The Shelf-life of Incumbent Workers in Times of Accelerating Technological Change: Evidence from a Reform of a Mandatory Training Regulation

Simon Janssen and Jens Mohrenweiser

IZA Discussion Papers, No. 11312

2017

In periods of accelerating technological change, incumbent workers must steadily update their skills to remain productive. In contrast, young graduates who just entered the labor market often acquired modern skills in school or university. We investigate how incumbent workers’ careers respond to an increasing labor supply of graduates with modern IT skills during a period of accelerating technological change. We identify a supply shock of IT-skilled graduates by exploiting a reform of a mandatory training regulation that obligated all new apprentices in a large German manufacturing occupation to acquire in-depth IT skills. We use a difference-in-differences approach to analyze how this supply shock of IT-skills affected the careers of incumbent workers. The results show that even young incumbents experienced long-lasting earnings losses in form of lower wage growth after the IT-skilled graduates entered the labor market.

Human Capital, Skills, Occupational Choice, Labor Productivity, Unemployment: Models, Duration, Incidence, and Job Search, Innovation, Research and Development, Technological Change, Intellectual Property Rights: General

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