Information Technology and Learning On-the-Job

Innovation and Economic Growth

Article Snapshot

Author(s)

James Bessen

Source

Boston University School of Law, Law and Economics Research Paper No. 16-47, November, 2016

Summary

Technology affects wages when workers learn skills on the job. Data shows that workers who use information technology (IT) at work have wage growth about 2% greater than non-IT workers. Workers with and without college degrees benefit, but more with college degrees use IT.

Policy Relevance

More workers with college degrees use IT. Their wages grow faster, contributing to income inequality.

Main Points

  • Ordinarily, for all workers, wages increase with a worker's job tenure; wages are about 2.5% higher for each additional year of tenure.
     
  • Firms invest about $800 per year per user in computers and related hardware, and about $2970 in software per Internet user; also, firms invest roughly $500 per IT user per year in learning IT skills, mostly in the form of informal on-the-job training.
     
  • The wages of workers who use IT rise from 1.3% to 2.6% per year; this effect has persisted since 1989.
     
  • The evidence does not show that younger or better-educated workers are better able to learn new IT skills; older and less educated workers are equally able to realize gains when they work with IT.
     
  • 39% more college graduates than high school graduates are IT users; the increase in IT workers’ wages with experience could account for most of the gap in earnings between high school and college graduates, meaning that on-the-job learning contributes significantly to wage inequality.
     
  • Skills acquired through formal schooling are less important than skills learned on the job; workers without a college diploma benefit as much as those with college degrees when they use IT.
     
  • One theory says that inequality results because IT raises the demand for college graduates; however, perhaps it is more significant that more college graduates work with IT, so their wages rise faster than those of other workers.
     
  • Spending on IT surged during the 1990s and then fell, so some suggest that productivity gains from using IT had fallen; however, the wages of workers using IT continued to rise, suggesting that their productivity is improving.
     

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