“The worst idea ever”

That is how Tyler Cowen describes Obama’s idea to make it illegal for companies (with more than 15 employees) to refuse to hire job applicants on the basis of their being unemployed. I agree with Cowen (I’m assuming he’s being a bit hyperbolic — something like “Obama’s worst idea since becoming president” would have been more accurate).

From the article:

White House officials see discrimination against the unemployed as a serious problem. In a radio interview last month, Mr. Obama said such discrimination made “absolutely no sense,” especially at a time when many people, through no fault of their own, had been laid off.

It is hard to both be original and critique Obama at the same time in this case. But the bottom line is that, if Obama were right, and if “such discrimination made ‘absolutely no sense,'” then, surely, the fact of its making “absolutely no sense” would be a far more powerful disincentive to use discrimination than Obama’s law prohibiting it. Only irrational employers engage in practices that make “absolutely no sense,” and, thanks to our system of capitalism, these irrational employers would be easily outcompeted by their rational counterparts. So why bother with the law?

Additionally, this law is, in my opinion, quite likely to make it harder for the unemployed to find work. An employer can’t be sued for just throwing out an unemployed person’s resume, so that’s what a rational employer who is a bit disinclined towards the unemployed will do. Without the law, at least the unemployed person might have gotten an interview.

Maybe Obama believes that it does make sense for employers to discriminate against the unemployed, but that the sense it makes is outweighed by the long-term harm done to the unemployed by this practice (the article describes the fear that there could become “a class of people who could be left behind as the economy recovers”). If he thinks that, he should say that, rather than saying exactly the opposite (that it makes “absolutely no sense.”) But his proposal would still self-defeating for the reason described in my previous paragraph, and in any case ill-advised because it is such a ridiculous encroachment on employment freedoms that it, in my opinion, would not be the right move even if it were good for the economy.