Gayconomics 101: Why the Latest LGBT Rights Legislation Could Be the 'ENDA' the Road for Some Job Seekers

The Employment Non-Discrimination Act (ENDA), designed to prohibit workplace discrimination on the basis of sexual orientation or gender identity, appears to have been designed with the best of intentions. But like '80s fashion or tequila shots, what sounds good in theory can have unintended consequences. Just like that hangover you had on Sunday.

It's discouraging, but we live in a society with people who still look at lesbian, gay, bisexual, and transgender (LGBT) Americans with contempt and hatred. These people discriminate based on physical or social characteristics, and this bigotry is, to be very clear, quite wrong.

But no legislation, regardless of how encompassing, can eliminate that terrible discrimination. Worse, ENDA could usher in a scenario where discriminating against LGBT job applicants makes more sense to the bottom line. The legislation that many Americans are cheering for may become another hurdle that LGBT job seekers will have to jump in order to find employment.

Imagine two candidates vying for a job in a job market where, thanks to ENDA, the LGBT community allegedly will be free from workplace discrimination. Both applicants went to the same college. Both are capable and competent. Both look fabulous in a suit. But only one comes with an asterisk next to his name, an ominous warning label that an off-the-cuff remark might be likely to lead to a costly lawsuit. Suddenly the cost-benefit analysis shifts against LGBT applicants because employers naturally look to hire people who will not only maximize profit but minimize risk.

Not only does ENDA create a sterile culture where employers and workers can become too frightened of a lawsuit to reach even briefly from the shackles of the politically correct, but suddenly costly training seminars and stricter guidelines turn LGBT employees into liabilities. On paper they won't be hired for one reason or another, while in reality the hidden cost of ENDA is the culprit.

Here's the good news: The free market is already correcting what bureaucratic red tape cannot fix. Companies are already signaling to potential employees that they are LGBT-friendly, and it's inspiring to witness how companies worldwide already have adopted anti-discriminatory measures voluntarily. In fact, 88 percent of Fortune 500 companies already prohibit discrimination on the basis of sexual orientation through self-implemented policies.

We can thank the impersonal forces of the market for this. As economists like Thomas Sowell and Gary Becker have explained, it's too costly for employers to discriminate. Passing over a best-qualified candidate for a job because of his or her sexual orientation or gender identity means an employer is willfully giving up the value that he expected that potential employee to add to the company. By hiring the second-best candidate, the employer is inherently receiving less value in exchange for the same salary. Without the cumbersome liabilities of ENDA, employers are less likely to factor in the cost of an LGBT person's sexual orientation or gender identity. They can be focused on profits rather than LGBT status.

And here's the best part: Even if we allow that employer to let his personal preferences get in the way of the economic decision that he faces, we can add insult to injury by way of competition. A second employer in the same industry will employ the overlooked candidate (who still looks fabulous in a suit), getting more bang for his buck and thereby outperforming the first employer. Competitive markets have a built-in habit of diminishing discrimination.

The LGBT-friendly attitude of the market is even making an impact internationally. After passing incredibly anti-LGBT policies, Russia still allowed Coca-Cola, a well-known LGBT-friendly company that gets a perfect score on the Human Rights Campaign's "Buyer's Guide," to sponsor the Winter Olympics in Sochi. Instead of getting bullied by Russian legislators for their pro-LGBT stance, Coca-Cola posed a threat to Russia as rumors swirled that the company might protest the new anti-LGBT laws. On the flip side, there is little evidence of legislation being successful in invoking the same proactive attitude.

So what's an LGBT person to do? Resources like the "Buyer's Guide" from HRC are a great start in nudging companies in the right direction. Other organizations should serve as watchdogs, praising companies who embrace LGBT employees and shaming those who don't.

Support for ENDA (68 percent among registered voters) is comforting in that it signals a shift in Americans' perception of the LGBT community. Support for the legislation is so broad because more and more people are backing LGBT rights. Kudos, America! But when a popular piece of legislation ends up putting LGBT job seekers at a disadvantage, it's crucial that our knee-jerk support doesn't cause the equality movement to take one step forward and two steps back.

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