Wednesday 21 May 2014

Drug testing and discrimination

If employers assume that minorities are more likely to take drugs than are other groups, and if you think that drug-taking makes for a worse employee, they could be fuelling a really bad equilibrium. Individuals can't easily signal that they're clean without simultaneously seeming weird (by, for example, voluntarily offering to undergo drug testing), so they pool with drug users and are less likely to get a job offer.

This happens whether or not the employer is right about the relative rates of drug use. If the employer is wrong, that employer will bear some losses by failing to hire quality candidates, and especially when labour markets are tighter. But, worse, initial misperceptions on relative drug use can turn into a bad self-reinforcing equilibrium: if everyone is going to think you're a stoner regardless of whether you do drugs, why not at least enjoy the consumption benefits? We then get the same kind of pernicious equilibrium that Glenn Loury talks about in his work on discrimination.

One way of breaking that equilibrium is to allow employers to require drug testing: it lets clean employees quickly demonstrate that they're clean and consequently breaks the pooling equilibrium. Drug-using potential employees are worse off, because they can't mask type as easily, but those who aren't benefit by the separation.

That's the theory. Abigail Wozniak shows that the empirics hold up. Here's an early ungated version of her paper; here's the NBER Working Paper.
Nearly half of U.S. employers test job applicants and workers for drugs. A common assumption is that the rise of drug testing must have had negative consequences for black employment. However, the rise of employer drug testing may have benefited African-Americans by enabling non-using blacks to prove their status to employers. I use variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring. Black employment in the testing sector is suppressed in the absence of testing, a finding which is consistent with ex ante discrimination on the basis of drug use perceptions. Adoption of pro-testing legislation increases black employment in the testing sector by 7-30% and relative wages by 1.4-13.0%, with the largest shifts among low skilled black men. Results further suggest that employers substitute white women for blacks in the absence of testing.
It feels good to oppose mandatory testing, thinking that it somehow is nicer for minority groups. But that opposition mostly works to encourage employers to substitute over to groups that they believe are less likely to take drugs. Another for the continuing series here on feeling good while doing harm.

I note this now because Twitter tells me that Radio New Zealand will be talking drug testing in 15 minutes.



  1. I was discussing this paper with a colleague the other day, and they asked "Why haven't private drug testing companies sprung up that offer non-using minorities a way to signal that they are clean?"

    It is a good question, and I didn't have a good answer for it. Sure, the fact that it is weird is likely to play a role but I doubt it is enough on its own. Are there laws against such a company setting up shop?

  2. Doubt there are any laws against it, but think about it from the employer's perspective. A candidate comes in and, unlike other similar candidates, hands over results from a drug test and happily announces he is not on drugs. Do you think:

    a) Hmm. Maybe the other candidates are on drugs and I should like this guy.
    b) Hmm. Maybe everybody else has previously thought this guy is on drugs and that's why he's making a big point about it. Why would they have thought he's on drugs? Is it that he often seems stoned when not on drugs? Or maybe he's just really weird. Would a weirdo be a good 'fit' for us?

    All of this makes me think that we might be reluctant to ban firms against broad-based testing.

  3. I imagine there are equilibria where (a) is more likely and equilibria where (b) is more likely.

    Raises the question: what (potentially non legislative) things can we do to move from one equilibrium to the other?

    No argument on the fact that we might be reluctant to ban broad-based testing.

  4. Good question.

    I haven't a ready answer, but it's a good question.

  5. Assuming that the USA has laws against employers discriminating on the basis of race, will this study become evidence in trials? Or is it just more evidence that laws against thought crime are unenforceable?

  6. It seems unlikely as it would be hard to tie to any particular employer. I suppose you could claim that a firm showing an increase in minority hiring after implementing testing had engaged in ex ante discrimination; not sure if you could make it stick, or that you'd really want to if it would effectively discourage other firms from following suit.

