ICT, the demand for heterogenous labor, and the structure of wages.
ICT, the demand for heterogenous labor, and the structure of wages.
<HTML>The rapid diffusion of information and communication technologies (ICT) in the workplace has been accompanied by vivid discussions in public and among economic scholars. In this project, the impact of ICT on the labor market was investigated with special focus on the demand for heterogeneous labor on the wage structure within and across different skill groups.</html>
One of the implications of the continuing shift towards a knowledge-based economy for the labor market is that the demand for skills and capabilities changes steadily. This feature was at the center of the analysis of the first part of this project. It analyzed how changes in the task composition of occupations have altered occupational skill requirements in West Germany between 1979 and 1999. The analysis showed that skill requirements at the workplace have increased in recent decades, owing to a shift towards analytical and interactive activities and away from cognitive and manual routine activities. The analysis also included direct evidence on how workplace computerization has contributed to this development. The literature so far cites evidence on various aggregation levels supporting the skill-biased technological change (SBTC) hypothesis. However, up to now, direct evidence on how computer technologies have changed occupational skill requirements in recent decades is scarce. The analysis in this project has closed this gap by investigating the mechanisms that induce ICT to be complementary to employees with high levels of education, thereby opening the black box that typically surrounds analyses of SBTC. The results suggest that ICT substitutes workers in performing manual and cognitive routine tasks, whereas it complements workers in performing non-routine cognitive tasks. The skill-bias in recent technological change then arises because employees with high levels of education have a comparative advantage in performing analytical and interactive activities.
The second part of the project investigated the wage impact of computer usage. The widening wage structure in most industrialized countries has often been attributed to the impact of skill-biased technological change. Yet the empirical evidence with respect to the relationship between the use of ICT and wages on the individual level is at best mixed, with most studies favoring the argument that the observed positive correlations are spurious, that is, attributable to unobserved heterogeneity. The analysis in this project contributed to the discussion on the relationship between computer use at the workplace and wages. In contrast to previous studies in this body of literature, computer usage was interpreted as a treatment and methods of treatment evaluation were applied. The validity of these methods is backed by the informational richness of the data set. Results are presented for specifications that assume homogeneous treatment effects and for specifications that allow the treatment effects to be heterogeneous across individuals. The overall conclusion of the analysis is that computer users would be worse off had they not started to work with computers. The associated wage markup amounted to about 8 percent in West Germany in 1998/99.
In a next step, this research question was extended by the aspect of organizational changes within companies. Over the past few years, there has emerged a growing awareness that in order to result in efficiency gains, the introduction of ICT in the workplace should be accompanied by appropriate organizational changes. The quantitative importance of these organizational changes has been documented in various studies on the company level. Typical features are: an increased role for teamwork and job rotation, a reduction in the number of management levels, an emphasis on continuous learning, a decentralization of responsibility within companies, and a direct involvement of employees in the decision-making process. The contribution of this project to the literature was that both organizational changes and computer usage were analyzed in a common framework using individual-level data. The study investigates whether the use of ICT and organizational changes affect wage outcomes and, hence, whether or not employers share part of the productivity gains associated with ICT use and organizational changes with their employees. The analysis also contributes to the discussion of complementarities between ICT and organizational changes. The findings show that employees working in companies that have implemented organizational changes earn significantly higher wages. This wage markup accrues to all employees within these companies, independent of whether they had been directly affected by these changes. This finding suggests that companies that change their organizational structure pay efficiency wages or compensating wage differentials. By contrast, it is unlikely that the wage markup results from the increased productivity of employees owing to the organizational change.
