Why Do Employers Use FICO Scores?
29th July 2010
Megan McArdle likes to dive deep into a topic that may seem eccentric.
We seem to be in a situation where we are systematically depriving employers of any potential information about employees. This is both bad for businesss, which end up with unnecessary turnover, and bad for employees, because it results in the use of less accurate proxies that aren’t banned. As Alex Tabarrok pointed out, banning inquiries about criminal history is likely to result in (illegal, but harder to detect) racial discrimination. Imposing liability for truthful bad references results in the use of things like FICO scores. And banning FICO scores–well, it may not be a good proxy, but what are bosses likely to use instead?