Distributional consequences of technological change: Worker-level evidence

Abstract

This paper explores the employment trajectories of workers exposed to technological change. Based on individual-level panel data from the UK, we first confirm that the share of middle-skilled routine workers has declined, while non-routine jobs in both high- and low-skilled occupations have increased, consistent with country-level patterns of job polarization. Next, we zoom in on the actual transition patterns of threatened routine workers. Despite the aggregate decline in routine work, most affected workers manage to remain in the labor market during the time they are in the study: about 64% “survive” in routine work, 24% switch to other (better or worse paying) jobs, almost 10% exit routine work via retirement and only a small minority end up unemployed. Based on this finding, the final part of our analysis studies the economic implications of remaining in a digitalizing occupational environment. We rely on an original approach that specifically captures the impact of information and communication technology at the industry level on labor market outcomes and find evidence for a digital Matthew effect: while outcomes are, on average, positive, it is first and foremost non-routine workers in cognitively demanding jobs that benefit from the penetration of new technologies in the workplace. In the conclusions, we discuss if labor market polarization is a likely source of intensified political conflict.