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Companies that deny people jobs based on factors that don't directly affect job performance (credit report, race, whatever) will have their lunch eaten by those
by csense 13y ago
Companies that deny people jobs based on factors that don't directly affect job performance (credit report, race, whatever) will have their lunch eaten by those who don't.
In other words, not hiring Mr. Carpenter represents a missed opportunity for those companies. If an experienced dress shoe salesman normally brings down $25 an hour, but Mr. Carpenter is desperate and willing to work for $20 an hour instead, the company that doesn't care about his credit and hires him anyway can save $5 on their hourly labor costs.
In fact, as long as Mr. Cooper is underbidding, it doesn't matter how much he underbids; hiring him is still a win-win situation if he asks for $24.75 an hour.
Why does this problem need regulatory solutions when plain old capitalism will do?
On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world?
- bdcs 13y agoBecause people/companies aren't the rational actors tradition economics makes them out to be. Case in point: low credit scores are uncorrelated or even positively correlated with good job performance (cf. the featured article's citations). Yet regardless, companies still base hiring decisions off of them (in the wrong direction, the data suggests). Mr Carpenter had to go through undue hardship due to ignorance and stereotyping of poor people. In summary, I hope Adam Smith's invisible hand slaps some sense into these companies.
- jiggy2011 13y agoThe "invisible hand" often works very slowly. By which time Mr Carpenter has been out of work for 3 years and is no longer the hot property he once was.
- csense 13y agoI doubt that shoe salesmanship skills become obsolete anywhere near as fast as web development skills.
- learc83 13y ago>On the other hand, if we empirically observe that Mr. Cooper can't find a job, why does the theory above fail to hold in the real world? I think what you're seeing is the effect of credit monitoring agencies marketing departments. Sure over the long term those companies that discriminate based on credit may lose out, but in the short term HR managers are going on the word of Equifax/Transunion/Experian that checking new hire's credit history is beneficial. The history of business is full of stupid trends that aren't supported by the evidence.
- eli_gottlieb 13y ago"The market can remain irrational longer than you can remain solvent."