Banning background checks increases racial discrimination. By Matthew Yglesias

www.slowboring.com

11 - 14 minutes

If you rent out a basement apartment or an ADU and two different applicants for the space seem pretty similar, except one of them was recently released from prison, you’re probably going to rent to the other person.

On one level, that’s perfectly understandable. But formerly incarcerated people need stable employment and housing so that they can live normal lives rather than involve themselves in new rounds of criminal activity.

Recently, activists have begun attempting to remedy this by pushing cities to adopt what they are calling “Fair Chance” ordinances, which limit or prohibit landlords’ use of background checks or similar screening for tenants. Various forms have been adopted in a number of cities, including Minneapolis. The “twin cities” structure of Minneapolis and St. Paul makes it a good place to study the impact of local policy choices. In this case, Marina Mileo Gorzig and Deborah Rho did an audit study for a Minneapolis Federal Reserve Working Paper series, submitting fake email inquiries for rental properties in both Minneapolis and St. Paul. They used names that were stereotypically white, stereotypically African American, or stereotypically Somali (there’s a large Somali population in the Twin Cities area). They did this both before and after the Minneapolis City Council passed a Fair Chance ordinance in 2019.

They find discrimination against both categories of Black men, in both Minneapolis and St. Paul, before and after the ordinance passed. But after the ordinance passed, “discrimination against African American and Somali American men increased” — but only in Minneapolis.

In my June 7 column “Tim Scott’s Wise Words,” I urged conservatives to take Scott more seriously when he argues that cases of what economists call “statistical discrimination” — racial profiling — are a significant moral and social problem in American life.

Reading about this Fair Chance fiasco reminds me that progressives should also take Scott’s argument more seriously.

The situation the audit study reveals is bad, though not surprising. A range of audit studies have shown that discrimination against Black applicants in employment and housing scenarios is not unusual. That’s frustrating on its own, and it can also generate spiraling bad outcomes. If you’re at a disadvantage in the rental market, you either need to overpay for a place to live or else live in an unusually bad neighborhood with respect to safety, schools, or job access. If you’re at a disadvantage as a job applicant, you’ll end up with less money to spend on rent.

It’s a very serious issue, and it’s not easy to identify tractable solutions in all cases. But we should, at a minimum, try very hard not to do things that make it worse.

But here we are in Minneapolis with a policy reform that made discrimination worse. And similar policies are in effect in Seattle, New Jersey, and a few other jurisdictions.

What’s really upsetting to me is that the groups who are pushing for this seem totally untroubled by the Minneapolis result, even though we already saw similar results in an employment law context. For a while, there was a big push to “Ban the Box” — i.e., prevent employers from asking job applicants about past criminal convictions. What happened when those laws passed? Well, young Black men without college degrees started facing more labor market discrimination.

That’s really shitty. And, look, you can say “employers shouldn’t have reacted like that — it’s morally wrong and also inconvenient for our project.” But they did. If you have two job candidates and one was convicted of a crime, a preference for the non-criminal makes a certain amount of sense. If you have a group of people and you’re not allowed to gather any information about their criminal record and someone forces you to guess who has one, it is a statistically correct guess that a non-college Black man is more likely to have a criminal record. By the same token, Abigail Wozniak finds that Black men are more likely to get hired in states that allow drug testing.

To be really clear about what’s going on here, these policies essentially sacrifice the interests of law-abiding Black men and their families in order to advance the interests of white criminals. It’s less a Fair Chance ordinance than a literal white privilege ordinance, with actual violent criminals skating by on stereotypes while innocent people suffer.

This is not to say that the housing needs of the formerly incarcerated are not a legitimate cause for concern.

If someone commits a burglary or is caught with an illegal handgun, you presumably do not want to house that person indefinitely at public expense in prison. The vast majority of felons find their way, sooner or later, back to the outside where we would like to see them participating in the legitimate economy, which requires having a place to live.

When Jennifer Doleac and I discussed her literature review on recidivism, she told me about an online platform that matched workers with low-skilled temp work. This platform found that employers often only wanted to hire people with no criminal record, which meant they were spending a lot of money on background checks. They teamed up with researchers and found that if they were willing to offer $1 million worth of liability insurance to employers, most employers would drop the ask for the background check. This even penciled out to be favorable from the standpoint of the platform — it was a classic insurance dynamic where pooling the risk was highly cost-effective.

