Job Displacement and Financial Outcomes

Using two proprietary datasets on earnings and credit outcomes, this paper finds that both high- and low-earners take a significant and persistent hit to income after job displacement. But these losses only translate into worse credit conditions — higher credit card utilization, lower FICO scores, and a pick up in the rate of card accounts that are delinquent or over limit — among low-earners. We observe no negative implications among higher income households, providing novel empirical evidence of the economically disparate impact of job loss.

Aaronson, Daniel and Agarwal, Sumit and Hotchkiss, Julie L. and Kelley, Taylor, Job Displacement and Financial Outcomes (November 1, 2018). Available at SSRN: https://ssrn.com/abstract=3305169 or http://dx.doi.org/10.2139/ssrn.3305169