Diverse professionals reaching for a corporate skyscraper, symbolizing equal opportunity.

Cracking the Code: How Elite Firms Perpetuate Inequality and What We Can Do About It

Samir D’Costa in Business & Economy December 2025 • 4 min read.

"New research reveals the hidden biases in hiring practices at top companies and offers solutions for a more equitable playing field."

For decades, the pursuit of equal opportunity has driven policy and reform in education and employment. Yet, despite progress, disparities persist, especially at the highest echelons of corporate power. Recent research sheds light on the hidden mechanisms that maintain these inequalities, particularly within elite firms.

A groundbreaking study by Soumitra Shukla, an economist at the Federal Reserve System, delves into the hiring practices of top U.S. and European multinational corporations recruiting from an elite Indian college. The findings expose a surprising truth: caste disparities in hiring don't arise from application screening, aptitude tests, or even job choices. Instead, they emerge in the final, most subjective round: the personal interview.

This article unpacks Shukla's research, revealing how seemingly innocuous criteria like 'cultural fit,' family background, and neighborhood can perpetuate inequality. We'll explore the implications of these findings and examine potential solutions for creating a more diverse and equitable workforce.

The Subtle Barriers: How "Cultural Fit" and Background Shape Hiring Decisions

Diverse professionals reaching for a corporate skyscraper, symbolizing equal opportunity.

Shukla's research reveals that the final round of interviews, often focused on assessing non-technical qualities, is where the greatest disparities occur. These interviews tend to screen for characteristics like family background, neighborhood of residence, and 'cultural fit'—factors that are plausibly weakly correlated with actual job performance but strongly tied to socioeconomic background.

The implications are profound. Employers, perhaps unconsciously, place a high value on candidates who mirror their own backgrounds and experiences. This creates a self-perpetuating cycle, where individuals from privileged backgrounds are more likely to be hired, regardless of their actual skills or potential.

The "Airplane Test": As Shukla notes, many hiring professionals endorse the 'airplane test' heuristic: 'Would I like to be stranded in an airport with this candidate?' This highlights the emphasis on personal connection and shared experiences, which can inadvertently disadvantage candidates from different backgrounds.
Cultural Fit Over Skills: Managers often prioritize cultural fit because they believe it cannot be easily taught, unlike job skills. This mindset reinforces the importance of background and personal attributes over demonstrable abilities.
Signaling Through Background: In elite, urban-educated India, caste is often signaled through background characteristics. Personal interviews risk reinforcing discrimination based on these cues, even if employers do not explicitly value caste.

This isn't just an Indian phenomenon. As Shukla points out, similar practices are common in elite U.S. colleges and corporate America, where unstructured interviews and a focus on 'fit' can perpetuate existing inequalities.

Leveling the Playing Field: Policy Recommendations for Equitable Hiring

Shukla's research offers concrete policy recommendations to address these inequalities. He proposes a hiring subsidy that eliminates the caste penalty, making elite firms indifferent between observably identical applicants from different backgrounds. This subsidy, equivalent to 4.8% of the average annual salary, would be more cost-effective than equalizing pre-college test scores or enforcing hiring quotas. By focusing on direct intervention at the point of hiring, companies can create a more diverse and equitable workforce, regardless of broader societal inequalities. The key is to acknowledge and address the subtle biases that creep into subjective evaluations, ensuring that talent and potential are the primary drivers of hiring decisions.

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Everything You Need To Know

According to Soumitra Shukla's research, where do caste disparities primarily emerge during the hiring process at elite firms?

Soumitra Shukla's research indicates that caste disparities in hiring at elite firms do not arise during the initial application screening, aptitude tests, or job choices. Instead, these disparities surface in the final, more subjective round of interviews, specifically the personal interview. This is where factors like 'cultural fit,' family background, and neighborhood play a significant, often unconscious, role in the hiring decisions.

What role does 'cultural fit' play in perpetuating inequality in hiring, and why do managers prioritize it?

'Cultural fit' plays a significant role in perpetuating inequality because it often leads employers to unconsciously favor candidates who mirror their own backgrounds and experiences. Managers prioritize 'cultural fit' because they often believe it is difficult to teach, unlike specific job skills. This emphasis on shared experiences and personal connection can inadvertently disadvantage candidates from different socioeconomic backgrounds, reinforcing existing inequalities.

What is the 'airplane test' and how does it contribute to biases in hiring?

The 'airplane test' is a heuristic used by hiring professionals, encapsulated by the question: 'Would I like to be stranded in an airport with this candidate?' This highlights the emphasis on personal connection and shared experiences during the interview process. It contributes to biases because it favors candidates with whom the interviewer feels a personal affinity, often those from similar backgrounds, which can inadvertently disadvantage candidates from different socioeconomic or cultural backgrounds, regardless of their actual job qualifications.

What specific policy recommendation does Soumitra Shukla propose to address inequalities in hiring at elite firms?

Soumitra Shukla proposes a hiring subsidy to eliminate the caste penalty, which would make elite firms indifferent between observably identical applicants from different backgrounds. This subsidy, equivalent to 4.8% of the average annual salary, would directly intervene at the point of hiring to create a more diverse and equitable workforce. This approach is deemed more cost-effective than other measures like equalizing pre-college test scores or enforcing hiring quotas because it directly addresses the biases in subjective evaluations.

How are the hiring practices described, potentially applicable beyond the context of caste in India, and what are the broader implications?

The hiring practices described have broader implications beyond caste in India, as similar biases related to 'cultural fit' and background also occur in elite U.S. colleges and corporate America. Unstructured interviews and a focus on 'fit' can perpetuate existing inequalities across various dimensions, including socioeconomic status, race, and gender. The implications are profound because these practices reinforce a cycle where individuals from privileged backgrounds are more likely to be hired, regardless of their actual skills or potential, thus hindering social mobility and perpetuating inequality at the highest levels of corporate power.