Oct. 1, 2011 -- The American Jobs Act provides yet another example of President Obama potentially snatching defeat from the jaws of victory. It proposes a punitive response to a problem that now plagues the country—employers are hesitant to hire the long-term unemployed. The missed opportunity is still there to be had: How about providing incentives?
At issue is the Job Act's proposal to make it "an unlawful employment practice" to refuse employment "because of the individual's status as unemployed," so long as the potential employer is a business with at least 15 employees. Obama is trying to attack a real problem—about 6 million Americans are "long-term unemployed," with nearly three-quarters of them being unemployed for more than a year. Outrageously, companies are actually stating in job listings that they will not accept applicants who are not currently employed. But does it really make sense to elevate unemployment to a protected status with race, creed, national origin or anything else protected by the Constitution?
This proposal would be a double whammy for many job seekers, because employers are also increasingly checking the credit reports of potential hires. A 2010 survey by the Society for Human Resources Management reported that 60 percent of employers run credit checks on at least some job applicants (though most are performed for finance-related positions), up from 42 percent reported in a roughly comparable survey in 2006. Job loss and challenged credit tend to go hand-in-glove, irrespective of the moral integrity or financial management skills of the individual. One significant and unexpected medical bill can mean bad credit if your income consists of an unemployment insurance check every two weeks. In response to this trend, a significant number of the nation's State legislatures have introduced or passed laws that restrict the ability of employers to check the credit of the prospective employee. There is at least one piece of proposed federal legislation to a similar effect that has been locked in committee for the last two years.
To be honest, I'm a bit conflicted about this. On the one hand, I believe it is generally unfair to deny employment to an otherwise acceptable applicant solely because they have bad credit due to unemployment, or because they have been unable to secure a job in a very tough economy (or both).
On the other hand, maybe there are some circumstances where an employer's need to know genuinely outweighs any legitimate interest of a prospective employee, or society as a whole. Discrimination on the basis of race or creed or gender was outlawed for obvious reasons, but is it unfair to suggest that I'm not comfortable hiring someone to manage my finances when they can't manage their own finances? And what about the disgruntled, unqualified job applicant with the unfettered ability to sue a prospective employer on the basis of discrimination based on credit checking or job status? It would mean full employment for lawyers, but I do not believe that it will solve the unemployment problem that we face as a nation. If anything, it may well raise yet another barrier to those who are pounding the pavement at a time when we should be encouraging employers to stop outsourcing or using overtime and part-time staff instead of actually hiring the right person for the job. Honestly, I'm a bit concerned that the proposed rule may eventually amount to a federally protected right to employment.
Japan has and has had for many years a thinly disguised policy of "guaranteed employment," fostered by significant government subsidies to companies to make sure that they do anything but fire people when times are bad. Japan's economy has faltered for more than two decades, which in the opinion of many observers is, in part, a result of that policy.
[Related Article: Can Medical Debts Prevent You From Getting a Job?]
While we applaud the intent of any measure intended to help the unemployed, the proposed legislation may be a non-starter. One of the few abiding principles of American law that really works is the legislative notion that requires disclosure of material facts, rather than prescribing or proscribing any action which might be reasonably taken by a business or individual. Instead of monitoring and attempting to control the criteria by which employers make judgments about applicants, let's write a piece of legislation that requires an employer to give to any applicant a standard disclosure, explaining why a credit check is necessary in terms of the position applied for, explaining how the information so collected will be evaluated, and eventually requiring any rejection based upon that information to be fully explained.
Instead of trying to protect the unemployed job seeker from discrimination on the basis of their unemployment, create an incentive for hiring as well as honing the skills (or even the retraining) of long-term unemployed workers. This could be accomplished by lowering employer withholding contributions for a period of time following such a hire. The cost of this policy would be outweighed by the decline of unemployment insurance payments and other program expenses at the State and Federal level, not to mention the indirect benefits to the economy. The current jobs bill proposes an easing of withholding requirements for government contracting jobs, but it could go much further.
We are a country of people who get things done, where there should be rights for both employers and employees—and laws, too. The United States is a meritocracy where performance and results are rewarded. This is not a Constitutional matter. It's economic, and it will be solved with good sound proposals that reflect the reality of the economic climate and the needs of both the employer and the employee.
Adam Levin is Chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.