The role of occupational skill sets in the digital transformation: how IT progress shapes returns to specialization and social skills

Abstract

Workers’ occupational skill sets play a crucial role in successfully handling digital transformation. We investigate whether and how different types of occupational skill sets benefit from digital transformation. We theoretically and empirically analyze wage returns of workers in occupations with more or less specialized skill sets and with more or less social skills when IT increases in their industry. Applying natural language processing methods to the texts of occupational training curricula, we develop measures for occupational specialization and social skills. We use vocational education and training curricula from Switzerland because they cover approx. two-thirds of the working population. Using curricula, industry-level IT data and individual-level administrative wage data, our individual fixed-effects analyses show that IT progress leads to higher wage returns for workers in highly specialized occupations but not for workers in more general occupations. In addition, we find that high levels of social skills cannot make up for this difference when IT advances. However, our results indicate that for workers with high specialization, a combination with high social skills generates additional benefits when IT advances. Overall, our results suggest that, contrary to typical assumptions in educational policy debates, workers with specialized occupational skill sets—possibly in combination with high social skills—appear to be the ones who are particularly well prepared to cope with digital transformation.