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The Shelf Life of Incumbent Workers during Accelerating Technological Change: Evidence from a Training Regulation Reform

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  • Janssen, Simon

    (Institute for Employment Research (IAB), Nuremberg)

  • Mohrenweiser, Jens

    (Bournemouth University)

Abstract

In periods of accelerating technological change, incumbent workers must continuously update their skills to remain productive. In contrast, high school or college graduates recently entering the labor market often have the most up-to-date skills. We investigate how incumbent workers' careers respond to the increasing labor supply of graduates with more technologically advanced IT skills during a period of accelerating technological change. We identify a supply shock of more technologically advanced IT-skilled graduates by exploiting a reform of a German training regulation, a reform mandating all new apprentices in a large manufacturing occupation to acquire in-depth IT skills. We use a difference-in-differences approach to analyze how this supply shock of IT-skilled workers affected the careers of incumbent workers. The results show that even young incumbents experienced long-lasting earnings losses in the form of lower wage growth after the IT-skilled graduates entered the labor market. A detailed analysis of the mechanisms suggests that incumbents on average forwent promotions and technologically advanced IT-skilled graduates crowded incumbents out of their occupation. However, despite losing their occupation, incumbents experienced relatively little unemployment during the transition period following the supply shock and on average resumed stable careers in other occupations and sectors.

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  • Janssen, Simon & Mohrenweiser, Jens, 2018. "The Shelf Life of Incumbent Workers during Accelerating Technological Change: Evidence from a Training Regulation Reform," IZA Discussion Papers 11312, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11312
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    2. Steffen Mueller & Georg Neuschaeffer, 2021. "Worker Participation in Decision‐making, Worker Sorting, and Firm Performance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(4), pages 436-478, October.
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    4. Fabienne Kiener & Ann-Sophie Gnehm & Simon Clematide & Uschi Backes-Gellner, 2019. "IT skills in vocational training curricula and labour market outcomes," Economics of Education Working Paper Series 0159, University of Zurich, Department of Business Administration (IBW), revised Sep 2022.
    5. David Sloan & Alan C. Mikkelson & Sebastian Vaduva, 2020. "The Importance of Mentorship in Diminishing Workaholism 1030 and Increasing Heavy Work Investment: Evidence from the United States," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 22(Special 1), pages 1030-1030, November.
    6. Arntz, Melanie & Gregory, Terry & Zierahn, Ulrich, 2019. "Digitalization and the future of work: Macroeconomic consequences," ZEW Discussion Papers 19-024, ZEW - Leibniz Centre for European Economic Research.
    7. Christian Eggenberger & Simon Janssen & Uschi Backes-Gellner, 2018. "Modernization of Vocational Training Curricula and Technology Adoption in Firms: A Descriptive Analysis with German Data," Economics of Education Working Paper Series 0150, University of Zurich, Department of Business Administration (IBW).

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    More about this item

    Keywords

    skill-biased technological change; wage adjustments; supply shock; apprenticeship;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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