Monetary Policy Under Labor Market Power

51 Pages Posted: 27 Jul 2022 Last revised: 30 Sep 2022

See all articles by Anastasia Burya

Anastasia Burya

Columbia University

Rui C. Mano

International Monetary Fund

Yannick Timmer

International Monetary Fund (IMF) - Research Department; Board of Governors of the Federal Reserve System

Anke Weber

International Monetary Fund (IMF)

Date Written: July 2022

Abstract

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.

Keywords: Labor market power, Monetary Policy, Vacancies, Wages, vacancy posting, wage Phillips curve, technology skill, monetary policy shock, Labor markets, Labor demand, Labor share, Unemployment rate, Global, labor demand effects of monetary policy, Employment

JEL Classification: E43, E52, J23, E24, J20, J30, J64

Suggested Citation

Burya, Anastasia and Mano, Rui C. and Timmer, Yannick and Weber, Anke, Monetary Policy Under Labor Market Power (July 2022). IMF Working Paper No. 2022/128, Available at SSRN: https://ssrn.com/abstract=4171832

Anastasia Burya (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Rui C. Mano

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://sites.google.com/site/ruimano/

Yannick Timmer

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Anke Weber

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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