By Melanie Arntz, Cäcilia Lipowski, Guido Neidhöfer and Ulrich Zierahn-Weilage
Technological change favors equal opportunities on the labor market
The effect of social background on professional success decreases when technological change is strong. In particular, in the 1990s in Germany, increasing computerization at the workplace led to a convergence in wages of workers from disadvantaged parental backgrounds and workers from advantaged parental backgrounds. In addition, it became easier for workers from disadvantaged backgrounds to enter occupations undergoing strong technological change, as this recent study shows.
While it is commonly acknowledged that technological change raises wage inequality between skill groups, it has been largely overlooked that technological progress also improves labor market opportunities for individuals from disadvantaged parental backgrounds. By changing the occupational task content, technological change renders skills and networks of the parents obsolete, increases the relative importance of individual skills, decreases the importance of parental background and, thus, reduces the disadvantage of individuals with low-educated parents. This is particularly the case for highly educated workers, i.e. those with a university entrance qualification – the most relevant qualification in Germany.
Until the early 1990s, in Germany, the wages of workers from disadvantaged parental backgrounds, i.e. with low-educated parents, were between five and ten percent lower than the wages of workers with the same level of education but from advantageous parental backgrounds. Reasons for this wage penalty within education groups are among others related to job referrals and different behavior regarding self-promotion or in wage negotiations. In the 1990s and 2000s, the wage penalties within education groups closed. At the same time, the share of workers mainly using computer-controlled tools more than doubled, rising from 16% in 1992 to 38% in 1999. The study shows that the more an occupation was affected by computerization, the more the wage penalty by parental background declined, especially for highly educated workers. This decline in the wage gap was driven by better promotion prospects for workers from deprived parental backgrounds, for example improved opportunities to move up to management positions. That way, technological change reduced the overall wage penalty of workers from deprived social backgrounds significantly and permanently. For highly educated workers the parental background wage gap closed completely.
Technological change not only improves wage opportunities but also job opportunities for workers from disadvantaged backgrounds: In occupations where employees increasingly used computer-based devices at the workplace, the share of workers with low-educated parents increased significantly. This is especially true for highly educated workers: If the degree of computerization in an occupation increased by ten percentage points – i.e. if ten percentage points more employees in an occupation mainly used computer-based devices – the share of workers with low-educated parents increased by about four percentage points among the highly educated employees.