IDEAS home Printed from https://ideas.repec.org/p/ecl/harjfk/16-008.html
   My bibliography  Save this paper

"No More Credit Score": Emplyer Credit Check Bans and Signal Substitution

Author

Listed:
  • Clifford, Robert

    (Federal Reserve Bank of Boston)

  • Shoag, Daniel

    (Harvard University)

Abstract

In the past decade, most states have banned or have considered banning the use of credit checks in hiring decisions, a screening tool that is widely used by employers. Using new Equifax data on employer credit checks, the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, and the LEHD Origin-Destination Employment data, we show that these bans increased employment of residents in the lowest credit score areas. The largest gains occurred in higher- paying jobs and in the government-sector. At the same time, using a large database of job postings, we show that employers increased their demands for other signals of applicants' job performance, like education and experience. On net, the changes induced by these bans generate relatively worse outcomes for those with mid-to-low credit scores, for those under 22 years old, and for Blacks, group commonly thought to benefit from such legislation.

Suggested Citation

  • Clifford, Robert & Shoag, Daniel, 2016. ""No More Credit Score": Emplyer Credit Check Bans and Signal Substitution," Working Paper Series 16-008, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:16-008
    as

    Download full text from publisher

    File URL: https://research.hks.harvard.edu/publications/getFile.aspx?Id=1414
    Download Restriction: no

    References listed on IDEAS

    as
    1. Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2015. "Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?," Working Paper Series rwp15-013, Harvard University, John F. Kennedy School of Government.
    2. Abigail Wozniak, 2015. "Discrimination and the Effects of Drug Testing on Black Employment," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 548-566, July.
    3. Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2016. "Downskilling: changes in employer skill requirements over the business cycle," Labour Economics, Elsevier, vol. 41(C), pages 333-347.
    4. Holzer, Harry J & Raphael, Steven & Stoll, Michael A, 2006. "Perceived Criminality, Criminal Background Checks, and the Racial Hiring Practices of Employers," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 451-480, October.
    5. Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2015. "Upskilling: do employers demand greater skill when skilled workers are plentiful?," Working Papers 14-17, Federal Reserve Bank of Boston.
    6. Matthew R. Graham & Mark J. Kutzbach & Brian McKenzie, 2014. "Design Comparison of LODES and ACS Commuting Data Products," Working Papers 14-38, Center for Economic Studies, U.S. Census Bureau.
    7. David H. Autor & David Scarborough, 2008. "Does Job Testing Harm Minority Workers? Evidence from Retail Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 219-277.
    8. Donghoon Lee & Wilbert Van der Klaauw, 2010. "An introduction to the FRBNY Consumer Credit Panel," Staff Reports 479, Federal Reserve Bank of New York.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James C. Cox & Daniel Kreisman & Susan Dynarski, 2018. "Designed to Fail: Effects of the Default Option and Information Complexity on Student Loan Repayment," NBER Working Papers 25258, National Bureau of Economic Research, Inc.
    2. repec:kap:jcopol:v:42:y:2019:i:2:d:10.1007_s10603-019-9407-6 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:16-008. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/ksharus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.