Demos on Credit Reporting and Employment; Surveillance, Inequalities and the Labor Market

I just learned recently that the FTC has given a thumbs up to the Social Intelligence Corp. archiving seven years worth of people’s Facebook posts, posts that can then be used as part of their background checking service for job applicants. With that in mind, I’d just like to tell whatever computer algorithms are currently crawling over and compiling my profile to sell to potential future employers that all my status updates about fake calling in sick to work, family health concerns, having too much fun at a party or disgruntlement with bosses were all j/k lol.

I read that at the same time I just read the latest Demos report by Amy Traub and Shawn Fremsted, Discrediting America, The Urgent Need To Reform The Nation’s Credit Reporting Industry. A fantastic report on something I’ve been wanting to think through and start to conceptualize a reform agenda: the credit reporting scores play a huge role in society but they have huge oversight gaps and major, systemic errors that bias against consumers. What do these errors look like? From the report:

A 2008 Federal Trade Commission (FTC)-sponsored pilot study found that about 31 percent of people who reviewed their credit report found errors that they wanted to dispute. About 11 percent of people reported errors that were categorized by the FTC as “material”, i.e. errors that significantly affected credit scores…A 2011 study funded by the credit reporting industry and conducted by the Policy & Economic Research Council (PERC) was larger and more representative, finding that 19.2 percent of people who reviewed their credit reports identified information that appeared to be erroneous. 12.1 percent reported apparent errors that could have a material impact—mistakes that go beyond a misspelled name or incorrect address…

How do errors in credit reports affect borrowers? A 2004 study by researchers at the Federal Reserve analyzed 300,000 credit reports, cataloguing the types and frequency of various categories of negative information on the reports [see above graph].

Beyond that, the report identifies a “mission creep,” where now 60% of employers are using credit reports regardless of the fact that no studies have shown any correlation between scores and job performance. You can read this editorial by Amy Traub at The American Prospect to get a sense of what this looks like, both the endless spiral where bad credit can’t be broken without a job, and can’t get a job with bad credit, as well as the subtle humiliations that come from a hiring scheme like this:

After two years of working in a temporary job as customer-service representative, Debra Banks was offered the job permanently. She was sent a hire letter, set a start date, and confirmed her new salary. But there was a hitch: To get the job, Banks had to undergo a credit check…But when the credit report came back showing unpaid bills from a recent hospitalization, the company rescinded the offer.

Demos offers suggestions for how to fix these problems, which can be driven through the CFPB and are also being fought at the state level. Check it out.

I’d note three things in addition to what Demos finds.

1. We’ve been trying to move away from the Rawlsian fairness brigade this year towards a more Walzerian Spheres of Justice approach, where justice calls for multiple spheres of inequality to keep each other in check. For our purposes here, I’m interested in the notion that nobody should be precluded a social good y because on their lack of possession of an unrelated good x. That the sloppiness of credit scores, the protection of bankruptcy against bad debts, the brute luck of bad health, etc. could all preclude someone from obtaining basic utilities and access to productive labor – that inequality in net worth, health and other spheres preclude access to the sphere of labor regardless of one’s abilities – is something to be fought tooth-and-nail.

2. There’s a medium-term problem. Hard and soft forms of behavioral surveillance technology are maturing into things legible and deployable for employers and recruiters at exactly the moment when employees have little-to-no aggregate bargaining power. From Elise Gould at EPI, the ratio of job openings for job seekers:

The unemployed (and this graph doesn’t count those who have dropped out of the labor force, or are underemployed) have to be willing to jump through a lot of hoops to secure work, and right now opening up the most revealing parts of their private lives are on the table for what is relevant for an employer to see.

3. There’s a long-term problem. As surveillance technology continues to mature we are seeing a strong internal surveillance state complex that blurs the private and the public sector. As Jack Balkin warns, private firms can often be used to end-run constitutional protections against state searches and this is all part of a larger issue that goes beyond the War on Terror. These problems, of who has access to your information and what they are allowed to do with it, are only going to get bigger as algorithms and technology becomes more sophisticated. Do liberals need a new conception of privacy, one related to the 21st century, to fully combat this, or can we work from where we are now if we had a President interested in appointing judges?

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13 Responses to Demos on Credit Reporting and Employment; Surveillance, Inequalities and the Labor Market

  1. BC says:

    We need a national “Do Not Scrape” list – like the “Do Not Call” list, but for websites that want to compile personal information into one easily marketable commodity.

    We as a society finally determined that having a telephone does not imply consent for random marketers to call and try to sell us stuff. In analogous fashion, we need to determine that having personal information on the web does not imply consent for random entities to compile all that information into one easily accessible archive.

    This really is simple. I shouldn’t have to track down every one of these websites and figure out how to get myself off their servers. They should shoulder the burden of checking my name against a national list. It worked for the telemarketers, and the principle is exactly the same.

