Structural Transformation and the Rise of Information Technology

Has the emergence of information technology changed the structure of employment and earnings in the US? We propose a new index of occupation-level IT intensity and document several long-term changes in the occupational landscape over the past decades. Using Census micro-data between 1970 and 2015, we show that: (i) the share of workers in IT-intensive jobs has expanded significantly, with little or no pause; (ii) IT jobs enjoy a large and growing earnings premium, even after controlling for general task requirements (e.g., cognitive, non-routine); and (iii) the rise of the IT employment share is closely associated with declines in the manufacturing employment share. Although the earnings premia for college-educated and high cognitive/non-routine skilled workers have declined in the aggregate since 2000, we show that they have continued growing in IT jobs. We subsequently introduce an equilibrium model of occupational sorting based on comparative advantage between IT and non-IT jobs to quantify the contribution of IT jobs towards accelerating the pace of structural transformation. Our results suggest that technological growth among IT jobs has played a major role in accounting for the surge in high tech service labor productivity since 1980.