e persistence of racial inequality in the U.S. labor market against a general backdrop of formal equality of opportunity is a troubling phenomenon that has signi cant rami cations on the design of hiring policies. In this paper, we show that current group disparate outcomes may be immovable even when hiring decisions are bound by an input-output notion of "individual fairness." Instead, we construct a dynamic reputational model of the labor market that illustrates the reinforcing nature of asymmetric outcomes resulting from groups' divergent access to resources and as a result, investment choices. To address these disparities, we adopt a dual labor market composed of a Temporary Labor Market (TLM), in which rms' hiring strategies are constrained to ensure statistical parity of workers granted entry into the pipeline, and a Permanent Labor Market (PLM), in which rms hire top performers as desired. Individual worker reputations produce externalities for their group; the corresponding feedback loop raises the collective reputation of the initially disadvantaged group via a TLM fairness intervention that need not be permanent. We show that such a restriction on hiring practices induces an equilibrium that, under particular market conditions, Pareto-dominates those arising from strategies that employ statistical discrimination or a "group-blind" criterion. e enduring nature of equilibria that are both inequitable and Pareto suboptimal suggests that fairness interventions beyond procedural checks of hiring decisions will be of critical importance in a world where machines play a greater role in the employment process.
In the context of hiring, however, Hu and Chen REF nd that applying the demographic parity constraint in a temporary labor market achieves an equitable long-term equilibrium in the permanent labor market by raising worker reputations.
A Short-term Intervention for Long-term Fairness in the Labor Market
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Computer Science Economics