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Monthly Report - Focus
Technology and good quality employment:  a shifting relationship?Technology and good quality employment:  a shifting relationship?

Technological change brings with it a change in most jobs and potentially job quality. The emergence of a new technology essentially leads to a new way of producing things with the consequent disappearance of some tasks and the appearance of others. There is also a change in the skills and knowledge required by workers. This transformation in employment affects different workers in different ways. Technology can improve job quality if it complements the work carried out and increases worker productivity.1 In other cases, technology can be disruptive and wipe out some professions, making effective active employment policies vital.

Spain’s labour market has certainly felt the impact of technological transformation. This article analyses the relationship between how technology-intensive each industry is and the quality of its employment. To explore this issue, we have divided industries into three groups according to their technological intensity. Data provided by EU KLEMS allow us to measure the stock of IT capital in each industry, defined as the total capital in computing and communication equipment, software, databases and R&D. Based on data from the LFS for Q4 2016, we have analysed the contract type (temporary or permanent) in the labour relation as this is a good proxy for job quality.2 The findings are conclusive in favour of technology: the temporary employment rate is 37% in less technology-intensive sectors, much higher than the rate of 23% found in highly technology-intensive sectors. The difference is particularly large for workers with primary qualifications (32 pp difference in the temporary nature of their employment), while it is less relevant for higher qualified workers (see the first chart).3

Innovation has accelerated over the past few years and it is therefore useful to focus on those employees who have been employed by a company for less time, since more established workers may have permanent contracts for reasons not related to the adoption of such technology. The second chart shows that workers who have been with the firm for a maximum of six months have very high temporary employment rates (87% on average). But it is revealing that the temporary employment rate falls as the industry’s technology intensity increases. This correlation is even stronger for employees who have worked for the company between 6 and 12 months, with an 11 pp difference in the temporary employment rate (see the second chart).4

In summary, the findings endorse the hypothesis that more ICT-intensive industries are generally associated with more stable labour relations and that the lower qualified workers are the ones who benefit the most in these sectors.

1. Generally, higher worker productivity is associated with higher wages and better labour conditions.

2. Job quality is a multifaceted concept and refers to other aspects of the labour relationship in addition to contract type. However, the temporary nature of employment is a good indication of quality as it is closely correlated with other variables such as involuntary part-time employment and overqualified workers.

3. These descriptive findings have been confirmed in a probit regression model for the probability of workers having a temporary contract which includes control variables for worker characteristics.

4. This difference in the temporary employment rate increases to 17 pp if we restrict our comparison to workers with primary qualifications who have been with the company for 6 to 12 months. Once again, the findings presented are coherent with those of a probit model which includes controls such as the educational attainment and age of the worker.