Human Capital Investments in Times of Technological Change: Does the Skill-Structure Matter?

Technological change is altering the skill requirements of the labour market. This labour market transformation is often associated with increased participation in continuing training (CT). However, increased CT participation does not necessarily translate into increased investment in human capital by employers, especially for already disadvantaged groups e.g. employees in low-skilled jobs. In many countries, employers are the main CT sponsors, so a lack of their sponsorship could increase CT inequalities. This is particularly the case as employees in low-skilled jobs are also less likely than other groups to participate in self-financed CT. Therefore, this analysis focuses on the relationship between companies' investments in human capital and technological change indicators, as well as whether a companies’ skill structure is moderating this relationship. Quantitative data from a representative German establishment survey are used for the analysis. The results indicate that firms' investment in technology and the technology level are positively related to human capital investments. Companies with a large share of employees with low-skilled jobs also invest less in human capital. However, in these preliminary results there is no evidence of a moderating effect of the skill structure.

The results suggest that technological change may lead to increased human capital investment. These results also suggest that a high share of employees in low-skilled jobs reduces human capital investment, but that the skill structure does not moderate the relationship between technology and human capital investment. However, as most training is financed by the employer, reduced investment by companies with a high share of employees with low-skilled jobs, could lead to increased or persistent barriers to CT for this already disadvantaged group. Therefore, these findings provide a good starting point for policies aimed at reducing barriers to CT, for example by creating incentives to increase human capital investment specifically for disadvantaged groups.