The Impact of Digitalization on Unemployment in Türkiye: Investigating the Interactive Role of Education

Digitalization has been a key part of production, improving efficiency but also raising concerns about its impact on jobs. There is no consensus in the literature on the impact of digitalization on unemployment. Some believe it will replace workers, while others argue that it can boost productivity and create new job opportunities. To enrich this discussion from a different perspective, this study aims to explore how digitalization affects the unemployment rate and the role of education in this relationship during the period 2001–2023, using the Fully Modified Ordinary Least Squares (FMOLS) technique in Türkiye. To represent digitalization, the Principal Component Analysis (PCA) technique is applied to obtain a single indicator using the variables commonly used as proxies for digitalization in the literature, namely internet usage, broadband subscription, and mobile subscription. The results of this study can be listed as follows: i) Digitalization is associated with a higher unemployment rate. ii) However, when digitalization is coupled with an increase in the level of education, its effect on employment becomes more positive, as a more educated workforce is better equipped to adapt to the demands of the digital economy, ultimately reducing unemployment. iii) A higher GDP also decreases the unemployment rate. iv) To test the robustness of the FMOLS results, Canonical Cointegrating Regression (CCR) is also applied, confirming their reliability. Based on these findings, several policy implications are discussed, and recommendations for future research in this field are provided.