  2. zunguzungu says:

    Via Nathan Vardi last year, this quote from an executive as SIC is sort of remarkable:

    “You cannot believe the things that we see. The amount of references to drugs and alcohol and the amount of provocative photos and the things that people say is jaw dropping,” says Max Drucker, chief executive of Social Intelligence Corp. “People that we see that are applying for jobs that have this kind of really incriminating information out there.”

    “Incriminating” behavior includes things like talking about alcohol and saying things that provoke. The conceptual leap between “crime” and “sort of disreputable socially but also very Hangover 2″ is remarkably short.

  3. Ted K says:

    I’ve never had a Facebook account, and if I did it would be under an alias. That being said I have said tons of things questionable and no doubt offensive to some people in comments, which I guess if someone tried extra extra hard and tied it to an IP might be able to figure out who I am. You know, my attitude is this, if I have to stop being human and stop being myself 24 damned hours a day, or can only be human in rooms blocked off from i-Phones and etc. I don’t think I want to be employed by someone that anal retentive.

    Look at how large sections of Steve Jobs life are blank and mysterious. Look at what Paul Allen had to say about Bill Gates and Ballmer. Look at what the Winklevoss twins said about Zuckerberg’s ethics. What would we now know if Social Intelligence Corp had been fully operational when Zuckerberg and Steve Jobs attended college???? I could make a nearly endless list going to Weiner then to Senator Tom Coburn (The C street Pious One) covering for his C Street buddy’s adultery and on and on and on. And how many Congressman are similar or worse than Weiner in their sex lives but are intelligent enough not to Twitter it??? Is this really where we want to go as a society??? If I had a gun to my head and only had 2 choices, I would take chaos and mass perversion over Orwell’s 1984/Social Intelligence Corp. 2015. If the Supreme Court doesn’t stomp this down soon, I don’t want to see the future of this country. It will make the Chinese Cultural Revolution of ’66–’76 look like a freaking picnic.

  4. K. Williams says:

    “For our purposes here, I’m interested in the notion that nobody should be precluded a social good y because on their lack of possession of an unrelated good x. ”

    It seems like a stretch to say that employers should treat the characteristic of “being bad at paying one’s bills” as “unrelated” to the characteristic of “being diligent and dedicated to one’s job.” Certainly there are many people who are the first who are also the second, but if you’re making a first cut, eliminating people who have a record of not paying their bills doesn’t seem unreasonable. You write that “no studies have shown any correlation between credit scores and job performance,” but as Taub’s article makes clear, only one real study has been done, which is hardly definitive. More to the point, I’m at a loss to understand the logic here: if, in fact, companies are (as you argue) eliminating candidates who would in fact do good work, they’re artificially limiting the supply of potential labor they can draw on, which would force them to pay higher wages to those they do hire than they otherwise would. And those companies that recognize the irrelevance of credit scores will be able to hire the unfairly-discriminated-against and profit thereby.

    This resembles, of course, the Beckerian argument against the persistence of discrimination, which we recognize doesn’t fit the reality of the way the labor market works. But we’re not talking about a deep-rooted and visceral historical prejudice like racism here. We’re talking about an employment practice that arose for purely business reasons — employers believed/believe that credit scores are meaningful. If they’re not, is there any good reason to believe that profit-seeking companies won’t recognize this?

    That doesn’t justify the failure of the credit-reporting agencies to keep accurate records, and the CFPB should be all over that. But you seem to be suggesting that it’s illegitimate, and should be illegal, for companies to use even accurate credit records in their employment decisions. Slippery-slope arguments are tendentious, of course, but it does seem like once you go down this road, where do you stop? Are we going to require employers to use only hiring criteria that have been clearly demonstrated to correlate with job performance?

    • Tim says:

      “It seems like a stretch to say that employers should treat the characteristic of “being bad at paying one’s bills” as “unrelated” to the characteristic of “being diligent and dedicated to one’s job.” Certainly there are many people who are the first who are also the second, but if you’re making a first cut, eliminating people who have a record of not paying their bills doesn’t seem unreasonable.”

      In a country where sudden illnesses cause many bankruptcies a year, no, this is not reasonable. You make the assumption (a very, very big one) that it is the fault of people who cannot pay their bills. At the most, you acknowledge that they aren’t the same, but yet, you know yourself that the mechanism does not allow differentiation, and then act surprised when it is implied that it should be outlawed?

      “if, in fact, companies are (as you argue) eliminating candidates who would in fact do good work, they’re artificially limiting the supply of potential labor they can draw on, which would force them to pay higher wages to those they do hire than they otherwise would. And those companies that recognize the irrelevance of credit scores will be able to hire the unfairly-discriminated-against and profit thereby.”

