Monetary Policy Under Labor Market Power

By Anastasia Burya, Rui Mano, Yannick Timmer, Anke Weber

July 1, 2022

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Anastasia Burya, Rui Mano, Yannick Timmer, and Anke Weber. Monetary Policy Under Labor Market Power, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using the near universe of online vacancy postings in the U.S., we study the interaction between labor market power and monetary policy. We show empirically that labor market power amplifies the labor demand effects of monetary policy, while not disproportionately affecting wage growth. A search and matching model in which firms can attract workers by either offering higher wages or posting more vacancies can rationalize these findings. We also find that vacancy postings that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. Our results help explain the “wageless” recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, especially for the low-skilled, who saw stagnant wages but a robust decline in unemployment.

Subject: Employment, Labor, Labor demand, Labor markets, Labor share, Unemployment rate, Wages

Keywords: Employment, Global, Labor demand, Labor demand effects of monetary policy, Labor market power, Labor markets, Labor share, Monetary Policy, Monetary policy shock, Technology skill, Unemployment rate, Vacancies, Vacancy posting, Wage Phillips curve, Wages

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/128
Stock No:

WPIEA2022128
ISBN:

9798400211812
ISSN:

1018-5941

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