You can’t directly infer from that exactly what might work in housing, but it’s worth considering something similar. If the government wants to help formerly incarcerated people get housing, it could offer some kind of subsidized insurance to address landlord concerns.

But more broadly, you have to think of a lot of different housing issues as a game of musical chairs. If there aren’t enough homes to go around then someone has to go without. You see a bunch of people out on the streets with mental health problems and think “well, this is a mental health problem.” And certainly it is a problem when people don’t get the treatment that they need. But if there aren’t enough homes, then people will be homeless. Conversely, if there’s enough competition among landlords to get tenants, then someone is going to decide that renting to an ex-con is better than losing money on a vacant unit.

“Ban the Box” hurts job prospects for all Black men while doing little to nothing to help people with criminal records get jobs.

What does help the formerly incarcerated? Crystal Yang has a nice paper showing that what helps is strong labor demand, especially in sectors that employ blue-collar men (emphasis mine).

    This paper estimates the impact of local labor market conditions on criminal recidivism using rich administrative prison records on over four million offenders released from 43 states between 2000 and 2013. Exploiting each offender’s exact date of release, I find that being released to a county with higher low-skilled employment and higher average low-skilled wages significantly decreases the risk of recidivism. The impact of higher wages on recidivism is larger for both black offenders and first-time offenders, and in sectors that report being more willing to hire ex-offenders. These results are robust to individual and county-level controls, policing and corrections activity, and do not appear to be driven by changes in the composition of released offenders during good or bad economic times.

But what’s really great about strong labor demand is it also reduces statistical discrimination. The racial gap in unemployment rates goes up during recessions and down during recovery. The more slack there is in the labor market, the more employers casually screen out applicants, and the burden of that falls disproportionately on Black job seekers. When labor demand is strong, employers get less picky and the impact of discrimination lessens.

It’s of course difficult to be sure how well this logic applies in the housing context, but my guess is that it works in basically the same way.

In non-recession times, landlords discriminate heavily against applicants with criminal records and a little bit against Black applicants in general. If you try to block them from searching criminal records, then statistical discrimination against Black applicants ramps up. But if you make housing abundant, you should see less discrimination of both kinds — we should be aiming for a housing market where landlords are desperate for customers.

Note that per Yang’s paper, YIMBY regulatory reforms are especially potent because the construction sector happens to be a high-leverage source of employment for re-entering prisoners. It’s male-dominated, it doesn’t require formal education, and there are plenty of roles that don’t involve customer-facing work. It’s an ideal place for someone trying to get his life on track to prove himself on the employment side.

What’s boring about pro-supply housing regulation and full employment monetary policy as solutions to the prisoner re-entry issue is they’re not even remotely targeted at the problem of prisoner re-entry.

What’s cool about them is they not only help with prisoner re-entry, but they also reduce general racial discrimination. Fair Chance and Ban The Box, by contrast, have really toxic downstream consequences that advocates are being disturbingly cavalier about. And what’s also also cool about housing abundance and full employment is that they’re not narrowly-targeted, race-specific remedies. All kinds of people benefit from more abundant housing and a strong labor market.

We’ve seen in the strong post-pandemic labor market that the share of disabled people who are able to find work has risen. That’s not a targeted disability policy remedy; it’s a happy consequence of a healthy labor market.

It’s probably true that you can’t solve all the world’s problems with a handful of big, non-targeted good policy reforms. But I really do think the merits of this kind of big-picture “this is a good idea” reforms are actually badly underrated. A vision of full employment on the demand side, sustained by helpful supply-side reforms in the most important markets — housing most of all, but also health care and energy — is broadly appealing and politically sustainable in a way that trying to make everyone want to do special favors for criminals isn’t. But it makes big progress on all these smaller-picture concerns, too.

Too often we see a lot of emphasis on what I think of as activist chum. Left-wing activists want something distinctively left-wing to ask of random municipal governments, and that gives everyone something to do: program officers write memos about it, groups do “organizing” and build their email lists, journalists write about it, and there are plenty of warm fuzzies to go around. But running chum campaigns as an organizing gambit often leads to those running the campaigns getting sloppy about questions like “does this accomplish what it’s supposed to?” or “am I wreaking horrifying unintended consequences on people who don’t have a voice in the political system because they’re not educated?”

There’s a clear pattern and a compelling theoretical explanation for why trying to help the formerly incarcerated by obscuring their pasts imposes unacceptable costs, and activists should instead focus their energy on solutions that actually help.