Disparate Impact: Anthony Kennedy’s Economic Time Bomb

Disparate Impact: Anthony Kennedy’s Economic Time Bomb

The Supreme Court’s disparate impact decision is way worse than its Obamacare decision.
Bill McMorris
By

Chief Justice John Roberts stole the spotlight when he swooped in to save Obamacare from the English language. The conservative backlash was predictable, brief, and damning, which is a shame. We could have saved that energy for Justice Anthony Kennedy, who issued an opinion in another case that will prove far more consequential in the lives of everyday Americans.

While Roberts’ decision can be reversed through legislation, Kennedy affirmed a dubious legal theory that only the courts can remedy. In so doing, the libertarian darling has upheld the college bubble and immanentized the eschaton of a future housing crash.

What Is Disparate Impact?

Like many bad ideas, this one traces back to Lyndon Johnson’s Great Society and terrible jurisprudence. As passed by Congress, Title VII of the Civil Rights Act of 1964 is straightforward, unobjectionable, and just: it outlaws racial discrimination in employment matters. But in the hands of an activist court, the passage transmogrified into one of Big Government’s most effective cudgels for greater regulatory power.

The regulation led formerly segregated companies, such as the North Carolina-based Duke Power Electric Company, to integrate the workforce. One way to prevent the reimplementation of the Good Ol’ Boy network was to create aptitude metrics to ensure that promotions were given in a fair measure. Duke adopted a simple requirement: employees could move on to management with the help of a high-school diploma, as well as a passing grade on a test designed to ensure plant safety and basic math skills. It sought to address the high-school graduation gap between black and white workers by offering to subsidize the educations of its employees. Still, 14 black applicants failed to meet the standards. Willie Griggs and 12 other black workers took the company to court.

The company argued it did its due diligence, since it rejected every worker, white or black, that failed to qualify. The justices found that regardless of what the Civil Rights Act said, the spirit of the law (that most artful of phrases) dictated that if blacks failed to meet a standard at a similar rate to whites, the standards themselves were racist—a legal doctrine known as disparate impact.

The theory proved an immediate boon to trial lawyers and government regulators, but by the 1980s the courts appeared to be going wobbly. Companies began pointing out that disparate-impact suits threatened their ability to hire quality workers and the Supreme Court started to rule in favor of the meritocracy. In stepped Ted Kennedy. He amended the 1991 Civil Rights Act to include disparate-impact theory, knowing that no Republican would dare oppose.

Credentialism over Meritocracy

Disparate impact laid the foundation for the college bubble and the depreciating value of the high-school education, enshrining the baccalaureate degree as the barrier of entry to the middle class. The irony would be lost on Chief Justice Warren Burger, who thought that eliminating tests would liberate the working man.

Companies fearful of disparate-impact lawsuits began relying on colleges to whittle down their applicant pool.

“What is required by Congress is the removal of artificial, arbitrary, and unnecessary barriers to employment when the barriers operate invidiously to discriminate on the basis of racial or other impermissible classification,” he wrote in Griggs. “Diplomas and tests are useful servants, but Congress has mandated the common sense proposition that they are not to become masters of reality.”

Burger’s ruling simply changed the nature of who the “masters of reality” were, sparking the first major onslaught of outsourcing the country would see. Companies fearful of disparate-impact lawsuits began relying on colleges to whittle down their applicant pool.

In the pre-Griggs world, companies used aptitude tests to screen applicants—an approach borrowed from the military during World War II. Exams worked for the employer because they were simple, cheap and, most of all, effective, favoring raw talent above all else. “Despite their imperfections, tests and criteria such as those at issue in Griggs (which are heavily…dependent on cognitive ability) remain the best predictors of performance for jobs at all levels of complexity,” University of Pennsylvania professor Amy Wax found.

If businesses were allowed to recruit and screen candidates using testing, workers could start working earlier, advance quicker, and do it debt-free.

Test scores at matriculation are a near-perfect predictor of class rank come graduation—a testament to the fact that students are learning less now that institutions have lowered their standards. Research has found a strong correlation between master of business administration entrance exams and final grades. If businesses were allowed to recruit and screen candidates using testing, workers could start working earlier, advance quicker, and do it debt-free.

Businesses, however, can no longer afford to administer aptitude tests under the constant threat of lawsuits from those who fail. The influx of student loans coupled with the college degree’s emergence as the ticket to the middle class freed colleges from keeping admittance affordable.

How Disparate Impact Hurts Black Men

“We began using college education as a screening device for being reasonably productive, and it’s incredibly wasteful of time and money,” Wax told me in a 2013 interview. “Ironically, this overtly seems to be hurting black men because they do not go to college at the same rate as whites or Asians or black females.”

‘This overtly seems to be hurting black men because they do not go to college at the same rate as whites or Asians or black females.’

No group has been hurt more by this arrangement than black men, those Griggs was supposed to help. Burger noted in Griggs that white workers had an innate advantage because 34 percent of white males in North Carolina had high-school diplomas, nearly double that of blacks. The baccalaureate’s degrees gap is about the same today among black and white men, and is even larger between men and women.

“The court decision accomplished very little in blunting biased company hiring practices. In fact, it’s probably true that it’s only helped make discrimination more rampant,” an editorial at the Vault Education blog says.

The employment factors aren’t just limited to the private sector. Employment tests remain a mainstay in public safety, but the standard is starting to erode there, as well. The beauty of disparate impact is that it never has to be consistent. The New York City Fire Department (FDNY) has been forced to hire women who failed the entrance exam because it was too physical and minorities who have failed the entrance exam because it is too cerebral.

Who Needs Competent Firefighters?

