A Bill to Increase Discrimination Against All Workers?

According to Robert Pear of the New York Times, the President’s latest stimulus bill includes a provision allowing unsuccessful job applicants to sue if they believe they were denied a position because they are unemployed.

The advocates of the proposal, of course, are hoping that this will discourage discrimination against the unemployed. Indeed, we can be pretty sure that it would discourage open discrimination against the unemployed (according to the EEOC, some want ads openly say that the unemployed need not apply). But, of course, ending open discrimination doesn’t end actual discrimination. More importantly: might this have just a few unintended consequences?

Some critics worry that this would just lead to more costly, frivolous law suits. Probably. But I’d also guess it will lead to less employment of people.

The key to understanding why is to think of a worker the way a firm’s owner does: as one among many inputs in the production process. A worker helps a firm make its product or service, but there are other ways to skin that cat. Instead of hiring one more worker, the firm’s owner could just increase the hours of her current employees, or she could buy a few more machines to do the work, or she could outsource aspects of the production process to other companies (perhaps those who work in places without such laws?), or she could simply not expand. The point is that a firm has lots of choices and anything that makes one of those choices (probabilistically) more expensive will cause the firm to rely more-heavily on its other options.

Maybe this should be called the full-employment-for-machines act?