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The digital skill premium: Evidence from job vacancy data

Author

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  • Garcia-Lazaro, Aida
  • Mendez-Astudillo, Jorge
  • Lattanzio, Susan
  • Larkin, Charles
  • Newnes, Linda

Abstract

This paper examines the relationship between digital skills demand and posted wages in the UK using novel vacancy data. Digital skills — classified into basic, intermediate, and advanced using an XGBoost model — are linked to significant wage premiums. Within occupations, they are associated with 5.8% higher wages, with advanced and intermediate skills increasing wages by up to 8.9% when listed in job postings. Each additional digital skill increases wages by 1%, rising to 1.6% for advanced and intermediate skills. Artificial intelligence (AI) and cybersecurity skills yield particularly high returns, increasing wages by 8.6%–9.7% when listed and by 4.8%–5.4% per additional skill.

Suggested Citation

  • Garcia-Lazaro, Aida & Mendez-Astudillo, Jorge & Lattanzio, Susan & Larkin, Charles & Newnes, Linda, 2025. "The digital skill premium: Evidence from job vacancy data," Economics Letters, Elsevier, vol. 250(C).
    • Handle: RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001314
    DOI: 10.1016/j.econlet.2025.112294
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    Cited by:

    1. Soares Martins Neto, Antonio & Liu, Yan & Khunara, Saloni & Porras Lopez, Juan Manuel, 2026. "Click, Code, Earn : The Returns to Digital Skills," Policy Research Working Paper Series 11313, The World Bank.
    2. Adele Whelan & Brosnan, Luke & McGuinness, Seamus, 2026. "Squandered skills? Bridging the digital gender skills gap for inclusive growth in Ireland – A comparative European perspective," Research Series, Economic and Social Research Institute (ESRI), number JR15.
    3. Tomáš Oleš, 2026. "In-demand skills: a shield against automation—evidence from online job vacancies," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 60(1), pages 1-56, December.
    4. Nebiler, Metin & Park, Kyunglin, 2026. "The Effects of Digital Literacy on Wages in Europe and Central Asia," Policy Research Working Paper Series 11308, The World Bank.
    5. Fabian Stephany & Ole Teutloff & Angelo Leone, 2026. "AI Skills Improve Job Prospects: Causal Evidence from a Hiring Experiment," Papers 2601.13286, arXiv.org, revised Mar 2026.

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    More about this item

    Keywords

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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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