Fact of the Week: A 10-Point Increase in a Firm’s Share of High-Skilled Workers Correlates With a 2% Productivity Increase for Knowledge-Intensive Services and a 7% Increase for Other Services

Source: Bijnens, G., and Dhyne, E., “The return on human (STEM) capital in Belgium,” OECD Productivity Working Papers, July 2021.

Commentary: A country’s stock of information and communication technology (ICT) increases overall economic productivity due to labor-saving innovations enabling people to work smarter rather than harder. But in order to maximize the positive externalities that ICT has on productivity, the supply of high-skilled labor, especially in the STEM field, must rise with the ICT stock. A recent OECD report examines Belgium to analyze the impacts of high-skilled labor on productivity. Belgium, a country whose growth in ICT stock has caused demand for skilled labor of ICT specialists to outpace available labor supply, has fewer postsecondary STEM graduates than the average EU-28 nation. The OECD reviews Belgian firm-level data using the National Bank of Belgium (NBB) and employee-level data taken from Belgium’s Crossroads Bank for Social Security (CBSS) to build regression models identifying the statistical relationship between the share of high-skilled labor within firms and their productivity.

Econometric analysis from the OECD finds that a 10-percentage-point increase in a firm’s share of high-skilled workers is positively correlated with a 2 percent increase in productivity of knowledge-intensive services, a 6 percent increase in productivity of manufacturing services, and a 7 percent increase in productivity of non-knowledge-intensive services. The effect on productivity is greater among non-knowledge-intensive industries, likely because their services are more easily innovated by new technologies implemented. ICT specialists therefore raise labor productivity for themselves and even more for workers employed in services that are not knowledge-intensive. Increasing a labor force’s human capital makes for more skilled operators of ICT best suited to implement them as efficiently as possible. If policymakers fail to prioritize investments into STEM-oriented human capital alongside investments in ICT, then productivity growth will stagnate and countries won’t receive the full economic benefits that ICT has to offer.