Your company is sued for job discrimination. Based on the hiring of 20 employees, the plaintiff argues that only 20% of the newly hired candidates were minorities, when 28% of all applicants were minorities. To prepare for the lawsuit you need to decide if this is strong evidence that your company’s hiring practices are discriminatory. Follow these questions:
- Would you use a one-tailed or two-tailed test? Why?
- What would a Type I error be? What would a Type II error be?
- If the hypothesis is tested at the 5% significance instead of 10%, how will the power of the test be affected?
- The lawsuit is based on the hiring of 20 employees out of 214 new hires over the past 5 years. If the plaintiff used a sample of 40 hires, will the probability of avoiding Type II error increase or decrease?
- Based on the analysis you did, what your next step should be?