A Wharton School publication says refusing to hire the unemployed is a really bad idea:
As an article yesterday in the Philadelphia Inquirer noted, some employers feel that people who fail to find a job after months of looking probably have “something wrong” with them. In addition, the article noted, companies worry that unemployed workers fall behind in job skills, especially when one in three job seekers has been out of work for more than a year.
Is that an accurate assumption? “It’s always tempting to give an ‘on the one hand’ and ‘on the other hand’ response to such practices, but in this case, there really seems to be only one hand. This is a bad idea,” states Wharton management professor Peter Cappelli. “I’m sure what these employers are thinking is that people who lost their jobs did so because employers didn’t think they were good workers. The essence of a recession like this one, though, is that lots of people lose their jobs” because, for example, the plant closes, the company fails or the employer offers buy-outs.
And what about those people already employed who companies say they want to hire? These employees may be difficult to work with, or failing at what they do and therefore want “to get out before they are fired. Why is that an advantage?” asks Cappelli, director of Wharton’s Center for Human Resources.
Wharton management professor Matthew Bidwell agrees that excluding the unemployed from applying for jobs is bad business. “This is clearly a terrible development from a public policy point of view,” he says. Yes, he acknowledges, workers’ skills “may atrophy during the time that they spend in unemployment. The longer that people are out of the workforce, the harder it is for them to get back in. But when employers start putting up barriers towards people returning to the workforce, that problem will just be exacerbated. We need mechanisms to make it easier for people to get back into work following unemployment, not harder. Policies like this raise the risk that we end up with a generation of people who struggle to ever get back to work again.”
At the same time, Bidwell suggests that this bias may seem rational from employers’ perspectives. “There is a famous paper by Bob Gibbons at MIT and Larry Katz at Harvard where they show that laid off workers did much better when their entire plant closed, versus when there was a partial layoff. The inference was that employers were worried that it was only the weaker workers who were being laid off — unless the layoff was clearly no fault of their own. It is a sensible inference that, on average, unemployed workers are those the employer was most willing to let go. Screening them out may save a little time for the employer.
“But on average conceals a huge amount of variation,” he notes. Aside from people losing their jobs because their company or division was closed down, some people just may not have gotten along with their boss for reasons beyond their control. By ruling those workers out, companies could miss an opportunity to hire very able workers. “This could make sense when firms feel so overwhelmed with good applicants that they don’t mind [excluding] some strong candidates, or when firms feel very uneasy about their ability to differentiate strong versus weak candidates and have to rely on hard evidence instead.”
Meanwhile, as the Inquirer article notes, the U.S. Equal Employment Opportunity Commission held a hearing in Washington, D.C., last month in an attempt to decide whether telling the unemployed not to apply for a particular job “amounts to intentional or inadvertent discrimination” against minorities, the disabled and workers over age 40.
Says Bidwell: The decision by some employers to sidestep the unemployed “is an understandable but very worrying development.”