The Department of Justice under the Bush administration sued the New York City Fire Department because minorities did not perform well on its 1999 and 2002 entrance exams. More than 20 firefighters developed the tests’ 85 multiple-choice questions focused on math and the proper way to combat fires. The New York Times interviewed no firefighters in its coverage, but gave the floor to University of Michigan constitutional law professor Richard Primus. Condescension, not egalitarianism bled through the page.

The last thing we need is a fire department filled with professionals.

“Much of what appears on written exams for firefighters is legitimately material that we should want firefighters to know,” he said, but some of it tends to be knowledge that “firefighting junkies have, even though it is not really necessary for fighting fires.”

The last thing we need is a fire department filled with professionals. One imagines he would dismiss any fireman who showed up at the University of Michigan in 2013 to decry the fact that only nine of the law school’s 188 professors is black. One hopes the professor will protest if the president’s next Supreme Court nominee is a fireman whose sole knowledge of the Bill of Rights is that there are ten amendments. Only constitution junkies know what disparate impact is, and we don’t want to give them a leg up.

Judge Nicholas Garaufis agreed in a typo-riddled opinion—at one point, he admitted that plaintiffs “did not asses [sic] the reading level of the Academy’s training materials”—that declared the tests racist. He awarded the failed firefighter plaintiffs nearly $129 million and appointed Obama Securities and Exchange Commission chief Mary Jo White to develop a test short on words and high on “more visual elements like photos and drawings.” White, an attorney known in FDNY circles for forcing the department to hire women who had failed the physical 30 years earlier, ditched questions about math and equipment and opted to test for “establishing and maintaining relationships”—no doubt the most important skill in extinguishing five-alarm blazes.

“They said that because we communicate verbally at the scene of a fire, that’s what’s important. But, in order to…communicate intelligently, you have to read the manual and understand the material,” FDNY Deputy Chief Paul Mannix said of the judge’s dismissal of reading comprehension on the firefighting exam.

‘Ideologues are making a dangerous job more dangerous all because they don’t like the way the fire department looks. If diversity is your number-one goal, then safety and competence can’t be.’

Mannix heads Merit Matters, a group he started after the Department of Justice launched the disparate-impact suit. Merit Matters is dedicated to the proposition that all men and women are not created equal, that certain individuals possess certain traits that make for the ideal firefighter and that those realities should trump political idealism that declares everyone the same.

“We now have females claiming that the FDNY’s physical test has a disparate impact because women don’t pass often enough. They say that it’s discriminatory that women don’t have 50 percent of the jobs. They say that most of the job doesn’t require brute strength. They’re right, but every once in a while the line between life and death depends on my ability to tear a metal gate from a window frame,” he said. “Ideologues are making a dangerous job more dangerous all because they don’t like the way the fire department looks. If diversity is your number-one goal, then safety and competence can’t be.”

Disparate Impact and the Coming Housing Bubble

Firefighting has played an enormous role in disparate impact of late. The Supreme Court affirmed in Ricci v. DeStefano that the New Haven Fire Department violated the equal-protection clause when it nullified the results of a promotion exam because not enough minority firefighters passed. The decision so spooked the Obama administration that it dropped a $200 million whistleblower suit against St. Paul, Minnesota, if the city agreed not to bring Gallagher v. Magner, a disparate-impact lawsuit, to the Supreme Court. They should have had more faith in Justice Kennedy, who cited the suit approvingly in his decision extending disparate impact to housing.

Regulators and trial lawyers used disparate impact to sue banks and lenders for denying home loans to people with bad credit because blacks had worse average credit rates than whites.

“Although the Court is reluctant to approve or disapprove a case that is not pending, it should be noted that Magner was decided without the cautionary standards announced in this opinion and, in all events, the case was settled by the parties before an ultimate determination of disparate-impact liability,” Kennedy writes. “Were standards for proceeding with disparate-impact suits not to incorporate at least the safeguards discussed here…that, in turn, would set our Nation back in its quest to reduce the salience of race in our social and economic system.”

The truth is, disparate impact has long been applied beyond the job market, where it was originally established. The federal government has sued insurance companies for raising premiums on houses with deficient roofing because it turned out that the shoddier structures were largely occupied by black people. Insurers opted to drop coverage in the area altogether, rather than take on the risk of paying out inflated roofing claims. With Justice Kennedy’s blessing, that’s not an option anymore.

Regulators and trial lawyers used disparate impact to sue banks and lenders for denying home loans to people with bad credit at the turn of the century because blacks had worse average credit rates than whites. Lenders opted against pulling out of the market and decided to double down and give wild mortgages to bad borrowers—a practice that resulted in 2007’s financial collapse. We can expect similar results now that Kennedy has entrenched disparate impact in housing. He has taken a regulatory assumption and established it as precedent. No lender will dare run afoul of that.

Soon, Kennedy will make gay marriage the law of the land. The media and certain thought leaders will laud him as a man dedicated to liberty and freedom above all else. His real legacy is disparate impact and eminent domain.

Bill McMorris is a staff writer for the Washington Free Beacon. He previously worked at the Franklin Center for Government and Public Integrity, where he was managing editor of Old Dominion Watchdog.
Photo FILE - In this Oct. 3, 2013, file photo, Supreme Court Justice Anthony Kennedy speaks to faculty members at the University of Pennsylvania law school in Philadelphia. The pro-gay rights rulings of Supreme Court Justice Anthony Kennedy have been a key spark in the march toward legalized gay marriage. To counter the trend, same-sex marriage opponents now are seizing upon other opinions by Kennedy himself. (AP Photo/Matt Slocum, File)

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