Demos applauds the work of Senator Elizabeth Warren (D-MA) who today introduced The Equal Employment for All Act, legislation that would prohibit the widespread use of personal credit history in employment. The use of employment credit checks is an unjust practice that poses a serious barrier to economic security for many Americans and leads to discriminatory hiring practices against people of color and the long-term unemployed.
Demos, a national public policy organization, has conducted extensive research on the use of employment credit checks and found that poor credit is associated with household unemployment, lack of health coverage, and medical debt—factors that reflect individual bad luck and the protracted economic recovery, not an applicant’s likely job performance or financial responsibility.
Nearly half of businesses surveyed report using credit checks in hiring decisions, and it is not limited to high-level managers or those with fiduciary responsibility—many employers require credit checks for low-wage jobs and positions including retail, maintenance, delivery driving and tech support. The practice continues because it financially benefits the companies that market and sell this information to employers, with little concern for the negative impact to the economic security of those with most at stake—low and middle-income Americans struggling to find work in a tough job market.
“It makes no sense to make it harder for people to get jobs because of a system of credit reporting that has no correlation with job performance and that can be riddled with inaccuracies,” Senator Warren said. “Families have not fully recovered from the 2008 financial crisis, and too many Americans are still searching for jobs. This is about basic fairness—let people compete on the merits, not on whether they already have enough money to pay all their bills.”