      First, because they CAN use this does not mean they do as frequently as imagined, and create large labor pressures. In theory this situation could happen, but given that wage pressures are downward right now this doesn’t come into play. What makes this metric bad is that it would be less terrible in a good economy with universal health coverage. But that isn’t our economy, which makes this metric have perverse consequences, and not the ones you speak of.

      “This resembles, of course, the Beckerian argument against the persistence of discrimination, which we recognize doesn’t fit the reality of the way the labor market works. But we’re not talking about a deep-rooted and visceral historical prejudice like racism here. We’re talking about an employment practice that arose for purely business reasons — employers believed/believe that credit scores are meaningful. If they’re not, is there any good reason to believe that profit-seeking companies won’t recognize this?”

      That’s assuming businesses can’t make a collective mistake. Yet, all sorts of environmental degradation occurs that results in a net loss of business opportunities because of over-usage. Fishing is a great example. Businesses are not collectively rational, intelligent or efficient. The decisions they make should always, always be open for scrutiny. Saying that profit seekers “might see value in it” is a cop out that avoids dealing with the actual issue.

  5. K. Williams says:

    “That’s assuming businesses can’t make a collective mistake. Yet, all sorts of environmental degradation occurs that results in a net loss of business opportunities because of over-usage. Fishing is a great example. Businesses are not collectively rational, intelligent or efficient. The decisions they make should always, always be open for scrutiny. Saying that profit seekers “might see value in it” is a cop out that avoids dealing with the actual issue.”

    No, this is a bad analogy — which is to say, it’s not analogous to the credit-score situation at all. Overfishing occurs because each individual fisherman has an incentive to take as many fish as possible, even though in the long run this creates a situation in which no fisherman can make a living. There is no incentive for an individual profit-seeking business to refrain from overfishing. In the case of using credit scores to vet potential employees, Mike is arguing that credit scores tell us nothing about future job performance. Therefore, profit-seeking businesses have no incentive to rely on them. More important, if some businesses do rely on credit scores to inaccurately evaluate workers, there is a clear incentive for their competitors to snap up those workers who are unfairly rejected, since they’ll presumably be available at lower cost than otherwise. In the case of overfishing or environmental degradation, competition actually magnifies in the problem. In the case of foolish labor practices, competition should work to alleviate it.

    Now, as is the case with racism or gender discrimination, it may not always work this way. But we need to see considerably more evidence that there is a systematic — and unjustified — bias against low-credit-score workers before concluding that businesses are acting in a collectively irrational fashion. And this is important — both of those things need to be true. That is, the discrimination needs to be both systematic and unjustified. If, in fact, there is a correlation between low credit scores and poor job performance, then obviously we don’t want the government interfering, since businesses should be free to hire the most productive workers they can.

    • JW Mason says:

      If, in fact, there is a correlation between low credit scores and poor job performance, then obviously we don’t want the government interfering

      This is not obvious at all.

    • Tim says:

      Yes, overfishing is not the exact comparison. Since you seem to think one is required I will break it down for you.

      What is being done when credit ratings are used for hiring/promotion is a cultural judgment. You might disagree, but that’s simply because you do not acknowledge the impact culture has on your perception of people who cannot pay their debts. Our culture generally looks down upon those who cannot pay their debts, that an inability to pay it is due to a personal fault. This is not the case everywhere, and it is not a perception that is based upon scientific reasoning. It is cultural.

      Now, you mentioned already how cultural perceptions can infiltrate the selection of job opportunities, and you and I both know how difficult it is to root out cultural perceptions, as it took the south being forced by law (and not economic concerns) to at least openly give them up.

      I will be as clear as possible: no non-definitive (in that it creates many false positives) practices should be legally admissible for condition of employment when their primary grounds are a cultural perception. If it is a cultural perception that has definitive science that can be used in a way that is direct and not a dragnet then it should be permissible.

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  7. Gary Wolf says:

    “Do liberals need a new conception of privacy…?”

    I find Ryan Calo’s ongoing investigation of robots and privacy useful here:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1599189

  8. njorl says:

    This genie isn’t going back in the bottle. The “do not call” list worked because people know when they’re being called. They can complain, and the violator has a tiny chance of paying a price. No one notices their information being gleaned.

    The solution to the problem of evaporating privacy is for everyone to stop giving a damn about the embarrassing things others have done. We’re going to have to eventually distinguish between prudishness and morality whether we like it or not.

  9. Frank says:

    As for the “new conception of privacy:” Scott Peppet raises the question quite compellingly in this article:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1678634

    I have proposed some solutions in a book chapter called “Reputation Regulation,” in a book called The Offensive Internet.

  10. Pingback: Daunting Tasks: The Online Job Application | The Art of Conscientiousness

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