More Harm from “Disparate Impact” Regulations

(Cross-posted from Open Market)

Earlier, we wrote about the Obama administration’s attempt to inject a race-conscious “disparate impact” provision into colorblind anti-discrimination laws like the Fair Housing Act, and how that could lead to risky, race-conscious lending, bad loans, and future bank failures, mortgage meltdowns, and financial crises. Now, Ohio University economics professor Richard Vedder highlights an additional area where disparate-impact rules may be having a negative impact: higher education. (“Disparate impact” is a term in anti-discrimination law for when a neutral policy happens to affect minorities more than whites. One example is a standardized test that whites pass at a higher rate than some minority group, even though test scores are calculated the same way for members of all races. Some civil-rights laws contain language authorizing “disparate-impact” claims, but others do not, and are phrased in colorblind terms.)

Vedder and others like George Leef of the Pope Center for Higher Education Policy believe the disparate-impact concept is fueling the college-tuition bubble and artificial competition for unnecessary paper credentials. At Minding the Campus, Vedder notes that disparate-impact regulations in the employment setting

have largely destroyed high-quality employer testing of job candidates. Four decades ago, in Griggs v. Duke Power, the Supreme Court outlawed testing that had a “disparate impact” on minorities. Such testing was an effective and inexpensive way of learning about the job potential of students and other job applicants. After Griggs, educational credentials became the dominant way of narrowing the pool of applicants for jobs. The problem, of course, is those credentials are hugely expensive to earn these days, so the information costs associated with hiring workers is astronomical.

Similarly, George Leef of the Pope Center for Higher Education Policy notes in The Wall Street Journal that the disparate-impact concept discourages inexpensive aptitude testing of job applicants by employers, resulting in the “move toward using” unnecessary and costly

college credentials as a screening mechanism for employers, a change largely due to the 1971 Supreme Court decision in Griggs v. Duke Power Co., which made aptitude testing a legal minefield for employers. It led to a strong movement toward offering the best-paying jobs only to people who had college degrees under their belts. That trend has continued and grown to the point where many entry-level jobs that ordinary high-school graduates could easily learn are open only to college graduates, even though nothing they studied in college has any relevance to the work. What appears to be increasing returns to college education is really the gradual elimination of most good career possibilities for anyone who doesn’t have a college degree.

In a longer commentary at this link, Leef describes how government regulations and subsidies helped spawn a looming student loan crisis and skyrocketing tuition.

Earlier, we described how the Obama administration is encouraging colleges to raise tuition at taxpayer expense, at this link, and at the expense of their students, at this link. Increasing numbers of students are now defaulting on student loans, and student loan debt now exceeds a trillion dollars.



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