The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets

44 Pages Posted: 17 Jan 2018

See all articles by Kristle Romero Cortés

Kristle Romero Cortés

UNSW Australia Business School, School of Banking and Finance

Andrew S. Glover

University of Texas at Austin

Murat Tasci

Federal Reserve Bank of Cleveland

Date Written: January 10, 2018

Abstract

Since the Great Recession, 11 states have restricted employers’ access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and credit markets, especially for subprime workers.

Keywords: unemployment rate, credit score, credit check

JEL Classification: J08, J23, J78

Suggested Citation

Cortés, Kristle Romero and Glover, Andrew S. and Tasci, Murat, The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets (January 10, 2018). FRB of Cleveland Working Paper No. WP16-25R2, Available at SSRN: https://ssrn.com/abstract=3103294

Kristle Romero Cortés

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Andrew S. Glover

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Murat Tasci (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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