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Economy 4.0 – Digitalisation and Its Effect on Wage Inequality

  • Anke Mönnig EMAIL logo , Tobias Maier and Gerd Zika
Published/Copyright: June 21, 2019

Abstract

This paper contributes to the discussion of the impact of digital transformation on labour markets by analysing the impact on wage inequality.

The novelty of this paper is on the one hand the quantitative approach that applies a macroeconometric input-output model which accounts for circular flow in the economy and feedback loops. Most of the studies on wage inequality and digital transformation focus on ex-post analysis. The applied quantitative model used in this paper also allows to perform ex-ante analysis. This is important, as economy 4.0 is not yet reflected in current datasets which makes statements about the impact of economy 4.0 on wage inequality on basis of ex-post analysis difficult.

On the other hand, it uses the inequality measures S80/S20 that has been applied to a unique dataset on employment and wages. The dataset differentiates on industry and occupational level. That allows to identify industry*occupation combination and their location in the upper and/or lower 20 % share ratio of wage distribution. The analysis demonstrates that digital transformation increases wage inequality, however to a low extent. The increase in wage inequality is already implemented in the reference scenario due to structural and demographic change. Digital transformation strengthens the impact of structural change on wage inequality. Especially in the long run, wage inequality rises stronger than in the reference scenario.

Because the digital transformation scenario does not confirm the polarization hypothesis, the impact of economy 4.0 on wage inequality remains rather low. The increasing demand of high-skilled employees is reflected in an increase in wage inequality. However, the relatively low impact of digitalisation on low-skilled employees prevents a stronger increase in wage inequality.

JEL Classification: J11; J31; O11

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Note

This article is part of the special issue “Digitalisation and the Labor Market” published in the Journal of Economics and Statistics. Access to further articles of this special issue can be obtained at www.degruyter.com/journals/jbnst.


ANNEX I

Table 6:

List of industry sectors.

Nr.Industry sector
1Agriculture
2Forestry
3Fishing
4Mining, extraction of stones and earth
5Manufacture of food and drink, tobacco processing
6Manufacture of textiles, clothing, leather goods and shoes
7Manufacture of wood, wicker, basket and cork goods (not including furniture)
8Manufacture of paper, cardboard and of paper and cardboard products
9Manufacture of printing products, reproduction of sound, picture and data storage media
10Manufacture of coke and refined petroleum products
11Manufacture of chemical products
12Manufacture of pharmaceutical products
13Manufacture of rubber and plastic products
14Manufacture of glass products, manufacture of ceramics, processing of stones and earth
15Metal production and processing
16Manufacture of metal products
17Manufacture of computer, electronic and optical products
18Manufacture of electrical equipment
19Engineering
20Manufacture of motor vehicles and motor vehicle components
21Other vehicle construction
22Manufacture of furniture and other goods
23Repair and installation of machines and equipment
24Energy supply
25Water supply
26Sewage, waste disposal, materials recovery
27Construction sector
28Motor vehicle trade, maintenance and repair of motor vehicles
29Wholesale (not including the motor vehicle trade)
30Retail (not including retail of motor vehicles)
31Land transport and transport in pipelines
32Shipping
33Aviation
34Warehousing, other transport service providers
35Post, courier and express services
36Hotel and restaurant trade
37Publishing
38Audiovisual media and radio
39Telecommunications
40IT and information service providers
41Financial services providers
42Insurance and pension funding
43Activities associated with financial and insurance services
44Real estate
45Legal and tax consultancy, management consultancy
46Architectural and engineering companies, technical support
47Research and development
48Advertising and market research
49Freelance, scientific, technical services (not mentioned elsewhere), veterinary medicine
50Renting of mobile goods
51Placement and hiring of workers
52Travel agencies and tour operators
53Service providers (not mentioned elsewhere)
54Public administration, defence, social security
55Education and teaching
56Healthcare system
57Residential homes and social services
58Art and culture, gambling
59Sport, entertainment and recreation
60Lobbying, religious associations
61Repair of computers and used goods
62Other providers of mainly personal services
63Housekeeping services
Table 7:

List of occupational fields.

Nr.Occupational field
1Agriculture, husbandry, forestry, horticulture
2Miners and mineral extraction workers
3Stoneworking, construction materials production, ceramics and glass related occupations
4Chemical and plastics occupations
5Paper manufacture, paper processing, printing
6Metal production and processing
7Metal, plant and sheet metal construction, installation, fitters
8Industrial mechanics, tool mechanics
9Vehicle and aircraft construction, maintenance occupations
10Precision engineering and related occupations
11Electrical occupations
12Textile processing, leather manufacture
13Cooks
14Production of beverages, food and tobacco, other nutrition occupations
15Construction, woodworking, plastics manufacture and processing occupations
16Auxiliary workers without further specified task
17Engineers
18Chemists, physicists, scientists
19Technicians
20Technical draughtsmen/ draughtswomen, related occupations
21Surveying and mapping
22Specialist skilled technicians
23Commodity trade in retail
24Wholesale/retail service occupations
25Banking and insurance professionals
26Other commercial occupations (not including wholesale, retail, banking)
27Advertising specialists
28Transport and logistics occupations
29Aviation, shipping occupations
30Packers, warehouse and transport occupations
31Managing directors, auditors, management consultants
32administrative occupations
33Finance, accounting, bookkeeping
34Core IT occupations
35Commercial office occupations
36Auxiliary office occupations, telephone operators
37Personal protection, guards
38Janitors
39Security occupations
40Legal occupations
41Artists, musicians
42Designers, photographers, advertising creators
43Healthcare occupations requiring a medical practice licence
44Healthcare occupations not requiring a medical practice licence
45Social occupations
46Teaching occupations
47Journalists, librarians, translators, related academic research occupations
48Body care occupations
49Hotel and restaurant occupations, housekeeping
50Cleaning and disposal occupations

ANNEX II

Table 8:

Descriptive statistics of daily wages per full-time person day, 1995–2013.

12345
yearmeanstandard deviationminmaxS80/S20
EUREUREUREUR
199576.1620.731.38131.122.00
199677.4821.099.39134.111.99
199778.5722.055.35137.842.00
199881.6822.9710.39155.042.14
199982.8523.787.12142.882.12
200084.1923.9910.06144.172.09
200186.0124.3910.09155.822.10
200287.5124.9510.09147.952.13
200391.4327.6610.09167.672.29
200492.1829.477.80558.002.31
200593.0429.058.85187.302.38
200694.0329.3410.09172.602.36
200795.1329.419.97173.202.41
200896.7729.7910.54271.902.44
200998.0230.0610.32178.492.35
201099.3830.6819.12180.822.42
2011100.6030.4110.40180.822.37
2012103.7330.7910.44268.992.32
2013106.2931.0911.15190.692.33
  1. Source: IAB Employment History Data (EHD)

Received: 2017-10-31
Revised: 2018-05-31
Accepted: 2019-03-25
Published Online: 2019-06-21
Published in Print: 2019-07-26

© 2019 Oldenbourg Wissenschaftsverlag GmbH, Published by De Gruyter Oldenbourg, Berlin/Boston

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