We study recent bans on employers' use of credit reports to screen job applicants – a practice that has been popular among employers, but controversial for its perceived disparate impact on racial minorities. Exploiting geographic, temporal, and job-level variation in which workers are covered by these bans, we analyze these bans' effects in two datasets: the panel dimension of the Current Population Survey (CPS); and data aggregated from state unemployment insurance records. We find that the bans reduced job-finding rates for blacks by 7 to 16 log points, and increased subsequent separation rates for black new hires by 3 percentage points, arguably contrary to the bans' intended effects. Results for Hispanics and whites are less conclusive. We interpret these findings in a statistical discrimination model in which credit report data, more so for blacks than for other groups, send a high-precision signal relative to the precision of employers' priors.
|Original language||English (US)|
|Number of pages||49|
|State||Published - Apr 8 2016|
|Name||MIT Department of Economics Graduate Student Research Paper 16-01|
- Employment Discrimination
- Policy Analysis
Bartik, A., & Nelson, S. T. (2016). Credit Reports as Résumés: The Incidence of Pre-Employment Credit Screening. (MIT Department of Economics Graduate Student Research Paper 16-01). https://doi.org/10.2139/ssrn.2759560