Prohibiting Employment Discrimination Against the Unemployed

Charles Lane seizes on one under-discussed element of President Obama’s proposed “American Jobs Act”:

“Prohibiting employers from discriminating against unemployed workers when hiring.”

That’s right, the White House (and some members of Congress) want to make it illegal to refuse to hire someone based on their current employment status, and subject employers to litigation if they are alleged to have done so. The President says it “makes absolutely no sense” not to hire someone who has been out of work for an extended period of time. Lane disagrees, and thinks the new prohibition is a lousy idea.

I can think of a couple of reasons why it would make sense. Companies may want people familiar with the latest trends and conditions in their industry, so that they don’t have to spend money training them up. Is it irrational for a hospital to prefer a nurse from their crosstown rival over a nurse who took five years off and is trying to get back into the field? Some firms may find that narrowing the field of potential hires in advance makes the hiring process more efficient.

This may or may not be a sensible calculation for any particular business. But I’m not prepared to second-guess them or assign malicious intent without a lot more specific information. In any case, if a firm that refuses to consider the unemployed is wrong about the costs and benefits of doing so, they’ll lose business to competitors that recruit differently. The market will punish them swiftly and effectively. . . .

Subjecting companies to the risk of job-discrimination litigation is justifiable in the case of pervasive, historically rooted evils such as race or gender bias. But burdening the private sector for this dubious new purpose, in these difficult times, would be a big mistake.

Let’s accept, for the sake of argument, that many employers discriminate against the unemployed in hiring decisions.  That doesn’t mean a legal response is required.  However much discrimination against the unemployed exists in labor markets, there is no reason to believe it is as pervasive and intractable as was, say, racial discrimination. Among other things there are no formal or informal government sanctions against those who hire the unemployed, no risks of boycotts, and no bands of bigoted thugs threatening to punish those who do not toe the line.  Further, making discrimination against the unemployed illegal and unleashing plaintiffs’ lawyers on private firms hardly seems like an effective solution.  To the contrary, it would give private firms yet another excuse to avoid hiring in the first place.

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