Wednesday, July 28, 2010

It's already possible to discriminate against the unemployed!

I wasn't really satisfied with my explanation of why most arguments for banning the use of credit scores in hiring don't hold water. To refresh, Kevin Drum's main complaint with using credit scores is that it creates a "Catch-22" for unemployed workers: they have low credit scores because they're unemployed, which makes it hard to get a job, which means that their credit scores will deteriorate even more, and so on.

Now, there are two possibilities here (not mutually exclusive):
  1. Employers are interested in information contained in credit ratings other than employment status (e.g. financial responsibility).
  2. Employers are interested in employment status.
In my post I addressed possibility #1, and I pointed out that employers presumably understand that a low credit rating from a currently unemployed person carries different implications than a low credit rating from someone with a steady income. If businesses are interested in the "character qualities" weakly proxied by a credit report, they'll adjust for employment history in interpreting the numbers.

Possibility #2, meanwhile, isn't really an issue. If employers want to discriminate against applicants who are currently unemployed, they are already able to do so, and I don't think anyone proposes a change in policy here. So as long as you grant that businesses aren't stupid, Drum's specific gripe doesn't make much sense.

This doesn't mean there is no problem at all with using credit ratings for employment. The most worrying possibility would be that credit scores are an unusually good proxy for some attribute we don't think should be involved in hiring, like medical history. If this turns out to be true, we should certainly consider placing restrictions on their use in evaluating job candidates. For now, however, it's not clear that looking at credit scores is any more unfair than looking at college degrees, personal connections, or any of the innumerable other features of the hiring process that are inequitable yet widely accepted.

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