Why discrimination laws don’t really work

Discrimination laws provide a weapon for the disgruntled and a permanent subsidy to the legal profession.

Dr Tim Soutphommasane, the former Race Discrimination Commissioner. Picture: Kym Smith

“It is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates,” said US president Lyndon Johnson in 1965, toward the end of his sweeping Great Society reforms, which sought to help reduce poverty and redress wrongs against African-Americans.

Fixing perceived wrongs in the job market with well-meaning laws isn’t easy, though.

Whether it’s calls for Liberals to introduce quotas to boost their ranks of female MPs, or for businesses to accelerate women’s progression up the corporate ladder, unintended consequences are rife.

In fact, even seemingly harmless statements from employers espousing support for “equal opportunity” can actually deter minority workers from applying for the jobs, a study has demonstrated.

In the US, since the 1960s, some employers have included Equal Employment Opportunity statements in their job ads. These are meant to signal that the employer wouldn’t discriminate against staff on the basis of sex and race etc.

They’ve acted more like a red flag. It turns out African-Americans were a whopping 30 per cent less likely to apply for a given job if the advertisements included such statements.

“Our findings paint a rather bleak picture of current EEO policies having a positive impact on minority labour market representation,” say two surprised authors in a new study whose aim was to show how EEO help minorities.

The analysis of the job application decisions of 2300 jobseekers across 10 US cities, jointly undertaken by economists at University of Chicago and Monash, also found African-Americans were less likely to apply for jobs the smaller the share of African-Americans in the vicinity of the job. “Racial minorities prefer not to apply for jobs where there is a high likelihood that they are token hires,” the authors say.

Is this so surprising?

“The appearance of an equal opportunity employer can lead to performance pressures, social isolation, and role encapsulation,” they add.

If these mild affirmative action policies have backfired, more invasive ones like quotas could have even worse consequences. Would women be turned off standing for Liberal pre-selection if there were quotas? Perhaps some would, especially if they thought they had the skill and tenacity to be picked unaided.

African-Americans are still twice as likely to be unemployed than white Americans, and they earn 20 per cent less. To be sure, that’s a vast improvement over a century ago, but it’s not a ringing endorsement of equal opportunity policies either. The same could be said about the conditions of indigenous workers here.

“There is little support for the inclusion of standard EEO statements in job ads in today’s labour market, and even evidence of important deleterious effects,” the two authors conclude, which raises questions about the effectiveness of similar laws.

In Australia businesses don’t have the option of having EEO statements in their job ads because blanket state and federal laws outlaw discrimination on race, gender, sexual orientation.

These laws are increasingly a bit like hitting a nail with a sledgehammer.

For a start, few people seem to think their experiences of discrimination are serious enough to warrant making a formal complaint.

Last year, fewer than 2000 people complained about any form of discrimination to the Australian Human Rights Commission. That’s not a lot in a workforce of 12 million. Complaints relating to race numbered around 480.

Inevitably, some of these claims will be frivolous or vexatious.

Discrimination laws provide a weapon for the disgruntled, and a permanent subsidy to the legal profession.

Unfortunately, we don’t know what share fit this category. We do know the commission costs around $25 million a year to run, or about $12,500 for everyone piqued enough to get on the blower.

Nobel prize winning economist Gary Becker famously argued in the 1950s that free markets would ultimately smite unjustified discrimination. Businesses that systematically discriminated against good employees because of factors irrelevant to their job would perform worse than those that didn’t.

In any case, attitudes have changed hugely since then, and for the better. Even over the past five years the number of complaints has fallen about 20 per cent, while the population has grown more than 7 per cent.

If they keep falling we might want to think about paring back the costly bureaucratic and legislative apparatus, which appears to be dubiously effective in achieving its goals. Logically, we must reach a point where the overall costs of these laws outweigh the benefits.

In any case, the sort of contrived diversity beloved of advocacies of anti-discrimination laws ignores research that shows people with things in common can work more effectively together than those with little in common.

That’s just common sense; communication is easier. This is far from an endorsement of unfair discrimination but it’s hard to ignore that individuals gravitate toward people with whom they have things in common. Legislators can’t change that.

Unjustified discrimination occurs. But laws are a blunt, costly instrument to redress it. Discrimination laws might well have outlived whatever utility they had.