System Working Paper 17-17

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

Kristle Cortés | Federal Reserve Bank of Cleveland
Andrew Glover | University of Texas at Austin
Murat Tasci | Federal Reserve Bank of Cleveland

Published June 16, 2017

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.

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