  7. To my
    mind this paper and blog shows why policy makers need to take an
    interdisciplinary approach to societal problems and that economics is
    only one aspect to consider.

    we are seeing here are prejudiced employers pushing back against
    societies preference for fairness. By drug testing the subjects of
    prejudice, provision of information is shifting employment practices.
    That drug testing is the best way to provide this shift is in my
    mind doubtful. That problem would be more effectively solved
    (probably at less cost) by training or disciplinary action against
    the managers concerned.

    accept drug tests are necessary where the are clear safety
    requirements, such as interstate transport, and only if everyone
    including the board and management staff are included; and tests must
    include screen and full GC-MS analysis of any positive results. The
    full analysis is required because the common screening tests are not
    accurate. In addition, NZ (and one would expect in the USA) there
    are additional privacy and ethical concerns around screening tests.

    in mind that the problem here is prejudiced managers and the impact
    of their hiring decisions on minority groups. We need to think
    about the testing, and the privacy and ethical concerns.

    the testing. Screening drug tests are often not accurate, the NZ
    standard requires a screening test followed by a full gc/ms analysis
    of any positive results (which will be expensive as this is a
    sophisticated skilled analysis requiring expensive equipment). The
    link below gives information on the magnitude of the problem; 10-15%
    false positives and 15-20% false negatives. (That means if a
    population has 1% drug takers, and you have 10-15 positive tests per
    100 tests only one will be a true positive).

    Tests Often Trigger False Positives: Poppy Seeds, Cold Medications
    Can Trigger False Alarms"

    New Zealand's ESR also confirms the
    necessity for full analytical testing; quote and link below.

    Quote, “NB: It is important to be aware that there are
    now available in New Zealand alternative tests that do not comply
    with the Australian/ New Zealand Standard. Such tests include “On
    site” urine tests (dip sticks, cartridges, cups), laboratories
    conducting the “Screen only” tests and Oral Fluid (or saliva)
    tests. These options can give the wrong result and the results would
    not withstand legal challenge”.

    Second. There are additional privacy and ethical concerns around
    screening tests. ESE makes the following comment regarding New
    Zealand law.

    ESR (highlight mine),

    “In order to meet privacy and human
    rights obligations, workplace drug and alcohol testing must have the
    following general features:

    testing is for the express purpose
    of ensuring the safety of employees and those likely to be affected
    by their actions in the workplace

    employees are not selected for
    testing on discriminatory grounds...”.

    It seems that in New Zealand screening
    minority groups is illegal.

    In summary: There are practical and
    ethical reasons to be

    thoughtful about the practice of drug
    screening tests. To my mind, the key issue here is that policy
    makers reflect scientific best practice and community requirements
    for fairness. I doubt that screening minority groups is ethical or
    accurate, and it will be costly to undertake correctly. The original
    paper certainly gives evidence that prejudice is a problem in hiring
    decisions in the USA. That problem would be more effectively
    solved (probably at less cost) by training or disciplinary action
    against the managers concerned.

    This case also shows why policy makers
    need to take an interdisciplinary approach to societal problems and
    that economics is only one aspect to consider.

  8. Maurice, I never said that economics should be the *only* consideration here. But the general popular view is that drug testing hurts minorities, and this nice bit of empirical work shows that it instead strongly benefits minorities' chances of being hired.

    There are four logical positions. You can believe that employer drug testing is ethically sound or ethically dubious: that's a values question. The empirical question is on the effects of the policy. Previously, those who thought it ethically dubious could have thought there were no real tradeoffs: it was ethically bad and also had bad consequences. But the paper shows otherwise. It can still be ethically dubious, but it also improves minority job prospects. In that case we have to weight the ethics against the consequences.

    I don't think that anybody in the States runs this as a "just screen minorities" programme; that would almost certainly be illegal. But screening everybody benefits those who would otherwise wrongly be assumed to be using drugs, and that's primarily benefiting minority applicants.

    It's totally fine to think that something has beneficial effects but is still ethically bad. For a long time I opposed the death penalty despite being pretty sure that it saved lives through deterrence effects. I'm now less convinced by the empirics on that as they've been shown to be pretty non-robust. Knowing the real-world effects of a policy always helps in assessing these tradeoffs though.