Not Employing the Unemployed

One of the hot topics of the few months has been the trend of discriminating against the unemployed. On February 16, 2011, the EEOC held a public meeting on the matter.

There are many pitfalls in the approach of a blanket ban on hiring the unemployed.

Being Employed Does Not Imply A Good Work Ethic:

In the EEOC's press release following the public meeting, Helen Norton, Associate Professor at University of Colorado School of Law, is cited as testifying that the correlation between current employment and a quality job performance is weak.

It is easy to recall dealing with bad employees. Consider any time you have been subject to poor service, costly mistakes, or a lackadaisical attitude from an employee of a company with which you do service. The point is, even looking at the proposition anecdotally, one can see the lack of correlation between having a job and being a good employee.

If the correlation between being employed and being a good employee is weak, then there is little benefit in limiting the pool of applicants strictly to the employed. Likewise, this makes the practice arbitrary and thus subject to scrutiny by the EEOC. Employers are better served utilizing tools such as pre-employment testing to identify strong candidates for a position. As with any selection measure, it should be job related.

Unemployment is Costly to Society:

Consider the fact that unemployed individuals result in costs to society. Fatima Gross Graves, Vice President for Education and Employment of the National Women's Law Center, noted the negative impact to the government efforts to get people back to work.

The unemployment rate is certainly a measure of the state of the economy. While the rate is known to be a lagging indicator of economic success, it is one that is widely watched by the public. By actively denying employment to the unemployed, companies create an extra burden to the government and propagate high unemployment.

Disparate Impact:

The reason the EEOC held a public meeting on the matter is that a ban on hiring the unemployed creates potential for disparate impact. In case you missed my blog covering unintentional discrimination, disparate impact occurs when an employment practice excludes minorities at a higher rate than non-minorities.

Consider the statistics reported by the Bureau of Labor Statistics in the March 2011 Employment Situation report.


Click to enlarge
(http://www.bls.gov/news.release/pdf/empsit.pdf)

Note that in March of 2011 Hispanics (11.3%) and Blacks (15.5%) have significantly higher unemployment rates than whites (7.9%). Older workers and the disabled are also minority groups that are likely to be negatively impacted by this type of policy.

By denying employment to the unemployed, the company could be excluding minorities at a significantly higher rate and thus face exposure either to a law suit or a discrimination claim.

The Take Away:

Basing hiring decisions on current employment does not create value but does create exposure for a company. Companies should avoid implementing such procedures. If a company wishes to improve the selection process, it should focus on validated and reliable tests that have been shown to have a strong correlation to success in employment.

Works Cited:

http://www.eeoc.gov/eeoc/newsroom/release/2-16-11.cfm

http://www.bls.gov/news.release/pdf/empsit.pdf