This paper reviews empirical research on finance and labour markets. Preliminary themes in the literature follow. Finance may interact with labour market institutions to jointly determine labour outcomes. Highly leveraged firms show greater employment volatility during cyclical fluctuations, and leverage strengthens firm bargaining power in labour negotiations. Bank deregulation may have mixed impacts on labour depending upon the state of bank regulations and labour markets. Leveraged buyouts tend to dampen acquired firm job growth as they pursue labour productivity gains. The shareholder value movement may contribute to short-termism among corporate managers, which can divert funds away from firm capital accumulation toward financial markets, crowd out productive investment and fuel unemployment. Declining wage shares in OECD countries may be driven in part by financial globalisation. The financial sector contributes to rising concentration near the top of the income distribution. Finance is linked to increased reallocation of labour, which may either enhance or impede productivity growth. Finally, there is limited evidence that rising interest rate environments and homeowners with mortgage balances that exceed their home’s value may reduce labour mobility rate.
Keywords: unemployment, labour mobility, wages, wage differential, capital structure, financial regulation, inequality, employment, Financial integration, deregulation, corporate finance, bank lending