Fact of the Week: A 1 Percent Increase in STEM Technicians Raises Manufacturing Firms’ Productivity by 4 Percent
Source: J.J. Harrigan, Ariell Reshef, and Farid Toubal, “Techies and Firm Level Productivity,” Université Paris 1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL, no. hal-04429434 (June 2023).
Commentary: A recent working paper by J.J. Harrigan, Ariell Reshef, and Farid Toubal analyzed the role that STEM technicians, or “techies” as the authors call them, on French firm productivity. They define “techies” as STEM workers who are primarily responsible for introducing and managing new technologies for firms. The study looked at over 20,000 manufacturing and over 100,000 non-manufacturing firms between 2011 and 2019. To measure productivity, the authors used total factor productivity (TFP), which refers to the ratio of output to total inputs of labor, capital, and materials. To measure employment of techies, they measured techies’ share of a firm’s total wage bill. The analysis consisted of two parts, each using a different methodology. One assumed that labor is static, while the other treated labor as being a dynamic input like capital. The study’s findings highlight the importance of STEM skills in the modern economy and the role that STEM workers play in the adoption and diffusion of productivity-enhancing technologies by firms.
Among manufacturing firms, they found that a 1 percent increase in techies’ share of wages was associated with a 4 percent increase in TFP in the next year. Additionally, exports increased by 0.9 percent. When breaking down techies into separate job categories, increasing R&D workers, ICT workers, and other engineers/technicians by 1 percent increased manufacturing firms’ TFP by 1.7 percent, 2.1 percent, and 2.9 percent, respectively. When the authors relaxed their prior assumption that labor is static, they found that a 1 percent increase in techies increased manufacturing firms’ TFP by 2.8 percent and increased exports by 2.8 percent.
Among non-manufacturing firms, they found that a 1 percent increase in techies’ share of wages was associated with a 5.7 percent increase in TFP in the next year. Additionally, exports increased by 0.8 percent. When breaking down techies into separate job categories, increasing R&D workers, ICT workers, and other engineers/technicians by 1 percent increased non-manufacturing firms’ TFP by 1.0 percent, 2.5 percent, and 5.3 percent, respectively. When the authors relaxed their prior assumption that labor is static, they found that a 1 percent increase in techies increased non-manufacturing firms’ TFP by 1.4 percent and increased exports by 0.9 percent.
