Discrimination (7): Statistical Discrimination v. Background Checks?

Employers often use background checks before deciding to hire someone. For example, they may check the criminal record of job candidates, their credit scores, health history etc. It’s somewhat understandable although not always acceptable that they are reluctant to hire someone who has been in jail, has been sick for a long time, or has proven to be undisciplined by not paying her bills.

Let’s focus on ex-convicts for the moment. These people have a hard time as it is, sometimes even for no good reason because they shouldn’t have been incarcerated in the first place (I argued here that many countries, and especially the U.S., put too many people in jail). So, allowing employers to use criminal background checks can force ex-convicts into a vicious circle: unable to find a job, they may be forced to go back to crime.

Furthermore, there’s a racial aspect to all of this: in the U.S., African Americans are more likely to be ex-convicts. According to some, this racial discrepancy is precisely the reason to allow criminal background checks. If employers aren’t allowed to check individual candidates, they will resort to statistical discrimination: they know that blacks are more likely to have a criminal record and so they won’t hire any blacks at all, just to be safe.

However, if you espouse this argument in favor of background checks, you essentially want to make things better for one disadvantaged group – blacks, who are generally disadvantaged in employment – by making things worse for an even more disadvantaged group, namely ex-convicts. And that’s assuming that employers will hire more black people if they can use criminal background checks; but assuming that means assuming there’s no racism. Helping a disadvantaged group by harming an even more disadvantaged group is plainly absurd, and you can only fail to see that it’s absurd if you have an overriding fear of government regulation. Regulation should be kept in check but not at any price. I think in this case regulating businesses and outlawing background checks is the appropriate thing to do.

Let’s turn briefly to another type of background check: credit scores.

[M]illions of Americans, as a direct consequence of looking for work, have lower credit scores. … The use of credit checks in employment decisions should be banned. It is a form of discrimination against the poor — the codification and enforcement of class barriers. It is therefore a form of discrimination against those groups more likely to be poor. (source)

It seems there’s a

growing tendency of HR departments to check the credit scores of potential employees apparently deeming this data to be an important predictor of employee behavior. This creates a Catch-22 scenario for the unemployed where you can’t improve your credit score unless you get a job and you can’t get a job until you improve your credit score. (source)

Apart from the obvious fact that credit scores seem to be a type of knowledge that is much less useful for an employer compared to a criminal record – if your house burned down and your credit score is low as a result, does that make you a bad employee? – there’s a real issue for the poor here. They shouldn’t be discriminated against just for being poor. It’s not just a lack of conscientiousness or discipline that can lower your credit score. Back luck and poverty won’t help either. Some say the free market and competition will take care of this: employers stupid enough not to hire good poor people simply because they have a credit problem will lose out. Their competitors who don’t engage in credit checks will hire them, and those businesses will acquire a commercial advantage. I don’t know. Seems awfully optimistic to me.