How Some Historic Policies Contribute to Racial Disparities in Hiring, Retention

Prof. Jeremy Petranka shows how data analysis can help identify and change discrimination

April 8, 2021
Big Data, Diversity

For many employers, recruiting a diverse workforce and building an inclusive work environment are perennial strategic goals.

Many firms adjust hiring targets and incorporate workplace training to achieve these goals, but could miss some of the more subtle ways systemic racism lurks in other policies and practices, says Jeremy Petranka, an assistant dean and associate professor of the practice at Duke University’s Fuqua School of Business.

“When we think of racism, we tend to think of racist ideas, which is where anti-bias training generally focuses,” said Petranka, who recently discussed the topic live on Fuqua’s LinkedIn page. “However, it is the structural policies we have in place that can lead to the most persistent racial disparities and can be much harder to identify.”

Petranka studies the role of data in organizations and how that relates to their larger strategic goals. Creating a diverse workforce requires a deeper understanding of the data behind an organization’s practices that may disadvantage particular underrepresented minority groups, Petranka said.

Often, racial disparities exist not because of overt racism, but because of the existing systems in place that can specifically disadvantage certain groups, Petranka said.

He offered an example from the book “The Color of Money: Black Banks and the Racial Wealth Gap,” by Mehrsa Baradaran, which describes the U.S. government’s establishment of the Home Owners’ Loan Corporation in the 1930s to help people refinance their mortgages. At the time, Petranka said, the primary reason that loans were denied was not a person’s credit history, wealth, or job status, but their race, which led to fewer loans for Black homeowners.

This overt bias was rolled into the credit-underwriting policies of the Federal Housing Administration, the government agency that insures mortgages, Petranka said. This race-based definition of a person’s  credit-worthiness resulted in a generation of higher interest rates, segregation, and a reduced ability to build intergenerational wealth within the Black community, leading to systemic wealth disparities that exist to this day, he said.

“Anything you base on wealth today, for instance, the ability to pay back a loan or the equity you need to get a small business loan, is now going to be skewed even if that policy was not purposely built on a racist idea – even if it’s based solely on actuarial data,” Petranka said in an interview.

Although only one example of systemic discrimination, employers must recognize how the depth of these disparities affect their hiring practices, he said.

Petranka explained that when a firm is hoping to hire candidates from diverse backgrounds, but the company hosts job fairs or interviews in locations that require candidates to have access to a car, this could introduce racial disparities into the company’s hiring practices based on a structural wealth gap.

Likewise, requiring a college degree for all entry-level roles means eliminating a whole segment of the population before even hearing from those candidates.

Hiring a diverse cohort only begins organizational change, Petranka said – firms must reevaluate retention and promotion policies, as well.

“You have to know what your recruitment path looks like, what your promotion path looks like,” he said in the interview. “You need to look at every stage and remember you can be measuring racial disparities as they’re happening, because if you can reduce racial disparities in your hiring practices and combine that with a reduction in racial disparities in your retention and promotion practices, you can start transforming your company. And that’s what we’re looking to do.”

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