6. Returns to ICT skills

Did you know?

Workers in jobs that are 10% more ICT-intensive than the average job may earn hourly wages that are up to 4% higher.

Digital transformation is changing the ways in which people live and transforming workplaces and the nature of jobs. Workers increasingly need to perform tasks that require information and communication technology (ICT) skills. Wages reflect workers’ overall skill endowment including but not limited to ICT skills, as these lead to better performance on the job and increased firm performance.

A new indicator using information on the tasks workers perform on the job shows that the ICT task intensity of any type of job varies substantially across countries. On average, workers in Nordic countries and the Netherlands perform jobs that have a higher ICT-related task content than jobs in other countries.

ICT skills are in high demand and – all things being equal (including education and other workers’ skills) – the higher the ICT task intensity of jobs, the higher the hourly wage earned. Estimates suggest that the pay-off for working in ICT task-intensive jobs varies widely across countries. In Korea and the United States, workers in jobs requiring 10% higher ICT task intensity than the country average earn hourly wages that are more than 3.5% higher. Conversely, workers in Israel and Turkey enjoy relatively lower returns on ICT task-intensive jobs (i.e. only about 1%). Returns on ICT task-intensive jobs depend on many factors including a country’s supply of and demand for ICT skills, and its wage structure.

However, ICT skills alone are insufficient to thrive in the digital economy. Analysis suggests that workers need other competences, in particular management and communication (M&C) skills, and that ICT and M&C skills are highly complementary. This is confirmed by the extra rewards workers enjoy when ICT and M&C tasks are performed together as part of the same job. For example, a 10% increase in the M&C task content of jobs at the country mean translates into hourly wages that are 0.6% (Belgium) to 2.1% (Germany) higher, and adds another 0.3%, on average, to hourly wages in jobs that are ICT task-intensive. In the United Kingdom, this extra 1.4% ICT-bonus doubles the labour market returns on M&C tasks. The Russian Federation seems to be the only exception in the sample, as M&C skills do not provide an extra wage bonus when coupled with ICT skills.

Definitions

ICT task-intensive jobs are jobs that have a 10% higher ICT task intensity than the average job in the country. Average returns on M&C tasks are calculated at the country mean, keeping all other variables (including education and skills-related ones) constant.

Measurability

Indicators of ICT task intensity and the Management and Communication (M&C) task intensity of jobs rely on exploratory state-of-the-art factor analysis and reflect the extent to which workers perform those tasks on the job. The ICT indicator relies on responses to 11 items on the OECD Programme for International Assessment of Adult Competencies (PIAAC) ranging from simple use of the Internet, to the use of Word or Excel software, or use of a programming language. The M&C indicator relies on five items ranging from negotiation tasks to planning the tasks of other workers, as well as advising and instructing others. The detailed methodology can be found in Grundke et al. (2017). Labour market returns on task intensities are based on OLS wage regressions (Mincer equations) using data from PIAAC. Estimates rely on the log of hourly wages as dependent variable and on a number of individual-related control variables including age, years of education, gender and the other skill measurements, as well as industry dummy variables as regressors. See Grundke et al. (forthcoming) for details.