Drug Testing, Signaling, and Labor Market Reform

by Reihan Salam

Notre Dame economist Abigail Wozniak finds that the rise of employer drug testing appears to have benefited African American workers:

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.

Though Wozniak’s work won’t be the last word on the subject, it raises an interesting possibility. If employer drug testing increases black male employment by reassuring employers than specific black male applicants aren’t habitual drug users, a fact that might serve as a proxy for other desirable noncognitive attributes, like impulse control and reliability, one wonders if proposals to “ban the box” might backfire. “Ban the Box” is an effort to improve the labor market prospects of black and Latino men by barring employers from asking applicants whether or not they have a criminal record. Bloomberg View endorsed the proposal in 2011, and there is (modest) evidence that it might have its intended effect. Yet one wonders if, like limits on employer drug testing, banning the box might lead employers to discriminate against all black and Latino men, regardless of criminal record, for fear of hiring someone who might prove disruptive, and who might prove difficult to fire should the need arise. (As Pat points out, however, employer drug testing is about current behavior while asking about an applicant’s criminal record is about past behavior. One could argue that allowing employer drug testing while banning the box allows employers to address their concerns about reliability, etc., without punishing applicants for past misdeeds.)

During a recent conversation about Room to Grow, the new collection from the YG Network (where I’m an advisor), one of the contributors, Rick Hess, offered a different approach that might prove more constructive. Many employers insist that applicants have a college degree not because they are hiring for a job that requires higher education, but rather because a college degree is a signaling device; among other things, it helps demonstrate that the applicant has the patience and fortitude to complete a course of study, or, frankly, the resources to do so (economic, social, and cultural capital), and all that entails (the ability to withstand shocks and disruptions, which might reduce absenteeism and make you a more reliable employee). College as signaling device represents a huge barrier to entry for non-college-educated workers, many of whom possess the qualities that a college education is meant to signal. And so Rick has tentatively suggested that public-private partnerships offer high school graduates a battery of tests and interviews designed to evaluate whether or not they possess the non-cognitive skills that are central to being job-ready. For this certification process to be deemed worthwhile by employers, it would have to be rigorous and selective. That is, not every high school graduate would pass muster. But a certification along this lines could be a huge boon to ex-offenders and others who might otherwise be perceived as risky hires.

* This post has been updated.