A Short-term Intervention for Long-term Fairness in the Labor Market
Abstract: The persistence of racial inequality in the U.S. labor market against a general backdrop of formal equality of opportunity is a troubling phenomenon that has significant ramifications on the design of hiring policies. In this talk, I will show that current group disparate outcomes may be immovable even when hiring decisions are bound by an input-output notion of "individual fairness.'' Instead, I'll present a dynamic reputational model of the labor market that illustrates the reinforcing nature of asymmetric outcomes resulting from groups' divergent accesses to resources and as a result, investment choices. To address these disparities, we adopt a dual labor market composed of a Temporary Labor Market (TLM), in which firms' hiring strategies are constrained to ensure statistical parity of workers granted entry into the pipeline, and a Permanent Labor Market (PLM), in which firms hire top performers as desired. Individual worker reputations produce externalities for their group; the corresponding feedback loop raises the collective reputation of the initially disadvantaged group via a TLM fairness intervention that need not be permanent. I'll show that such a restriction on hiring practices induces an equilibrium that, under particular market conditions, Pareto-dominates those arising from strategies that statistically discriminate or employ a "group-blind'' criterion. The enduring nature of equilibria that are both inequitable and Pareto suboptimal suggests that fairness interventions beyond procedural checks of hiring decisions will be of critical importance in a world where machines play a greater role in the employment process.