Computerization, Obsolescence and the Length of Working Life Péter Hudomiet (RAND) Robert J. Willis (University of Michigan) 2020 Working Longer and Retirement Conference SIEPR October 1, 2020 Hudomiet & Willis Computerization and retirement October 1, 2020 1 / 27
Introduction Technological change and retirement Technological change affects labor market disappearing and new jobs growing inequalities make us productive or redundant? Technological change may affect retirement decisions productivity may increase (retirement ↓ ) obsolescence: hard to keep up with the young (retirement ↑ ) Hudomiet & Willis Computerization and retirement October 1, 2020 2 / 27
Introduction Research question Track obsolescence induced by computerization, 1984-2018 track computer use at work by detailed occupations, years, and age estimate knowledge gap ◮ diff. in computer use between young and old ◮ proxy for obsolescence Effect of knowledge gap on retirement/wages/job satisfaction controlling for skill & year fixed effects Hudomiet & Willis Computerization and retirement October 1, 2020 3 / 27
Introduction Contribution to the literature Large literatures on effect of IT investments, computer use on employment and wages ◮ Aubert et al. (2006), Gaggle and Wright (2017), Freeman (2018), Burstein et al. (2019), Friedberg (2006); Schleife (2006) wages and employment in STEM vs. regular jobs ◮ Ahituv and Zeira (2010), Bartel and Sicherman (1993), Deming and Noray (2018), Weinberg (2002) Not much on the effect of knowledge gap on retirement time-series (cohort) variation Big data CPS computerization supplements (~600 thousand obs.) monthly CPS (~7 million obs.) on labor force status March CPS (~2 million obs.) on wages HRS (~12 thousand obs.) on expectations, depression, etc. Hudomiet & Willis Computerization and retirement October 1, 2020 4 / 27
Introduction History of computerization Early phase (low penetration into jobs, homes) 1940-50s: digital computers invented 1950-60s: mainframe introduced commercially 1960-70s: minicomputer introduced Late phase (growing penetration into jobs, homes) 1970-90s: personal computers introduced 1990-00s: growth of the internet 2000-10s: smart phone, tablets Hudomiet & Willis Computerization and retirement October 1, 2020 5 / 27
Introduction PCs and internet use by cohort and experience Computer use at work Internet use at work 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 Fraction Fraction 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 10 20 30 40 10 20 30 40 Labor market experience Labor market experience 1950-1959 1960-1969 1950-1959 1960-1969 1970-1979 1980-1989 1970-1979 1980-1989 1990-1999 2000-2009 1990-1999 2000-2009 Computer & net use asymptotes to ~60%. Varies by birth cohorts youngest cohorts always used older cohorts learned on the job oldest cohorts did not learn Hudomiet & Willis Computerization and retirement October 1, 2020 6 / 27
Introduction Computer use at work by education High school dropouts College graduates 1.00 1.00 0.90 0.90 0.80 0.80 0.70 0.70 0.60 0.60 Fraction Fraction 0.50 0.50 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0.00 0.00 10 20 30 40 10 20 30 40 Labor market experience Labor market experience 1950-1959 1960-1969 1950-1959 1960-1969 1970-1979 1980-1989 1970-1979 1980-1989 1990-1999 2000-2009 1990-1999 2000-2009 Computer use at work increases with education Cohort gaps larger among highly educated Hudomiet & Willis Computerization and retirement October 1, 2020 7 / 27
Introduction Our theory 1. Price of computers gradually falls higher skilled occupations adapt first (engineer) 2. Computers enhance productivity but need to pay a fixed cost of learning 3. Younger workers adapt first many older worker do not adapt ⇒ knowledge gap (temporary) 4. This “knowledge gap” harms older workers skill obsolescence lower wages occupation changes early retirement Hudomiet & Willis Computerization and retirement October 1, 2020 8 / 27
Introduction Computer use at work Computer use and knowledge gap in a hypothetical occupation 1 Age 40-49 .5 0 1 Age 60-64 .5 0 1 Knowledge gap .5 0 1980 1990 2000 2010 year The gap varies by occupations & time Hudomiet & Willis Computerization and retirement October 1, 2020 9 / 27
Patterns in computer use CPS Computerization supplements Computerization supplement available 1984-2017 14 waves N = 50 , 000 per wave ( 600 , 000 in total) after restrictions Main measures: computer use at work: 1984-2003 internet use at work: 1997-2017 computer use at home: 1984-2017 internet use at home: 1997-2017 Hudomiet & Willis Computerization and retirement October 1, 2020 10 / 27
Patterns in computer use Computer use, high school dropouts ������������ ������������������������ ������������������������������������ ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ��������� ��������� ��������� ��������� ��������� ��������� ��������� ��������� Low use of computers slowly growing not much difference by age Hudomiet & Willis Computerization and retirement October 1, 2020 11 / 27
Patterns in computer use Computer use, high school graduates ������������������������������������ ������������������������������������ ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ��������� ��������� ��������� ��������� ��������� ��������� ��������� ��������� Moderate use of computers trending upward less use among older workers, mostly 60-69 young-old gap largest in the mid-late 90s Hudomiet & Willis Computerization and retirement October 1, 2020 12 / 27
Patterns in computer use Computer use, some college ������������������������������������� ������������������������������������� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ��������� ��������� ��������� ��������� ��������� ��������� ��������� ��������� Higher use of computers less use among older workers, mostly 60-69 young-old gap largest in the late 80s Hudomiet & Willis Computerization and retirement October 1, 2020 13 / 27
Patterns in computer use Computer use, college or more �������������������������������� �������������������������������� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ����� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ��������� ��������� ��������� ��������� ��������� ��������� ��������� ��������� Very high use of computers less use among older workers, ◮ both 50-59 ◮ and 60-69 young-old gap largest in the 80s Hudomiet & Willis Computerization and retirement October 1, 2020 14 / 27
Patterns in computer use Computer use summary Large variation in computer/internet use by skill and age more skilled workers more likely to use more skilled started using earlier older workers started using later higher skill older workers faced the largest gap Next step formalize the knowledge gap (between young and old) test if knowledge gap affected labor market outcomes Hudomiet & Willis Computerization and retirement October 1, 2020 15 / 27
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