A provision in President Obama's proposed American Jobs Act would prohibit employers from discriminating against prospective employees on the grounds that they are currently unemployed. This is in response to reports that some companies are limiting job openings by explicitly turning away job-seekers who are not currently employed elsewhere.
In the Washington Post, Charles Lane takes aim at the proposal, with a hearty concurrence from Jonathan Adler. While I don't have a strong opinion yet on the provision itself (having just learned of it), I have to say I find Lane and Adler to be very unpersuasive critics. Both, in my view, give a short-shrift to the purposes that underlie employment discrimination law -- narrowing its ambition in ways that would not just obviate the need for an "unemployment discrimination" provision, but many other anti-discrimination provisions they claim to support.
Lane makes the case that for some firms in some cases, it is perfectly rational to discriminate on basis of immediate past employment history. For example, a company might prefer a candidate who is up to date on current trends in the industry versus one who would need time to get up to speed. Consequently, we should be reluctant to "assign malicious intent without a lot more specific information", and trust the market to punish firms that do discriminate in an inefficient manner.
Lane's argument could be (and sometimes is) used against all employment discrimination laws (if it's really irrelevant, the market will solve, otherwise, it's rational market choice and should be left alone). Adler at least makes an effort to preserve some of them by analogizing to racial discrimination, where, for much of our nation's history, a company who attempt to hire in a non-discriminatory fashion would be beset by boycotts, intimidation, and violence. Even though racial discrimination is inefficient and race is not relevant to job qualifications, it would persist because no company could break from the status quo and hire racial minorities without incurring huge costs. Employment discrimination laws are justified in such cases to solve a first mover problem (and, notably, companies would prefer such a law to be in place for that very reason).
The first problem with this distinction is that it probably doesn't apply today -- it seems unlikely that in 2011 a company which did hire Blacks would face a coordinated campaign of violence and intimidation as a result -- which means it is hard for Adler to avoid arguing that employment discrimination law as a whole has passed its prime and should be repealed (which maybe he does think, I don't know). But in any event, the second, larger problem is that it doesn't even touch on a different rationale behind employment discrimination laws: that certain sorts of appraisals should be restricted even where they're arguably relevant, either because they're morally inappropriate or because we believe whatever efficiency gains might exist from a free market system are outweighed by the damage done to the discriminated-against group member and general American values of inclusion.
The obvious example on this front is discrimination on basis of disability. One clearly can think of many cases where disability is relevant in an employment decision; and far more where it is isn't so clearly irrelevant so as to demand an inference of "malicious intent". Nonetheless, we bar it anyhow, both because we think the harms it imposes upon the disabled outweigh whatever efficiency gains would manifest from an open market, and because we've made an assessment that such discrimination is morally suspect as a general rule. The ADA, of course, has not been an economic catastrophe -- whatever economic losses it has created by barring "efficient" discrimination we appear happy to absorb as a cost for a more inclusive American society.* Meanwhile, we don't have the ADA because we think employers are malicious -- this is the misleading strawman that tells us that for their to be discrimination, there must be some villain cackling about how much he hates minorities. Not at all -- we often have anti-discrimination laws not because there are evildoers who need to be warded off, but rather because there is a maldistribution of opportunity in our society that we view as unfair.
Now, one element of disability discrimination law (indeed, most employment discrimination provisions -- race is a notable exception) is that if an employer actually can prove that the disability is relevant to bona fide occupational qualification (BFOQ), then that is a valid affirmative defense. So we don't even ban this sort of "efficient discrimination", we just force employers to back it up. This defense apparently is incorporated into the proposed unemployment discrimination provision. Indeed, it appears that provision is stricter still -- barring such discrimination only when it was the sole rationale for the employer decision (thus giving a pass to "mixed motive" cases, where employment status was one reason among others for the employer's decision).
Lane recognizes these caveats but darkly warns that they'll be "endlessly litigated before settled case law emerged" and thus will act as a deterrent to company hiring (Adler concurs). This is unlikely: as noted, the provisions parallel already extant statutory rules in Title VII. Far from being a judicial blank slate, it overlays itself upon anti-discrimination rules that are quite settled and well-known to HR professionals -- they stand out only in that they track the weakest threads of contemporary anti-discrimination law. It would be difficult to imagine a new regulation that would be more easily absorbed by the business community. Adler's assumption that companies will simply avoid hiring people at all for fear of being sued under the new provision seems more than a little melodramatic.
* It is also possible that there is a separate sort of first mover problem being solved here, where it was irrational for any one firm to recalibrate itself to be inclusive towards the disabled but a net utility boost could come once we unlocked the potential of a hitherto underutilized segment of our society. One thing that I think capitalism does very well is that it is adaptable to varying sets of constraints: when a new restriction is imposed, firms don't throw up their hands and give up, they look for new ways to create wealth and utility consistent with the new regime.