July 16, 2009

Disparate Impact in Business v. Academia

One of the conundrums of American law is that cognitively-demanding tests that are legally frowned upon due to disparate impact in hiring and promotion are perfectly A-OK in the university classroom ... even when they are the exact same test.

I experienced this firsthand in 1982 when I walked into the offices of a 2-year-old marketing research firm in Chicago that was the first research firm to use data from supermarket scanners. I had just earned an MBA from UCLA with double concentrations in marketing and finance, and had letters of recommendation from the most quant-intensive professors that I was the second best quantitative marketing analyst in that year's graduating class. (The best one, no fool, opened a scuba diving shop in the Florida Keys.) I was looking for a job in marketing model, but they didn't have any openings, so they asked if I was interested in the more general Client Service area.

The Human Resources department gave me their Client Service hiring test, which was the final exam given by a co-founder of the firm, U. of Iowa professor Gerry Eskin, to his class in Marketing Research 402: Senior Seminar on Quantitative Methods (or something like that). I sweated over it for three hours, computing correlation coefficients on my HP hand calculator. The next day, having graded it, they called me back for a day's worth of interviews. I worked there, on and off, through 2000.

The firm continued to use Dr. Eskin's final exams until a number of years later, when it had grown large enough that it was now on the Equal Employment Opportunity Commission's radar. The Griggs decision said that tests that had racially disparate impact, as no doubt this one did, being cognitively demanding, caused the burden of proof in discrimination cases to be placed on the employer, unless the firm demonstrated that it met the stringent level of "business necessity." Some of our clients, such as Procter & Gamble, the paladin of the consumer packaged goods industry, went through the considerable expense of validating their hiring tests to the standards demanded by the federal government, but our HR department decided to give up on using something as idiosyncratic as a Big Ten test.

My personal view is that the quality of our hiring never recovered from this change.

The interesting contrast, however, is that while the firm gave up using this U. of Iowa test, the federal government never had any complaint about the U. of Iowa going right on using Dr. Eskin's test to determine grades, credits, and diplomas, which obviously has an indirect impact in the employment market. Disparate Impact just doesn't much apply to universities.

As Justice O'Connor wrote in her majority decision upholding the U. of Michigan's quota system (just don't call it a quota) in 2003's Grutter decision:
"Our holding today is in keeping with our tradition of giving a degree of deference to a university’s academic decisions, within constitutionally prescribed limits.... "

One might think Supreme Court Justices would logically give less deference to universities -- what with all the Justices having at least seven years experience with higher academia -- and more deference to, say, marketing research firms, few of the Justices having any experience in that business. Instead, however, the opposite is true.

The long term effect of Griggs's Disparate Impact theory is explained well in The Bell Curve: It pushes the evaluation process required for hiring back from the employer to the university. It exacerbates the tendency toward credentialism in American life.

My published articles are archived at iSteve.com -- Steve Sailer

44 comments:

SKT said...

"I was looking for a job in modeling."

Whoa, I didn't realize you were a stud in your younger days.

dearieme said...

So good he sang it twice.

Steve Sailer said...

You know what they say about market researchers, "Live fast, die young, stay pretty."

Well, now that I think about it, they don't actually say that about market researchers.

Anonymous said...

The MSM seems to have forgotten that gov'ts, universities, etc. came to adopt (theoretically) bias-free achievement/aptitude/IQ/personality civil service tests in order to make hiring/admission processes fairer -- as a check against nepotism. Forget fairness. Equality is more important.

headache said...

that I was the second best quantitative marketing analyst in that year's graduating class.


Congratulations for starters. Why weren't you the best? Was the other guy an Asian? Maybe that's where your chip comes from.

noseworm said...

It exacerbates the tendency toward credentialism in American life.


Well, in that sense the US system is becoming more European. In Germany for instance it was traditionally thus that if you cam from a good university (and most state universities operated by the same high standard), and your grades were sufficient, the company hired you based only on a short interview. They assumed that the uni had basically filtered out the rot.
Unfortunately the new EU Bologna education system is screwing up this age old filter system but that's another topic.
I could never understand all the testing and assessment done by companies. Surely the education system should be sufficient. But I guess there are so many lousy colleges around that they need to weed out those who don't exactly come from an Ivy League institution. In addition, politicians are abusing the education system to give perks to their favorite minorities. So you never know whether the absolvent obtained his degree by merit or by a set-aside.

Anonymous said...

Actually what they say i "Marketing? Oh they are over there, and that's a two drink minimum."

Jeff008 said...

Was the firm IRI? Are you allowed to name it?

