Socialism: test co-ops' hiring with paired fake applications, as a group, and make discrimination a loan breach at any size

Co-Authored-By: Claude Opus 5.5 <[email protected]> Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx
2026-09-26 18:47:58 -06:00
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@@ -100,6 +100,21 @@ The pilot already publishes how many jobs its co-ops create ([The Pilot, in Numb
 - **Expansions voted down.** Each co-op reports major expansion proposals and how members voted on them.
 - **Spin-offs:** how many, how they do, and the gap in pay and profit share per member between each parent and its spin-offs.
 - **Who gets hired.** Applicants and hires by gender and race, compared with the matched firms, since members who share profit have a reason to hire few people, and people like themselves.
 - **How hires heard about the job.** The share of hires who came through a member's referral rather than a public posting, and how long referred and other hires stay. Referred hires often stay longer, so referrals aren't bad in themselves. But hiring through friends and family is also the quietest way for a co-op to keep looking like its founders, and applicant counts can't see it.
 - **Who leaves during probation.** People let go or pushed out before they could join, by gender and race, pooled across co-ops. The push-out check ([No Pushing People Out](high-turnover.md#no-pushing-people-out-before-theyd-join)) looks at one co-op at a time and can't see a pattern that small.
 - **Compared with the local workforce.** Hires are compared with people doing the same work in the same county, from Census survey data, as well as with the matched firms.
 None of this sets targets. It's measured because the incentive is predictable, not because co-ops are assumed to discriminate.
 **Testing hiring directly.** Counting applicants can't show whether equally qualified people are treated alike. The standard check sends fake job applications that are identical except for a name suggesting the applicant's race or sex, and records who gets called back. The largest such study sent over 83,000 applications to entry-level jobs at 108 of the biggest American employers. About 24% got a call back within 30 days. Applicants with distinctively Black names got about 2.1 percentage points fewer calls, and the gap varied a lot between companies. Telling one company apart from the rest took up to 1,000 applications per company ([Kline, Rose and Walters](https://www.nber.org/papers/w29053)). So:
 - **Co-ops are tested as a group, never one by one.** A small co-op fills a few jobs a year, far too few to judge on its own. The pilot's outside reviewers send applications to entry-level openings at funded co-ops at random times between years three and nine. The dates aren't announced. Each opening gets one pair of applications, one with a name suggesting a Black applicant and one a white applicant, because more would stand out at a six-person co-op. Jobs that need a license are skipped unless both applications can honestly show the same one.
 - **One main measure, filed in advance.** The difference in calls back within 30 days between the Black and white names, pooled over all the testing. It's reported on its own terms, against zero, and next to the published results for big employers. Sex, Hispanic names and other comparisons are reported too, corrected for testing many things at once.
 - **What it can find.** Before filing, the reviewers count how many entry-level openings co-ops actually post, from the pilot's own payroll records, and state the smallest gap the test could detect, allowing for the fact that openings at the same co-op aren't independent. As a rough guide, if co-ops posted about 1,500 openings, the smallest gap it could reliably detect would be somewhere around 5 to 6 points, more than twice the big-employer average. If openings fall short, the result is "not settled." Either way, **a test that finds nothing doesn't show co-ops hire fairly.** It can only catch co-ops being much worse than ordinary employers.
 - **No unwilling firms.** Co-ops agree to the testing when they borrow. Conventional employers never agreed to anything, so they aren't sent fake applications, even though that would make a cleaner comparison. The co-ops' result stands next to other studies' published results instead. Before any testing, the ethics board that approves [the support lottery](pilot-spec.md#the-support-lottery) signs off, and state laws on testers are checked. Fake applications are withdrawn as soon as a co-op responds. Afterward, a sample of co-ops is asked whether they spotted the test, and the rate is published.
 - **Every opening is posted, with exceptions.** As a loan condition, co-ops post every opening publicly for at least a week, with written criteria for the job, before filling it. Payroll start dates are checked against posting dates, so a posting that closes after the new hire started doesn't count. Exempt, but counted separately: recalling laid-off members, rehiring someone within three years, union hiring halls, and aides a home care client chooses.
 - **Discrimination is a loan breach, whatever the co-op's size.** Federal job-discrimination law covers only employers with 15 or more workers ([42 U.S.C. § 2000e(b)](https://www.law.cornell.edu/uscode/text/42/2000e)), and most co-ops are smaller. Every borrower agrees not to discriminate in hiring, pay or membership. Complaints go to the civil-rights agencies where they can act, and to the bank as a possible breach where they can't.
 - **What a bad result does.** Nothing happens to any single co-op on the test alone, because the test can't single one out. If co-ops as a group show a real gap, scored interviews and outreach beyond members' own networks become a condition of every new loan, and the test is repeated.
