The Effect of Job Loss on Bank Account Ownership

Abstract

We estimate the effect of job loss on households’ bank account ownership using a novel assembly of data: FDIC-sponsored biennial supplements to the Current Population Survey (CPS), linked to respondents’ work history in surrounding months constructed from the basic monthly CPS. We leverage differences in the timing of unemployment spells across respondents to plausibly identify the effect of job loss. Our estimates indicate the effects of job loss are quite large in magnitude. For example, households that experienced a job loss in the months leading up to the FDIC survey are about 18 percentage points more likely to be unbanked than households that lost a job in the subsequent year. This effect is roughly three-quarters of the sample mean unbanked rate among the lower-income, renter households that we study. Job loss also leads to increased use of other transaction products and services that might substitute for a bank account, including prepaid cards, check cashing, and money orders.