Anonymous said...

I think this is your most devistating argument. Everything the university uses to judge the best from the worst students has a disparate racial impact. If some court issued an injunction requiring the universities to come up with evaluations that had equal impact the universities would disintegrate - no tests, no grades, kids would stop going to lectures or reading assigned texts

anony-mouse said...

There may be a way around this for most private employers. I don't believe their hiring of 'consulting firms' is (so far) affected by these court rulings. and if these 'consulting firms' are small enough they wouldn't be covered by the court-rulings either.

Maybe this is any idea for a business-conduct IQ related tests for the employeees of small consulting firms, the results they could show to potential employers, er, clients. (I realise the IRS has rules regarding consultants being really employees, but I'm not sure this would apply to the court rulings and even if it did, as long as the firms had more than 1 client, that should solve that problem)

Anonymous said...

Disparate impact is allowed to happen in business as well but only in limited situations:

- finance
- high-tech
- hollywood
- engineering
- cutting edge research
- startups

...basically the few segments of the economy that still globally dominate and/or are competitive to keep America afloat.

As the world economy becomes more integrated and efficiencies magnifiy the "few big winners vs many losers" reward system, there will be even less ability to carry deadweight.

FistinemingX said...

Well, now that I think about it, they don't actually say that about market researchers.

What about scuba-diving pros?

Big Bill said...

And this is precisely the hypocrisy of the www.volokh.com law prof site.

They sit and discuss ad nauseum all the ins and outs of Ricci and disparate impact, while somehow never even noticing that the same rule (applied as a matter of simple logic and justice) would devastate their sinecures at the top of the educational establishment.

Change is coming. Recently there have been some mice nibbling around the edges of collegiate "blind grading" making the identical "disparate impact" arguments that Ginsburg clutched to her shallow chest (as in "are written tests really a good way to pick firemen?").

Blind grading, they say, should not immunize a professor and university from charges of racial discriminatory grading. The issue, they say, is not the discriminatory intent, but the disparate racial results.

[note: look for the next step in the campaign: federal legislation to require state universities to gather racial stats, course-by-course, and professor-by-professor to identify their racial grading patterns. No punishment, mind you, just data gathering -- as if they didn't know what the results will be!]

One could, with equal justice, make the same Ginsburgian argument of lawyers and law professors. Why written tests in law school? Why not practical tests? Lawyers are supposed to "practice" law, after all.

So test all the students in mock court exercises (where the grader/observers can see their race!) and get graded for that stand-up work as opposed to written exams ... and hold the law schools responsible for any racial imbalance. [If it works for firemen, Mrs. Ginsburg, it ought to work for other professions, right?]

They will soon get the message, particularly if federal student aid is on the line.

This is not mere theory, either. There is a big struggle in California now over the racial results of the bar exam. The state bar is fighting tooth and nail not to disclose the raw data since the racial pass rate will be so painfully obvious. Anbd once the racial results are made public, every time thebar exam is taken there will be louder and louder voices demanding a "disparate impact" analysis of the test development process, how it is dominated by the white legal elite (including law professors) and how it has to be democratized in order to "look like America".

It really is only a matter of time.

Ronduck said...

One might think Supreme Court Justices would logically give less deference to universities -- what with all the Justices having at least seven years experience with higher academia

When you consider that one of our Supreme Court justices is 89 years old their fondness for academia makes a lot of sense. Assuming the 89-year old codger started school at 18 and went for seven years that would mean he finished school around 25, or 64 years ago.

2009-64=1945

Worse, many people form their views of the world around the time they are between 14-18 meaning that this 89 year man thinks of what happened during the Great Depression when he needs a reference for how Blacks in America are treated.

On top of that the codger probably picked up a few outdated biases from his parents that date even farther back. In fact:

2009-89=1920

This guy is C. Montgomery Burns! If his parents had him at 25 that means his parents were born in 1895. In fact, if his father and grandfather delayed marriage his grandfather could have fought in the Civil War.

OneSTDV said...

"It exacerbates the tendency toward credentialism in American life."

This is the problem. The elites don't care about creditionalism because they've generally got it and everyone in their family has the means (money) to obtain it as well.

They get to social engineer the country through affirmative action, getting their precious NAMs into elite colleges and then giving them cushy diversicrat jobs afterwards.

But the losers in all of this are the lower-class whites/Asians who are highly qualified but lacking in funds to both pursue expensive extracurricular activities in HS and attend one of the Big Three universities.

