Working Paper

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

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 rates; credit check; credit scores;

JEL Classification: J08; J23; J78;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2016-11-10

Number: 16-25R2

Note: This paper was originally published in November of 2016 and a revision was published in October of 2017. This is the second revision of the paper.