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The Unintended Consequences of Employer Credit Check Bans for Labor Markets

Author

Listed:
  • Kristle Romero Cortes
  • Murat Tasci

    (Federal Reserve Bank of Cleveland)

  • Andrew Glover

Abstract

Over the last decade, 11 states have restricted employers? access to the credit reports of job applicants. We document a significant decline in county-level vacancies after these laws were enacted: Job postings fall by 5.5 percent in affected occupations relative to exempt occupations in the same county and the same occupation nationwide. Cross-sectional heterogeneity in the estimated effects suggests that employers use credit reports as signals: Vacancies fall more in counties with a large share of subprime residents, while they fall less in occupations with other commonly available signals.

Suggested Citation

  • Kristle Romero Cortes & Murat Tasci & Andrew Glover, 2019. "The Unintended Consequences of Employer Credit Check Bans for Labor Markets," Working Papers 190500, Federal Reserve Bank of Cleveland, revised 25 Feb 2019.
  • Handle: RePEc:fip:fedcwq:190500
    DOI: 10.26509/frbc-wp-201905
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    References listed on IDEAS

    as
    1. Marianne Bertrand & Sendhil Mullainathan, 1999. "Is There a Discretion in Wage Setting? A Test Using Takeover Legislation," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 535-554, Autumn.
    2. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2013. "Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1123-1167.
    3. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    4. Kyle Herkenhoff, 2014. "The Impact of Consumer Credit Access on Unemployment," 2014 Meeting Papers 448, Society for Economic Dynamics.
    5. Marieke Bos & Emily Breza & Andres Liberman, 2018. "The Labor Market Effects of Credit Market Information," Review of Financial Studies, Society for Financial Studies, vol. 31(6), pages 2005-2037.
    6. Tomaz Cajner & David Ratner, 2016. "A Cautionary Note on the Help Wanted Online Data," FEDS Notes 2016-06-23, Board of Governors of the Federal Reserve System (U.S.).
    7. Amanda Agan & Sonja Starr, 2016. "Ban the Box, Criminal Records, and Statistical Discrimination: A Field Experiment," Natural Field Experiments 00539, The Field Experiments Website.
    8. Paul Goldsmith-Pinkham & Will Dobbie & Neale Mahoney & Jae Song, 2016. "Bad credit, no problem? Credit and labor market consequences of bad credit reports," Staff Reports 795, Federal Reserve Bank of New York, revised 01 May 2017.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    vacancies; credit score; credit check;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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