In turn, widescale social and economic mobility through hard work and ability is hindered because one must have money or the right skin color to attain the right credentials. The whole point of a free society is that anyone has the opportunity to prove themselves through objective, unbiased measures. Affirmative action, ironically claiming to do this, makes these opportunities scarce for qualified whites/Asians.

Chris Anderson said...

Steve,

I'm very interested in that last paragraph and hope that sometime you will expand on it further.

I've played the game with credentialism ("I have a Master's Degree!" said Dr. Science), but demonstrating your cognitive ability that way not only is expensive and time consuming, it is also career-limiting down the road.

How many people are bored or unsatisfied with the field that they are in, but stay there because the expense and time of re-credentialing is too great, not to mention the opportunity cost? How many employers won't take a flyer on someone who could be easily trained and would perform well, but doesn't have the right degree? I think the answer to both is "lots."

Anonymous said...

So why is credentialism stronger in European countries which don't have a problem with disparate impact? In theory, the companies there can discriminate on the basis of tests. In practice, the IVY plus league of the US, is a much weaker credential for getting a top job in the US than the elite grandes ecoles are in France. You would expect the opposite to occur. Since the French can test all they want, the importance of a college pedigree should be weaker.

Anonymous said...

Your article is essentially the reason why we have an education arms race now. Since employers cannot give tests, they must rely on companies (in this case, schools) that can, to determine who would be the best. As more and more people attend colleges, etc, higher and higher education will be required. Unfortunately, since most of what is learned in college and graduate school is a waste, we actually have a very costly zero sum arms race in progress. That could be reversed by allowing companies to offer tests.

Anonymous said...

Steve, just in case you missed it (it was kind of buried), there was an interesting article in the New York Times recently on the racial achievement gap.

Anonymous said...

Why is it that when it comes to failing job tests, only blacks and hispanics are getting "discriminated" against? As shocking as it may sound, there are many whites who fail these exams on a regular basis as well. What's up with that?

Are these white flunkies just super-dumb for failing exams that are extremely "biased" in favor of whites? Or maybe the secret whites-only "cheat code" got lost in the mail or email?

The Last Man in Europe said...

They don't notice disparate impact in tests because then the students would complain when they realized what was going on. Of course, when you have any sort of tracking program, all the administrators and politicians jump on it when any disparate impact shows up.

The Last Man in Europe said...

And apparently, even a liberal thinks the Sailer strategy could work

The Last Man in Europe said...

Of course, I still find it interesting that people continue to post comments like this "
And it’s going to be increasingly hard to get whites to see minorities as ‘the other’ when the people you went to school with and with whom you’re working on a daily basis are increasingly of a variety of racial and ethnic backgrounds." but on DailyKos a solid majority of the commenters approved of the Ricci decision. They don't have to say anything against blacks or Hispanics, they can just win support on immigration and affirmative action type issues which are ignored by the elite. It's funny how this stuff gets picked up by the mainstream many years later.

Anonymous said...

The silliness about tests and 'disparate impact':

If today, 5 of 10 blacks correctly answer: What is 7 X 8? That question is illegitimate.

If tomorrow, 8 of 10 blacks correctly answer: What is 7 X 8? The question magicly transforms from illegitimate to legitimate.

Therefore tests and 'disparate impact' combine to form a soft quota system just as intended.

rast said...

Actually Steve, they were saying that about market researchers up until about 1982...

beowulf said...

It is a pretty absurd situation. And I guess that means that Uncle Sam will find a Disparate Impact if you use a test created and validated by Uncle Sam?

A pity, otherwise it'd certainly be convenient (and relevant to both white and blue collar jobs) to simply require job applicants take the ASVAB.
http://en.wikipedia.org/wiki/Armed_Services_Vocational_Aptitude_Battery

Anonymous said...

Does anyone know how the State Department is still able to get away with requiring their Foreign Service Exam without offending EEOC?

Henry Canaday said...

It is doubly perverse to give deference to universities, which face no compelling test of performance and seem to always expand and never fail, over businesses, which face a constant market test of performance, frequently shrink and often wipe out investors completely, even when they are trying to do everything smart.

Do lawyers think that business execs sit around all day, twiddling their thumbs, grinning fiendishly and asking each other, "what idiotic, pointless test can we pay a lot of money for so that we can inflict pain and humiliation on job candidates and make ourselves vulnerable to discrimination litigation?"

Yes, many American lawyers probably do think that.

testing99 said...

Big Bill is quite right. Disparate impact is coming to universities quite soon, for patronage/politics reasons.

albertosaurus said...

