7.2 Skill/technology interactions
Improvements in workforce skills can support the introduction and effective use of new technologies. There is broad agreement that the adoption of new technologies has been associated with increases in the relative demand for skilled labour. At the aggregate level, associations have been found between measures of technical change, such as R&D expenditure or computerisation, and the relative demand for skilled workers. The evidence suggests that this association arises because the adoption of new technologies increases the demand for skilled workers and replaces less skilled workers. Skill availability also interacts with investment/innovation decisions. Even with substantial increases in the supply of skilled labour, over the past two decades the earnings premium for skills has risen or remained high. Thus, increases in the supply of skilled labour can induce the development of skill-complementary technologies.
The firm dynamics literature points to the differences in the productivity of firms within an industry being both marked and persistent. Productivity increases as innovative firms enter, poorly run new businesses fail, and continuing firms adjust their mix of skills and technology. Resource re-allocation from less to more productive plants within an industry, and from firm entry/exit, play an important role in aggregate MFP growth. Plants with higher levels of firm productivity have higher workplace skills. There is US evidence of different skill-technology matches amongst plants, giving rise to a growing dispersion of wages and productivity between plants within the same industry. This, in turn, is linked to different rates of technological adoption. A related set of studies provides evidence that plants adopting new technologies appear to have already employed more able workers. In particular, the evidence suggests that workers are better paid because they are abler, rather than because they are utilising newer technologies. Thus firms may be employing a more skilled workforce in order to be more advanced technologically.
Other evidence indicates that obtaining the full productivity gains from technical change, particularly from the diffusion of computer based technologies, requires substantial changes in workplace organisation. This includes flatter management structures, more team work, and performance-related pay. These changes alter the skill mix that employers require. They reduce the demand for less skilled labour for repetitive tasks, and increase the skill levels required for analysing data and for worker autonomy and responsibility. Firm re-organisation allows alternative combinations of skills to be drawn together to take advantage of the complementarities between human capital, information technologies and organisational change. Some commentators have suggested that rapid workplace organisation may account for a larger fraction of the productivity gains than does technological change alone.
More recently, attention has been given to the productivity effects of ICT diffusion across industries. The OECD has identified three broad groups of factors that are influencing the rate of diffusion. First, the regulatory environment affects the ability of firms to take advantage of opportunities, in particular product market competition, flexibility in the labour market, and firm entry and exit. Second, firms differ in their ability to absorb ICT, arising from the firm’s skill base and level of innovative activity. Another important source of productivity gains is the reorganisation of work practices. Spillover effects around learning from the increased use by industries of ICT also supports adoption by remaining firms. Third, large differences persist in the costs of investing in ICT across OECD countries. There also seem to be timing effects. The investments required in complementary learning and organisational change can lead to substantial lags between ICT capital investments and productivity growth in the ICT-using industries.
