Defending against an EEOC charge or lawsuit typically costs employers hundreds of thousands; the yearly legal costs of such cases are in the billions. These often exceed the actual amount of compensation paid or even at issue. This is the first core problem with the current process: because the costs of defense are so high, employers have a strong incentive to settle for a fraction of the amount claimed, which encourages using the process as a means of legalized shakedown of businesses. The damage awards are also frequently totally disproportionate to the actual harm suffered by the person discriminated against. Many of the linked cases involve judges reducing clearly excessive awards, leading to leftists advocating the elimination of their ability to do that! (This problem has been partially addressed by a cap on Title VII damages, but this scales with the number of workers the company has, which is obviously absurd: the actual amount of harm suffered due to discrimination has no relationship to the size of the employer. This is illustrative of what is wrong with the entire system.)
This potential for absurd awards and excessive defense costs has forced the creation of other real and substantial costs as defensive measures: HR bureaucracy proliferation, mandatory “DEI” trainings, selection of less-qualified employees to achieve demographic proportionality 1, prohibition of workplace romance 2, and so on.
There is also a freedom of expression issue. Courts have consistently struck down attempts to prohibit even hateful political extremists from marching in the streets, mailing their propaganda, or endorsing violence against specific ethnic groups. The standards of free expression in the United States are very broad by international standards, and that is as it should be: unpopular ideas are precisely those in need of protection from censorship, and the power to censor is always used by the powerful to suppress challenges to their power. However, case law has found that even ideas expressed entirely outside the workplace or not directed at specific employees may be used as evidence of harassment or discrimination. The result is a chilling effect which would be impermissible in other contexts: employers can be found liable if their employees express ideas which can be construed as such evidence, which violates both the rights of the employees to express the ideas and the right of the employer to freely associate. For example, an employer might rationally decline to retain as a supervisor someone who runs a blog advocating hereditarian explanations for racial outcome differences even if this does not affect his work performance or interactions with other employees, because a Black person reporting to such a supervisor could use that as evidence in a discrimination/hostile work environment lawsuit. This would interfere with hereditarians’ ability to express their views and obtain broad acceptance of them which, if they proved to be substantially accurate, would prevent the waste of trillions of dollars on ineffective education funding, futile attempts to correct disparities, and so on. These laws have also been used to impose upon water-cooler political discussion and humor in the workplace, and even on actual work (printing of materials with offensive content).
If these laws were necessary to preventing widespread discrimination on irrelevant characteristics, this all might be justifiable. They are not. Market competition ensures that discrimination on irrelevant characteristics will be selected against at multiple levels.
To illustrate why, start with the following simple example: there are two restaurants in a town, owned by A and B. Both offer a job which, when performed by a competent worker, generates $60,000 in revenue yearly to the restaurant’s owner; A pays $55,000/year for this job, and B only $50,000/year. A Mexican man applies for the job at A, because the wage is higher. A is a racist who hates Mexicans and will not hire him. So he applies to B and is hired.
What happens? A loses $5,000 per year in profits, and B gains $10,000. The productive Mexican goes to the employer willing to make use of him, and both benefit.
However, in this situation, B may realize that he can make further gains by recruiting additional Mexicans and paying them less (say, $40,000/year for $60,000 in revenue, increasing profit to $20,000); he can do this because there is no competition from A to push up the wage. This works for Mexicans at one level (it becomes easy for them to get jobs) but fails at another, as they are unfairly paid less, relative to both non-Mexican workers and the value of their labor. But this is not a stable equilibrium, because C can notice this pool of underpaid Mexicans, start his own restaurant, and offer them $45,000, thus luring them away from B and increasing their wage. B (or D, also starting a new business) must respond by increasing the yearly pay to $48,000, and so on, until wages are bid up to parity. (Collusion between employers to hold down wages is an issue here, but that is true without any question of bigotry-related discrimination (i.e., A, B, and C could do that with zero Mexicans in the town), and there are other laws against it.)
Over time, this selects against discrimination on irrelevant traits, while allowing discrimination on traits that actually are relevant to job performance to persist (without the state needing to determine which is which). While B and C profit from their Mexican employees, A does not. This allows B and C to expand, such as by opening second locations in neighboring towns, while A continues to struggle to provide a competitive product. These processes repeat throughout the economy.
A common response to this is that no such mechanism eliminated discrimination against Black Americans in the Jim Crow South. The answer is simple: it could not. Such discrimination was not merely a choice made by business owners; it was mandated by law, or enforced by mob violence (which, again, there are other laws against). There is also the more subtle point that universal discrimination is a quasi-stable equilibrium: if A, B, C, and D all hated Mexicans, the Mexicans would be screwed; likewise if most occupants of the town refused to patronize a restaurant with Mexican employees. And yet the market sometimes succeeded in working around all these obstacles! However, it is now illegal for states to require racial discrimination or segregation, no one has been murdered by the KKK in decades, and racist attitudes have become sufficiently rare that discriminatory policies are much more likely than their absence to result in boycotts. In forcing the market out of the bad equilibrium, “civil rights” law mostly made itself obsolete.
This set of rules which I and other Libertarians propose has literally never been tried: the Civil Rights Act of 1964 was a transition directly from mandating segregation to prohibiting it.
Finally, none of this should be, nor is properly, a federal matter. Harassment, sexual coercion, deprivation of rights, and detrimental reliance (in the context of a hostile work environment) have been recognized as common law torts for centuries. State courts applying relevant laws are entirely capable of resolving such claims and ordering compensation payments to those affected. The application of federal law here is yet another example of DC’s intrusion into every aspect of existence enabled by Wickard v. Filburn (which should be overturned by SCOTUS or constitutional amendment).
This would allow the “laboratories of democracy” to pursue different policies in this area, as are consistent with local values and determining which work best. If California, Colorado, and New York wish to require baking of cakes for gay weddings and award millions of dollars over offensive graffiti, that is their voters’ affair. Ohioans would be enabled to decide for ourselves where to draw the lines between freedom of association and contract, and the protection of the dignity of every individual and maintenance of efficient markets. A natural tension prevents a race to the bottom: laws which are too strict drive out employers due to defense and settlement costs (and actually disincentivize hiring people likely to bring claims), whilst those which are too lax drive discriminated-against groups to flee the state for more protections—hence shortages of qualified employees.
The Americans with Disabilities Act should likewise be repealed. It requires the installation of expensive infrastructure to precise requirements for the benefit of a tiny minority of the population, while raising prices for everyone else because of the substantial costs of compliance and lawsuits over technical violations. It violates the increasingly trampled upon freedom of association of business owners. It is unnecessary, as businesses with significant handicapped customers would have incentives to provide for their needs, with no top-down mandates required. It is a futile attempt by government to make life “fair”, while life is inherently unfair. And, on top of everything else, the ADA actually reduces employment of the people it is meant to help!
- I should note that this piece substantially overstates the strength of the effects it describes, and I do not fully agree with its conclusions. It is here because it is known as a rare example of a willingness to discuss what it does. ↩︎
- This has real costs to society. ↩︎