Look on the bright side. Formerly if you had a test that you wished to validate as being 'g' loaded you would have to do a lot of tedious correlations against accepted published tests. Today its much easier. If blacks score low, you know your test measures intelligence.

I expect to soon see Disparate Impact being cited in journal articles as proof of 'g' loading.

Anonymous said...

"Since the French can test all they want, the importance of a college pedigree should be weaker."

Admission to the Grandes Ecoles is by exam. So the college pedigree is more or less the same as the test score.

Note that college grades DO supply additional information about the individual beyond just exams -- they give an indication of Conscientiousness.

John Seiler said...

Steve, your experience confirms one reason why America's economy keeps crashing: absurd laws over common-sense business decisions. Obviously, China, Korea, Japan, etc. don't hobble their best businesses that way.

Anonymous said...

How do computer software companies get around this? Or do Indians and Chinese count as "minorities" for the purpose of "disparate impact"?

I bet somebody here knows the answer.

Anonymous said...

Correct me if I'm wrong, but didn't "disparate impact" only become law in 1992 with an amendment to the Civil Rights Act signed off on by GHWB?

Anonymous said...

on DailyKos a solid majority of the commenters approved of the Ricci decision.



And these same Daily Kos commenters want Sotomayer to get approved, at which point she will be a vote to overturn Ricci.

Nobody ever said the Kossacks were rational. This same dynamc plays out a lot on the left, where many people dislike a lot of the Democrats agenda. But they still support it to the hilt.

Anonymous said...

In turn, widescale social and economic mobility through hard work and ability is hindered because one must have money or the right skin color to attain the right credentials.

As you're suggesting, the cost of tuition has a disparate impact that negatively affects whites, as well as blacks.

Anonymous said...

This same dynamc plays out a lot on the left, where many people dislike a lot of the Democrats agenda. But they still support it to the hilt.

Yeah, kind of like conservatives who continue to vote for the Republican party.

Anonymous said...

absurd laws over common-sense business decisions.



It's worse than that. Americas businesses are completely on board with the whole absurd racial spoils system. This is one of those frequent instances where the "elite" are all on the same page.

Joseph said...

The Civil Rights Act as amended in 1992 allows litigants to group together in large class action suits, pay lawyers only on contingency, have jury trials, and win huge awards including penalties. Witness the $200 million judgement against Texaco. Before 1992, a single litigant had to pay a lawyer out of his pocket, face only a federal judge, and receive only actual damages. Now companies are held hostage by law firms that can force discovery of de facto racial discrimination by showing a statistical difference in pay between different races. Consequently, Pay for Performance is Dead. Witness the $21.4 million judgement against Kodak. This despite the Education Department report released Tuesday July 14th that stated that despite unprecedented efforts to improve minority achievement, the performance gap between white and black students remains. So Pay for Performance must die. If companies do not want to face this liability, the only options are to placate underperformers or send manufacturing to other countries, such as China. Oh, they're already doing that?

Sockstand said...

My mother was 41 when she had me, my father was 54. His mother was 22 when she birhted him but his father was 60. I grew up hearing tales of chemical plant and mining work that were only secondhand, which went back to the nineteenth cntury. My father had an uncle who had worked as a machinist on the dynamite guns on the Great White Fleet. His brother, my uncle had been an airship sailor before WWII and served in submarines at the end of his career. In fact, when Apollo was current, I was a young teen and I remember the old guy being disappointed Ike had created NASA-he felt that each service should have had their own program, especially the Navy, since airships and submarines were the closest thing to space travel, not jet airplanes.

Long generations are a great thing: they make history live long after everyone else has forgotten.

Anonymous said...

So business can't use objective tests to determine who to hire or promote. Great. That means they will judge by appearance and "good looks" instead.

Lucius Vorenus said...

Sockstand: Long generations are a great thing: they make history live long after everyone else has forgotten.

That's an interesting idea.

David said...

"Obviously, China, Korea, Japan, etc. don't hobble their best businesses that way."

Their societies are more homogeneous than America's society is. Brazil, of all places, has racial quotas as well as America has. The racial spoils system, and its inefficiencies, is one reason why very heterogeneous societies decline. See Roman Empire, Late.

Nanonymous said...

Meanwhile, today's latest news on disparate impact and firefighters:
FDNY's exam is racist

The judge said black and Hispanic applicants had disproportionately failed the written examinations and those who passed were placed disproportionately lower down the hiring lists than whites.

On a whole, it appears that every single written exam in the world causes racial discrimination.
Why can't FDNY countersue and establish in court that its test is relevant to firefighter's job? If I understand correctly, this would negate application of disparate impact law.