A Statistical Analysis of Adverse Impact of Employer Decisions

Abstract

Federal law prohibits discrimination in employment decisions against persons 40 years old and older. This article uses data from an actual case to illustrate several methods of showing adverse impact, a legal doctrine under which only the effects of the employer's acts are at issue and not the motives with which they were done. The strengths and weaknesses of the Fisher exact test of significance, a Bayesian analysis, and a method of paired observations inspired by the Mann-Whitney-Wilcoxon statistic are assessed. One important conclusion from this analysis is that it is useful to have several different kinds of analysis bearing on the same issue. To the extent that the analyses agree, credibility is added to each.

Key Words:

• Age discrimination
• Bayesian analysis
• Cross-classified table
• Fisher's exact test
• Mann-Whitney-Wilcoxon statistic
• Reference prior