The Early-Career Consequences of Digital Technologies

Abstract

How do digital technologies affect early-career employment and wage growth? Using administrative data from the Netherlands for 2006–2024, I document two concurrent trends across school-leaving cohorts: the probability of employment after leaving school fell, but early-career wage growth rose. I propose that the rise of digital technologies offers a unifying explanation for both trends. Following investment spikes in digital technologies, such as software and databases, firms reduce their early-career employment share and increase early-career wage growth. By enabling firms to codify their routines and knowledge, digital technologies substitute for early-career workers but augment the experience of those who do become employed. A calibrated heterogeneous-firm model that embeds both channels shows that the decline in the price of digital technologies is quantitatively important for both cohort trends. Substitution rather than augmentation is the dominant channel.

This is the job market paper of Elliott, please see his personal website.