The Visibility of Discrimination in Frictional Labor Market

Abstract

Policies against discrimination in the labor market do not stop employers from discriminating the less-preferred groups. Instead, anti-discrimination policies make discrimination invisible to workers. I explore the “Ban-the-Box policy” (BTB) as an experiment for this study. This paper presents a theoretical model of discriminatory market segregation against ex-offenders based on a search and matching framework, focusing on the implications of BTB policy. The model characterizes the labor market dynamics and market segmentation where prejudiced firms exclude ex-offenders. The BTB policy prevents employers from excluding ex-offenders from the application so that workers no longer able to know the discriminatory preference of firms. However, firms can still discriminate workers by their criminal records during the hiring process. The BTB policy increases labor market outcomes among ex-offenders, while it simultaneously diminishes employment for workers without criminal records. The model predicts a net decrease in the crime rate of 2.77 offenses per 1,000 individuals, accompanied by a decline in the recidivism rate by 7.28 percentage points.

Keywords: discrimination, search and matching, unemployment, criminal records, Crime, ban the box