fewer applicants to consider, businesses can look at each of the candidates in more detail, thus minimizing errors.

If permitted, would this practice be discriminatory?  The answer is yes if disparate impact is strictly applied. Disparate impact occurs when an employer implements a policy that significantly affects one group over another.  If the advertisement restricting the unemployed is not necessary in meeting a job requirement, then the firm can be in violation of equal employment laws.

Regarding disparate impact, there is some ambiguity on whether intent must be proven or not.  For instance, the EEOC manual states that a policy does not have to be discriminatory in practice, but should only have to show a statistical disparity in order for equal employment laws to be violated.  Given that unemployment ratesamong blacks (15.9%) is much higher than whites (8.1%), the policy of only considering employed applicants would disproportionately hurt blacks.

However, the 1976 Supreme Court case of Washington v. Davis muddies the application of disparate impact.  In that case, two black applicants were denied jobs within the Washington, D.C. police force due to inadequate performance on a written personnel test.  They argued that these tests were not relevant to performing their jobs as police officers.  In a majority vote of 7-2, the Supreme Court ruled that discrimination did not occur because the applicants had to prove intent to discriminate.

State and federal government officials have looked at measures that will help the unemployed against these recruitment practices.  Republican Governor Chris Christie recently signed legislation that could fine violators up to $5,000 for repeat offenses where either print or online advertisements state that unemployed individuals cannot apply.  Michigan and New York are considering similar pieces of legislation.

While this legislation may have good intentions in moderating the pain of long-term unemployment, there are unintended consequences in passing these types of laws.  States with less stringent laws can benefit at the expense of New Jersey. Employers might cringe at the potential of greater fines and seek to go to states with less restrictive polices.

Therefore, it would be more effective to pursue eliminating this practice at the federal level.  U.S. Congress has considered drafting legislation in this area, but it will be difficult to reach a consensus.  While advocates might point to surveys expressing general distaste of this employee recruiting tool, business interests would object to another layer of regulation that is already hampering job creation.

In addition to 13.9 million being out of work, it is also distressing that 44.4% of this total have been out of work at least six months.  The combination of lack of jobs and unwillingness to accept a job at a drastically lower wage are some of the reasons why long-term unemployment is more than double its usual rate of 20%.  Even though unemployment insurance provides a brief respite for families, it can be detrimental when one is not working for a long period of time.

Rather than hoping for regulation to make job hunting more friendly to those out of work, the unemployed must be proactive in changing their status.

  • First, take advantage of this idle time to acquire more schooling.  There is a drastic difference between unemployment of college graduates (4.3%) with those that are high school graduates (9.3%).
  • Second, try to limit skill erosion through self-employment opportunities or volunteering at non-profit organizations.  These experiences can go on your resume and alleviate the concern of explaining large gaps in employment.

In times of rising budget deficits, the safety net for Americans is likely to shrink.  Resist the despair and discouragement that comes with being unemployed and be persistent in seeking job opportunities.

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