A Short-term Intervention for Long-term Fairness in the Labor Market.

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Lily Hu, Yiling Chen

The persistence of racial inequality in the U.S. labor market against ageneral backdrop of formal equality of opportunity is a troubling phenomenonthat has significant ramifications on the design of hiring policies. In thispaper, we show that current group disparate outcomes may be immovable even whenhiring decisions are bound by an input-output notion of "individual fairness."Instead, we construct a dynamic reputational model of the labor market thatillustrates the reinforcing nature of asymmetric outcomes resulting fromgroups' divergent accesses to resources and as a result, investment choices. Toaddress these disparities, we adopt a dual labor market composed of a TemporaryLabor Market (TLM), in which firms' hiring strategies are constrained to ensurestatistical parity of workers granted entry into the pipeline, and a PermanentLabor Market (PLM), in which firms hire top performers as desired. Individualworker reputations produce externalities for their group; the correspondingfeedback loop raises the collective reputation of the initially disadvantagedgroup via a TLM fairness intervention that need not be permanent. We show thatsuch a restriction on hiring practices induces an equilibrium that, underparticular market conditions, Pareto-dominates those arising from strategiesthat statistically discriminate or employ a "group-blind" criterion. Theenduring nature of equilibria that are both inequitable and Pareto suboptimalsuggests that fairness interventions beyond procedural checks of hiringdecisions will be of critical importance in a world where machines play agreater role in the employment process.

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