The US Equal Opportunity Commission identifies characteristics by which an employee can’t be harassed, hired, paid, or promoted. A challenge with enforcing the non-discriminatory standards is that the evidence must be a slam dunk. There needs to be a smoking gun of a paper trail, recorded conversation, or multiple witnesses. Mere statistical regularities are insufficient for demonstrating that characteristics like race, age, or sex are being considered inappropriately.

If employees are all identically qualified, then we’d expect the employment at a firm to reflect the characteristics of the applicant pool, within a margin of error due to randomness. One difficulty is that plenty of discrimination can occur within that margin of error. A firm may not have sexist policies, but a single manager can be sexist once or even multiple times and still keep the firm-level proportions within the margin of error. This is especially stark if the company managers or officers are the primary positions for which discrimination occurs.

Another difficulty is that randomness can cause extreme proportions of employee characteristics. Having a workplace that is 95% male when the applicant pool is 60% male isn’t necessarily discriminatory. In fact, given a sample size, we can calculate how likely such an employee distribution would occur by randomness. Even by randomness, extreme proportions will inevitably occur.  As a result, lawsuits or complaints that have only statistical evidence of this sort don’t  go very far and tend not to win big settlements.

But this doesn’t stop firms from avoiding the legal costs anyway. Firms generally prefer not to have regulatory authorities snooping around and investigating. Most people break some laws even unintentionally or innocuously, and a government official on the premises increases the expected compliance costs. Further, even if untrue accusations are made, legal costs can be substantial. Therefore, firms have an incentive to ensure that they can somehow demonstrate that they are not being discriminatory based on legally protected characteristics.

However, as I said, extreme proportions happen randomly. If those extremes are interpreted as evidence of illegal discrimination, then the firms have an incentive to hire among identical applicants in a non-random manner. They have an incentive to tilt the scales of who gets hired in favor of achieving a specific distribution of race, sex, etc. People have a variety of feelings about this. Some call it ‘reverse discrimination’ or discrimination against a group that has not historically experienced widespread disfavor. Others say that hiring intentionally on protected characteristics can help balance the negative effects of discrimination elsewhere. I’m not getting into that fight.

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