Talent Management Column

The Catch-22 of Unemployment Discrimination

It may not be illegal, but a strong case could be made that it's foolish for employers to screen out the unemployed when looking at job applicants. As long as the applicant's skills are current, wouldn't such a candidate be more motivated to perform well and more likely to work cheaper?

Monday, August 15, 2011
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A little-known hearing by the U.S. Equal Employment Opportunity Commission this past February raises some interesting questions that could have long-term consequences for employee management.

The hearing investigated the practice of excluding unemployed job applicants from consideration for open positions. Apparently some employers literally put a requirement in their job advertisements that states only employed applicants will be considered for jobs.

The extent to which employers who do not explicitly prohibit unemployed individuals from applying, but nevertheless screen them out after they've applied, is unknown -- but a reasonable guess is that the latter is much more common than the former.

The EEOC's initial interest in this practice is that, because unemployment is considerably more prominent among minorities, a practice of discriminating against the unemployed would appear to have an adverse impact on those groups and -- absent some compelling evidence to the contrary -- would appear to be illegal.

The concern about the practice of restricting job applicants to those already employed is growing, however, and goes beyond the notion that it affects already protected groups. At last count, at least two bills have been introduced in Congress to prohibit discrimination against the unemployed in hiring per se, not just because of potential adverse impact.

This is a tricky one, isn't it? Catch-22 author Joseph Heller's bombardier Yosarrian would be very familiar with a rule that says we can't employ you because you're not employed. This situation may account for the otherwise puzzling fact that many people who are laid off never get jobs again, especially at senior positions.

It's certainly brutal for the unemployed job seeker. On the other hand, should we prohibit employers from ruling out unemployed applicants?

Employers routinely exclude applicants who don't have experience. That seems to be both acceptable and understandable, given the interest in having applicants with the tacit knowledge that can only be learned on the job. That situation creates its own Catch-22 problem: If you can't get hired without experience, how do you ever get experience?

Certainly, companies might be concerned about candidates who are unemployed because they were fired from previous jobs. But that has to do with being fired, not unemployed.

Being unemployed in the Great Recession, with round after round of layoffs and plant closings, is a poor proxy for being fired for performance issues as relatively few people who are out of work were fired.

Another argument might be that employers are now so flooded with unemployed applicants that they need to sort them out somehow.

A more sensible concern is that work-related skills have declined for out-of-work candidates, especially in areas such as technology where skill requirements change quickly. Not everyone who has been out of work has that erosion of skills, though, and not every job has skill requirements that change quickly.

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Wouldn't it be more sensible just to see if applicants had the right skills?

More importantly, wouldn't unemployed candidates be more grateful for a job, more motivated to perform well, and more likely to work cheaper? That alone should make them worth considering.

The interesting point here is that most job applicants, in fact, are already employed as are most of the people who move into vacant jobs. This is less the case in economic downturns like this one, but even now, the evidence suggests that a large proportion of the workforce wants to look for a different job.

Refusing to consider unemployed job applicants doesn't seem like a smart idea, but organizations do many things that don't make sense. That doesn't necessarily suggest that we should prohibit every silly thing they do.

Where it starts to get tricky is when the actions of employers spill over to affect stakeholders other than their shareholders. This is certainly one of those cases. Is it egregious enough to merit legislative prohibition? I guess we'll find out.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.

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