To fight hiring discrimination, make sure worker protections don’t backfire

Last month, New York City added height and weight to a lengthy list of legally protected characteristics. It’s the latest provision, common in federal and state law, designed to limit workplace discrimination, promote the interests of specific workers or ensure some other meaningful outcome. 

But while certain labor laws can make a difference, others can backfire in ways that inadvertently encourage discrimination.

Case in point: In forthcoming research, we find that states that seek to protect workers in one specific way — giving unions more power to recruit members and raise funds — have up to 30 percent higher rates of discrimination against older workers. The implication extends beyond contentious union debates and into other types of well-meaning, but sometimes misguided, labor laws.

Our work specifically examines the effects of policies that, in the name of worker cohesion and welfare, allow unions to collect fees from all of an enterprise’s employees, even those who choose not to join the union. Conversely, some states have adopted right-to-work laws that prevent workers from being compelled to support union activities as a condition of employment.

Naturally, by giving workers the choice to “opt out” of union membership, right-to-work laws tend to reduce the size and strength of unions. As a result, unions in right-to-work states have less bargaining power. After Michigan passed a right-to-work measure in 2012, for example, the state’s largest union lost more than one-third of its active members, accompanied by a sharp decline in union revenues.

Right-to-work laws indeed tend to depress the wages of unionized workers, but they benefit other members of the labor market who might otherwise be passed over by employers. The reason is simple: When workers’ compensation is higher, as is the case in states that tailor their labor policies toward unions, it’s great for those with advanced skills or who are already well-established in the workforce. At the same time, higher initial wages discourage employers from hiring applicants who might be regarded (rightly or wrongly) as less productive — or those against whom employers are more likely to harbor a bias.

For example, a union might use its leverage to prevent a business from paying anyone on its payroll less than $15 per hour. Faced with that constraint, the employer will only hire an applicant believed to be worth that amount to its bottom line. And with fewer other businesses hiring at that pay grade, the employer will have more applicants to choose from. Both of these things are more likely to harm a teenager or elderly worker, non-English speaker or someone who has been set back in their career by previous discrimination.

On the other hand, in the absence of a powerful, government-backed union that’s able to set such policies, the employer might pay less for entry-level work — but they’ll be more willing to hire more people.

We can provide real-world evidence of this phenomenon. Using data from thousands of resumes submitted for retail job openings around the country, we estimate that employers in states without right-to-work laws are 30 percent more likely to discriminate against older female applicants than employers in states with right-to-work laws. Thus, right-to-work laws make people who are sometimes viewed, however irrationally, as less-productive workers more appealing to employers.

Although our study focuses on age discrimination, right-to-work laws likely influence many other types of discrimination in the labor market, including discrimination against racial minorities and those with criminal records. Our work also suggests that other policies that mandate wage floors — such as minimum wage laws and “prevailing wage” regulations in the construction sector — contribute to discrimination as well.

The policy debate over right-to-work laws is nearly a century old and shows no signs of slowing down. Since 2010, five states have either adopted a right-to-work law or repealed one. Currently, 26 states have right-to-work laws on the books, but more than half of American workers live in a state without these protections. 

Lawmakers have historically judged these and other labor laws based on their impact on jobs, wages and economic development. These are important outcomes, of course, but our work shows that government intervention in the labor market can have far more profound effects on vulnerable groups than previously realized. 

The cautionary lesson applies not just to union policy, but to any labor policy that seeks to protect workers without accounting for unintended consequences.

Vitor Melo is a postdoctoral fellow at the Mercatus Center at George Mason University and a fellow with the Initiative on Enabling Choice and Competition in Healthcare at the University of Chicago. Liam Sigaud is a postgraduate fellow with the Mercatus Center at George Mason University.