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How To Make Help-Wanted Ads Disappear

If you are in desperate need of a job, the Obama administration has a new plan that will help you, although there is a catch. You have to be either a lawyer or a headhunter.

Your salvation lies in the American Jobs Act, the president’s $447 billion proposal to jump-start the labor market with a combination of temporary tax cuts and pumped-up federal spending. These are the same approaches the administration has used repeatedly since 2009, at even greater cost than this proposal, though to little effect. I do not believe the results would be better this time.

But the president’s bill has a previously untried twist. His legislation would make it illegal for employers (except for the smallest businesses) to discriminate against job applicants who are unemployed.

In June, New Jersey became the first state to prohibit help-wanted ads that require applicants to be currently employed in order to be considered. Similar legislation has been proposed in New York, and if it has not happened anywhere else yet, it can only be a matter of time before it does.

However, both the president’s proposed legislation and the New York bill go beyond New Jersey’s restriction on discriminatory advertising. Both would make unemployed people a new protected class of job applicants, and both would allow disappointed job hunters in that class to sue employers who reject them. The employer would have to show that it based its decision on some factor other than the applicant’s joblessness.

Proving this, of course, is easier said than done. No job seeker describes himself as having fair-to-middling skills or a merely adequate work ethic. In the competition for a paycheck, all the children are above average. A would-be employer has to consider whatever objective information is available.

Suppose you run a software development company. You know that one of your competitors has laid off a quarter of its programming staff. You are perfectly happy to take someone who has experience at the other company. Will you want to take an employee who was laid off if you have the option to take one who was retained instead?

There may be nothing wrong with the laid-off candidate, of course. Sometimes, especially in a bad economy, people lose jobs through no fault of their own. But employers also do not cut staff randomly. When they decide whom to lay off, they try to hold on to the most valuable workers. As a competitor, you probably want the people the other guy kept, not the ones he let go.

The president’s legislation and its New York counterpart would make this sort of bias illegal. Will it therefore disappear? Will employers simply take whoever happens to be in the market for a new job? Can we get them to effectively bias their hiring against those who are already employed, in order to perform a public service by hiring someone from the unemployment rolls?

Well, no. That is not going to happen, at least not to any significant degree.

But there will likely be some lawsuits brought by job seekers and attorneys, working on contingency fees, who figure they can extract at least a small settlement from hapless employers who would prefer not to spend time and money defending even an unjustified claim. Lawyers, and at least a few lucky plaintiffs, will benefit.

Lawsuits won’t be the biggest fallout of such legislation, however, because successful businesses are not going to expose themselves to such claims. Instead of merely cleaning up discriminatory help-wanted ads, as New Jersey’s modest new law demands, I suspect some employers will dispense with such advertising entirely. You can’t illegally discriminate against someone who never applies for a job in the first place.

Wary employers will hire through other channels. To get a job at a certain company, you may need to know someone who already works there, or you may have to first join the company as an intern, a contractor or a temporary employee. Employers can hire internal or external recruiters and direct them to fill positions – but with a budget of zero for help-wanted ads. These headhunters will therefore have to come up with their own databases of people with the desired skills. Most names will come from lists of employees at similar businesses. Data mining for prospective hires at Facebook and other social networking sites may become one of our fastest-growing industries.

Litigation-shy companies can permanently shift some of their work to non-employee contractors, temp agencies and, of course, to states other than New York. They can shift work completely offshore, if federal law becomes a problem. Staffing a call center? Nova Scotia might start sounding more appealing if you prefer to keep your U.S. legal bills down.

Those who back the anti-discrimination proposals are, of course, well-intentioned. The economic downturn is keeping large numbers of competent, and increasingly needful, people jobless. The longer they stay unemployed, the more difficult it will be for them to get back into the labor force. Some employers discriminate against them in ways that are both unfair and, from a business perspective, unwise.

Then again, the desire to protect older workers from discrimination, as embodied in the Age Discrimination in Employment Act, was equally well-intentioned and equally misguided. The ADEA is reasonably effective at protecting existing employees from being forced out of their jobs merely because of their age. But it has been a disaster for older workers who lose their jobs due to business failures, corporate downsizing or other nondiscriminatory reasons. Older workers have a very difficulty time finding new work. Hiring older workers invites potential problems if new employees don’t work out, so employers find other reasons not to recruit or hire them. The law keeps some current workers in their jobs at the expense of every older worker who needs one. It is a bad trade.

The best way to get unemployed Americans back to work is to promote economic growth and to improve the country’s competitiveness so that more of that growth is reflected in the domestic work force. Obama has been unable to do this. High-cost, high-tax states such as New York lack the wherewithal even to try. Well-intentioned as it is, the proposed anti-discrimination law is a Band-Aid that can only depress hiring. In the end, it will leave even more Americans without jobs.

Except for lawyers and headhunters. The American Jobs Act would bring them lots of new opportunities.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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