A young man with dark hair and a dark beard sits at a wooden desk across from a short-haired woman. The woman is seen from behind; she is holding and examining a paper covers with small type. Next to her is an open laptop with a screen showing a list with information in several columns. The man sits with his hands folded on top of the desk and looks eager.
Slightly over a third of businesses would hire workers with criminal records, according to a recent study. However, that percentage rises when other factors are added. — Getty Images/mixetto

More businesses are willing to take a chance on hiring formerly incarcerated workers. According to Indeed.com's economic research arm, the Hiring Lab, “In May 2022, 2.5% of US job postings on Indeed advertised fair chance hiring, up from 1.9% in May 2019.” The data suggests that more employers are willing to give formerly incarcerated individuals a second chance. However, business owners and hiring managers still have risk and productivity concerns.

A new study published in The Quarterly Journal of Economics (QJE) shows what factors increase the willingness of entrepreneurs to hire workers with criminal records (WCs). Below, we review the findings of this report to provide takeaways for small businesses wanting to expand their applicant base.

Addressing the underlying reasons for criminal background checks

Business owners and hiring managers worry about the risks to their businesses due to theft or customer safety. They also express productivity concerns. Accordingly, companies may use criminal background checks to weed out applicants they find less desirable. Yet the QJE study found that 39% of businesses would work with WCs “without additional incentives or conditions.”

This figure increases to around 45% for non–customer-facing roles and 51% for positions without access to high-value inventory. A tight labor market also impacts hiring decisions, with 68% of those surveyed saying they’d consider someone with a criminal record if they had trouble filling a position on a hiring platform.

The research revealed that demand increased when hiring platforms:

  • Offered crime and safety insurance.
  • Required applicants to complete one prior job successfully.
  • Limited the candidate pool to those without an arrest or conviction within the past year.
  • Provided performance data about WC vs non-WC applicants.

[Read more: Could Second Chance Hiring Ease Your Hiring Challenges?]

Reducing hiring manager bias

Giving hiring managers objective WC performance data improved demand for workers with a criminal record “by about six percentage points.” The QJE study also compared “first-job performance ratings” for qualified WCs and non-WCs. It found that workers with criminal records “modestly outperform” other employees in their first jobs.

In May 2022, 2.5% of US job postings on Indeed advertised fair chance hiring, up from 1.9% in May 2019.

AnnElizabeth Konkel, Indeed Hiring Lab

Likewise, research published in the IZA Journal of Labor Policy found that “employees with a criminal record have a much longer tenure and are less likely to quit their jobs voluntarily than other workers.” Additionally, the data showed “that in certain jobs, employees with a criminal record are no more likely than those without a record to leave their job involuntarily or for reasons of misconduct.”

A Society for Human Resource Management (SHRM) report noted that more than 80% of business leaders and human resource (HR) professionals “believe workers with criminal records perform their jobs just as well as or better than workers without criminal records.” Factors influencing hiring decisions include a desire to select the best candidate for the job (regardless of criminal background), wanting to provide second chances, and making their community a better place.

Key takeaways

Experts estimate the unemployment rate will be around 4% in 2023, suggesting that the labor pool will remain tight. However, Science reported that almost half of “unemployed US men have a criminal conviction by age 35,” highlighting an underutilized labor pool. Second chance hiring can address the worker shortage. Moreover, hiring platforms can improve the second chance hiring rate by providing incentives, such as a modest crime and safety insurance policy.

But employers will need to overcome barriers preventing them from employing people with a criminal background. Small business owners should take steps internally to select the correct positions for WCs. Start by bringing your managers or department leaders together to get concerns out in the open. Then look for ways to ensure your company, candidates, and managers benefit from second chance hiring.

Use these tips for improving your process:

  • Provide objective data to combat potential bias against WCs and identify concerns about employment.
  • Work with hiring managers to explore suitable job roles and potential risks. Consider changes that will lessen threats or liabilities.
  • Check out our guide to second chance hiring programs and tax credits to find ways to lower the costs and risks of hiring WCs.
  • Use search terms like “fair chance,” “no background check,” or “felon friendly” in your job posting.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published September 23, 2022