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The effect of computerisation on the wage share in United Kingdom workplaces

The effect of computerisation on the wage share in United Kingdom workplaces
The effect of computerisation on the wage share in United Kingdom workplaces
This historical paper analyses the distributional consequences of computerisation on the wage share of income in United Kingdom (UK) workplaces in the first decade of this century. The reasons why computerisation might increase a firm’s income but reduce the share assigned to wages are still not well understood. The uniquely rich Workplace Employment Relations Survey (WERS) 2004–2011 includes firm-level measures of the main production inputs and outputs, and thus allows an analysis of the main mechanisms through which increased computer usage influenced the wage share of income in UK workplaces over this period. This analysis shows that the proportion of employees using computers impacted the wage share in ways that were at odds with two mainstream views: that computers complement capital, and that labour can be easily replaced by capital. The results show that the proportion of employees using computers reduced the wage share by disproportionally increasing the productivity of the least skilled employees, who were not proportionally compensated for their increase in productivity. The stability of the wage share, over the period of interest, is explained by the rise in a workplace’s share of professional employees and by a rise in work effort. This positive contribution to the wage share was counteracted by an increased share of employees using computers and by a reduction in the share of employees whose pay was negotiated by unions, thereby contributing to a decline in the wage share of firm income.
Income distribution, industrial relations, political economy, technological change
Pensiero, Nicola
a4abb10f-51db-493d-9dcc-5259e526e96b
Pensiero, Nicola
a4abb10f-51db-493d-9dcc-5259e526e96b

Pensiero, Nicola (2021) The effect of computerisation on the wage share in United Kingdom workplaces. The Economic and Labour Relations Review. (doi:10.1177/10353046211048750).

Record type: Article

Abstract

This historical paper analyses the distributional consequences of computerisation on the wage share of income in United Kingdom (UK) workplaces in the first decade of this century. The reasons why computerisation might increase a firm’s income but reduce the share assigned to wages are still not well understood. The uniquely rich Workplace Employment Relations Survey (WERS) 2004–2011 includes firm-level measures of the main production inputs and outputs, and thus allows an analysis of the main mechanisms through which increased computer usage influenced the wage share of income in UK workplaces over this period. This analysis shows that the proportion of employees using computers impacted the wage share in ways that were at odds with two mainstream views: that computers complement capital, and that labour can be easily replaced by capital. The results show that the proportion of employees using computers reduced the wage share by disproportionally increasing the productivity of the least skilled employees, who were not proportionally compensated for their increase in productivity. The stability of the wage share, over the period of interest, is explained by the rise in a workplace’s share of professional employees and by a rise in work effort. This positive contribution to the wage share was counteracted by an increased share of employees using computers and by a reduction in the share of employees whose pay was negotiated by unions, thereby contributing to a decline in the wage share of firm income.

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Accepted/In Press date: 30 March 2021
Published date: 2021
Keywords: Income distribution, industrial relations, political economy, technological change

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Local EPrints ID: 448351
URI: http://eprints.soton.ac.uk/id/eprint/448351
PURE UUID: c760a8b1-1b1b-4ac2-88ce-ef0e0cca5148
ORCID for Nicola Pensiero: ORCID iD orcid.org/0000-0002-2823-9852

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Date deposited: 20 Apr 2021 16:35
Last modified: 13 Dec 2021 03:37

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