We develop an equilibrium model to study the dynamic adjustment of a frictional labor market to aggregate shifts in the demand and supply of a job amenity. When preferences for the amenity are heterogeneous in the population, and its availability is heterogeneous across jobs, labor reallocation ensues. The defining traits of such reallocation (a rise in vacancies and job-to-job transitions, a fall in matching efficiency and in relative wages of jobs supplying the amenity) closely resemble those observed in the post-pandemic U.S. labor market in the aftermath of the shift to remote work. A version of the model calibrated to the U.S. experience matches the data well with shocks of plausible magnitude. Cross-sectional and survey data from various sources offer support for this mechanism.

Over the last four decades, employment composition has shifted towards large firms in the US. This has occurred amidst a decline in employer-to-employer transitions. A natural question is, are workers in large firms climbing job ladders internally rather than externally? Using data from various supplements of the Current Population Survey, I find evidence of the prevalence of internal job ladders within large firms. I document that job stayers in large firms, relative to small ones, realize a larger annual pay growth and a higher probability of internal job switching. Accounting for internal job ladders amplifies labor market dynamism and offsets part of the decline in external employer-to-employer switching rates. At the same time, there has been a decreasing trend in the rate of internal job switching, suggesting that the forces affecting declining external dynamism could have also had implications on internal job ladders. I hypothesize that the decline in internal dynamism could be driven by the firm's endogenous response to decreasing labor market competition.

This paper documents the change in nominal wage rigidity in the US using the 1996-00 and 2008-13 panels of the Survey of Income and Program Participation (SIPP). Using the empirical methodology of Barattieri, Basu & Gottschalk (2014) to correct for measurement errors in self-reported wages, this paper finds evidence of (i) an increase in the frequency of wage adjustment among hourly job-stayers over the two periods, and (ii) conditional on wage adjustments, a higher proportion of wage cuts during the Great Recession relative to the subsequent recovery. These findings are robust when the methodology is applied to salaried workers. They can be seen in light of increasing labor market flexibility in the US over the recent decades.

Worker mobility and wages, relative to productivity, have declined in the US amid a rise in employer market power. I propose a theory of the labor market linking these trends, in which a decline in employer competition, characterized by a lower number of firms per worker, drives the decline in worker mobility and wages. The model has two main ingredients: (i) there exists a finite number of employers that differ in productivity, and (ii) employers exert market power by excluding their offers from the set of outside options faced by their employees. The combined effect of these features, in response to a decreasing number of firms per worker, is to reduce the value of workers' outside options, thereby reducing wages and worker mobility in equilibrium. Overall, the model accounts for 2/3rd of the decline in employer-to-employer transitions rate and a fifth of the decline in wages relative to productivity from the 1980s to the 2010s. I evaluate the model's key predictions using the public-use data from the Census and document that labor markets characterized by a lower number of firms per worker are associated with reduced measures of worker mobility and average wages.