THE SCARLET DEBTOR

Posted in Rants on August 20th, 2009 by Ed

Before Mike headed over to guest-blog The Baseline Scenario for a week (notice how he started taking RortyBomb seriously about 6 months ago and is already 1000 times more popular / better at blogging than me? I have a feeling I'm going to be able to say I know a lot of famous people in 20 years from my commanding perch in obscurity.) he noted that we as a society are standing on the brink of employers utilizing credit checks in hiring decisions. In other words, you're unemployed. Your credit goes to shit. Potential employers start turning you away because your poor credit indicates "poor judgment." I can't wrap my head around the number of levels on which this is fucked up.

First, the vicious cycle of unemployment-to-bad-credit-to-unemployment is not hard to spot. You get canned and end up living off your credit cards and/or filing bankruptcy. When employers use that as a reason to deny you a paycheck, you live off more credit and leave a vapor trail on your way to bankruptcy court. Second, to put on our social scientist hats for a moment, they appear to use Credit Score as a proxy for an unobserved/latent variable (judgment). But is there any logical basis for doing so? To the extent that the individual's judgment is an independent variable it is highly collinear with other vague ("the housing market", "the economy") or unmeasurable (life circumstances, etc.) variables. Frankly, a standardized test for applicants would do more to shed light on decision-making skills. So might throwing darts at a board, for that matter.

Finally, have we bought into social darwinism so completely that we're going to start branding debtors with a scarlet letter – or perhaps we can tattoo their Equifax score on their foreheads – to mark them as undesirables? Of course we have. We're more than comfortable using debt as a form of social control and class stratification in this country. Consider the mid-nineties explosion of the "Intern Economy" in which employers started insisting that college graduates have internships to make their resumes "stand out." What does this accomplish? Does a summer or a year of fetching coffee and making copies really make someone more qualified for a job? No, but it does thin from the applicant pool any college kids whose parents lack the means (or the willingness) to support them while they work for free in New York, DC, or some other disproportionately expensive and happening place. Scanning credit scores, which will simply identify people who have no personal financial safety net, is the logical next step and a legally permissible alternative to writing "Sons of management only, please" in the job ads.

Sure, this process will catch the morons who took $450,000 mortgages on a $40,000/yr salary or who routinely run up their Mastercards and file bankruptcy. In other words, it will catch the straw man debtor who lives in John Boehner's head. It will catch them even though they are a minority of people with poor credit. It will also catch a lot of people with excellent "judgment" who have gotten screwed. It's like fishing for tuna with depth charges. Sure, you'll get your tuna, and I guess you can ignore all of the other carcasses that float up alongside it.

(PS: This is my favorite post title ever. Out of 1200 and counting.)