NorthStar is pleased to announce the publication of our newest piece of thought leadership, The Investor Case for Fair Chance Employment, authored by Mari Schwartzer, our Director of Shareholder Activism and Engagement with support by from Tenzing Tashishar, Investment Research Analyst, and Whitney Nguyen, Director of Impact Research. This report builds upon our 2018 paper on prison labor, and aims to detail our research on fair chance employment along with our related strategy on company engagement. In laying out our argument for fair chance employment as a solution to certain company and economy-wide problems, we urge other shareholders to support our work.

One in three Americans has been directly affected by the criminal legal system in the United States, meaning that they have conviction and/or incarceration records. Despite the ubiquity of having a record, employers have long been wary of hiring people with such a history. For example, a Bureau of Justice study found that only 12.5% of U.S. employers were willing to consider hiring a person convicted of a felony[1], which leads to an outsized burden of unemployment. The unemployment rate for people with criminal records is over 27%, higher than the total U.S. unemployment rate during any historical period, including the Great Depression[2] and the COVID-19 pandemic. However, racial and gender bias heighten this burden — one study found that formerly incarcerated Black women had the highest unemployment rate at 43.6%.[3]

The widespread bias against people with criminal records generates economy-wide risks by creating fragile financial situations for these individuals and their families, which also affects the cohesion of communities and, in turn, the long-term value of companies that rely upon those communities for filling jobs or its customer base. Combined with research predicting a dramatic shortage of skilled labor, potentially resulting in 2.1 million manufacturing jobs going unfilled by 2030[4], corporations face various oncoming potential risks related to labor shortages, discrimination lawsuits and diminished brand name, and risk to company value. However, studies have found a potential solution for these risks: proactive recruitment of formerly incarcerated people, otherwise known as “fair chance employment.”

Through nearly 2 years of research, including interviews with expert advisors from the nonprofit, for-profit, and directly-affected communities, NorthStar’s new report presents a series of best practice actions that companies should take to mitigate risk by expanding their hiring programs to proactively recruit people with criminal records. Also addressing considerations of hiring liability, examples of success, and pitfalls to avoid, The Investor Case for Fair Chance Employment answers questions and lays the groundwork for why investors should support NorthStar’s shareholder proposals on the proxy this coming spring.

[1] https://wbhm.org/2014/life-after-prison-ex-felons-often-struggle-to-find-a-job/

[2] https://www.prisonpolicy.org/reports/outofwork.html

[3] https://iei.ncsu.edu/2023/05/22/the-employment-of-justice-involved-persons/#:~:text=In%20this%20same%20study%2C%20they,the%20general%20population%20(6.4%25)

[4] https://www2.deloitte.com/us/en/insights/industry/manufacturing/manufacturing-industry-diversity.html