Information Technology Skills and Labor Market Outcomes for Workers

Abstract

Job erosion is a major concern globally, especially given the COVID-19 pandemic. Unemployment and low wages remain pressing societal challenges in the wake of increased automation, more so for traditionally-disadvantaged groups in the labor market, such as women, minorities, and the elderly. However, workers who possess relevant IT skills might have an edge in an increasingly digital economy. In this study, we examine the role of IT skills in labor market outcomes for workers. We leverage a household IT use survey from an emerging economy that captures detailed, individual-level data on IT skills and IT use, which are also integrated with household labor force survey data on workers’ wages, occupations, and industries between 2007–2015. We find that basic IT skills increase employment probability, and these employment effects can be explained by both increased labor force participation and a higher probability of transitioning from unemployment to employment, after accounting for the decision to participate in the workforce. Advanced IT skills are not significantly associated with higher employment, conditioning on basic IT skills. However, having advanced IT skills helps workers to earn higher wages and incrementally increases the probability that they are employed in higher-paid jobs. Interestingly, the effects of basic IT skills on employment are significantly larger for the female and older workforce that typically has a higher preference for flexible work options. Additionally, IT skills complement occupations that have a higher share of non-routine tasks that cannot be performed by pre-defined rules. These results emphasize the importance of providing necessary IT access and basic IT training to traditionally socially disadvantaged groups to reduce the IT skills gap and close the digital divide. We contribute to the literature by providing evidence on the role of different IT skills in the entire labor force across multiple occupations and demographics, going beyond IT professionals and employed workers who have predominantly been studied in the IS literature. We discuss implications for the future of work and education and public policy for designing IT training policies for workers, students, and organizations to stimulate employment with higher wages, particularly in developing economies and for traditionally-disadvantaged segments of the workforce, such as women and the elderly.

Keywords: IT skills, General-purpose skills, Employment, Labor force participation, Wages