 Spin-offs can borrow from the bank. Because they start with an established co-op behind them, they're reported separately and don't count in the pilot's main test, the same way the pilot handles businesses that aren't really new ([Guarding the Pilot](pilot-safeguards.md#relabeling-an-old-business-as-new)). That keeps them from flattering the survival numbers, and keeps a struggling low-margin spin-off from counting against the test.
@@ -21,7 +21,7 @@ An honest list of what the model hasn't solved yet, most dangerous first.
 6. **Political durability.** *(Partly answered.)* Gradual construction invites gradual repeal. [Making It Last](durability.md) builds the bank to survive a hostile government: the lending standards and the test are fixed in law, board vacancies can't freeze lending, the verdict says "not tested" rather than "failed" if the bank turns away applicants who meet its own standards (every rejection is re-scored, the line is more than 1 in 10 clear passes turned away, and the result has to be one those applicants could have changed; see [the line](durability.md#when-rejections-mean-not-tested)), and repeal can't unlock the co-ops. Still open: after the Supreme Court's 2026 ruling any president can replace the bank's board; money not yet lent can be taken back in a budget bill; the lock's bankruptcy protection depends on a federal law that can be repealed; and at pilot scale the sector has no real constituency. The 1-in-10 line is a judgment call with no benchmark behind it. The bank's law lets applicants and borrowers sue to enforce its deadlines and signed loans ([Who can go to court](durability.md#who-can-go-to-court)), but that's untested, lawsuits are slow, and if the Justice Department won't defend the law itself, the people left to defend it may not be allowed to. The Constitution probably requires that the board have the last word on each loan, so the board can overrule its staff, only in writing, by named vote and in public ([Who has the last word](durability.md#who-has-the-last-word)). Whether the credit officers can keep protection from being fired after *Slaughter* is unsettled, and a president who empties the board hands its power to the Treasury Secretary.
-7. **Growth and dilution.** *(Partly answered.)* Softened by the tenure ramp, not eliminated, and federal tax law softens it less than the founding plan expected: by default, the part of a share new members haven't reached goes to the reserve, not to other members ([How a Locked Co-op Is Taxed](taxes.md#the-tenure-ramp)). In steady state, an equal split per head still means a marginal hire must generate the average surplus to break even for incumbents. Capital-intensive expansion into lower-margin lines will face internal resistance conventional firms don't have. [When Growing Means Sharing](growth.md) makes Mondragon's answer the standard path: a lower-margin line becomes its own locked co-op, funded from the parent's reserve as a finite, voteless investment, under rules that stop it being used to push existing workers out or move money through insider deals. Still open: growth that can't be split off still dilutes, spin-offs create richer and poorer co-ops (the groups can pool profits, but don't have to), and the evidence comes from co-ops that could hire non-members, so it probably understates the problem under the lock.
+7. **Growth and dilution.** *(Partly answered.)* Softened by the tenure ramp, not eliminated, and federal tax law softens it less than the founding plan expected: by default, the part of a share new members haven't reached goes to the reserve, not to other members ([How a Locked Co-op Is Taxed](taxes.md#the-tenure-ramp)). In steady state, an equal split per head still means a marginal hire must generate the average surplus to break even for incumbents. Capital-intensive expansion into lower-margin lines will face internal resistance conventional firms don't have. [When Growing Means Sharing](growth.md) makes Mondragon's answer the standard path: a lower-margin line becomes its own locked co-op, funded from the parent's reserve as a finite, voteless investment, under rules that stop it being used to push existing workers out or move money through insider deals. Still open: growth that can't be split off still dilutes, spin-offs create richer and poorer co-ops (the groups can pool profits, but don't have to), and the evidence comes from co-ops that could hire non-members, so it probably understates the problem under the lock. Members who share profit also have a reason to hire people like themselves. The pilot tests co-ops' hiring as a group with fake paired applications ([Testing hiring directly](growth.md#5-measuring-it)). But that can only catch co-ops being much worse than ordinary employers, conventional firms aren't tested alongside them, and hiring through members' friends and family is only counted, not tested.
 8. **Who decides which sectors are "essential"?** *(Partly answered.)* Subsidy authority is price-setting power over a large chunk of the labor market, and every low-margin industry will suddenly discover it is Essential. [Who Decides What's Essential](essential-work.md) takes the choice away from people. A fixed formula decides: work qualifies only if public programs already pay for most of it and it pays badly. The money goes to workers by the hour, measured from records like Medicaid's visit logs, and states whose rates fall behind inflation lose federal Medicaid money in step. The data sources are now named: federal payment records for public money, and Census revenue, with new Census questions on a deadline and rules so status can't flip on noise. Still open: counted properly, hospitals are near the line, which would add their low-paid jobs and a great deal of cost; child care's status is undetermined until the new data exists; other work mostly paid for by families doesn't qualify; employers and owners may still capture some of the money; and it plausibly costs tens of billions of dollars a year.