Monetary policy and the racial wage gap

TL;DR

This paper investigates how monetary policy shocks influence wage inequality and racial disparities in the US, finding limited evidence of direct effects on the racial wage gap but some impact on between-group inequalities post-2008.

Contribution

It provides new insights into the relationship between monetary policy and wage inequality, emphasizing the role of racial disparities and the timing of policy impacts.

Findings

Racial disparities account for 12% of total wage inequality.

No strong evidence links monetary policy to the racial wage gap.

Accommodative monetary policy increases between-group wage inequality after 2008.

Abstract

This paper aims to clarify the relationship between monetary policy shocks and wage inequality. We emphasize the relevance of within and between wage group inequalities in explaining total wage inequality in the United States. Relying on the quarterly data for the period 2000-2020, our analysis shows that racial disparities explain 12\% of observed total wage inequality. Subsequently, we examine the role of monetary policy in wage inequality. We do not find compelling evidence that shows that monetary policy plays a role in exacerbating the racial wage gap. However, there is evidence that accommodative monetary policy plays a role in magnifying between group wage inequalities but the impact occurs after 2008.