Is College Education Still Enough? Explicating the Relationship between Information Technology and Human Labor

Abstract

Many believe that information technology (IT) substitutes for human labor in work processes; others believe that a college degree might protect employees from tech-related job loss. This study finds that college education may not be sufficient to prevent the substitution, and that the substitution/complementarity relationship between IT and labor depends on the education levels of the employees and the tasks to be performed. We examine the IT-labor relationship using an industry-level dataset covering 60 U.S. industries from 1998 to 2013. We adopt the elasticity of substitution and the organizational complementarity approaches to examine this substitution/complementarity relationship between IT and labor with different education levels. Our findings indicate that, since the late 1990s, workers with college education have become substitutes to IT investment, and graduate education has been increasingly required to benefit from the massive adoption of IT by U.S. industries.

Keywords: information technology, human labor, college education, IT investment, elasticity of substitution