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Fintech 13 Nov 2018

Digital advancements to revolutionize the job market

The digital transformation is altering the Spanish economy as demonstrated by varying levels of ‘routinization’ in numerous fields and the growing relationship between average salaries and hardware and software use in different occupations. These are some of the conclusions detailed in a report prepared by BBVA Research, which analyzes the impact of the routinization and computerization of different manufacturing sectors, occupations, and employment profiles on the Spanish economy.

Technological developments of recent decades have gradually reshaped employment supply and demand in Spain. Although the process is still in its infancy, it “helps us make projections about the accelerated use of digital advancements that will revolutionize the job market,” BBVA Research points out in its Economic Watch series in the report, “Industry Computerization and Occupation Routinization in Spain.”

Using data from 1995 to 2016, the report analyzes the differences between the automation of routine tasks (or ‘routinization’) and computerization in Spain, and identifies the occupations that are most impacted by these phenomena. On one hand, the research establishes that the workforce for occupations with greater hardware-related activity is dominated by young males with a higher level of education; whereas there is a greater proportion of women and workers over the age of 50 in occupations that are more software intensive.

Another conclusion from the BBVA Research study is that the process of computerization “has been greatest in those occupations with higher average salaries.” While task automation in Spain has been “to the detriment of those workers with average salaries” and has ended up eroding the wage base for traditional occupations.

“These two IT sectors have made a significant contribution to the capital accumulation in Spain, and on the gross value added growth for the rest of the economy”

The authors of the report explain that in this context the supply and demand for professionals has to adapt to new technological options, because digitization, with hardware and software, enables “continuous improvement” in the most routine tasks. At the same time, in many occupations where new technologies are more-widely available and used, certain skills —such as proficiency with computers or tablets, or competence with software— become differentiators when it comes to improving productivity.

Differences and similarities between the U.S. and Spain

Similar to the U.S., routinization in Spain has evolved more profoundly in occupations that sit squarely in the average salary range. In addition, in both countries, using hardware – and even more so, software – is increasingly correlated to the average salary for different occupations.

With regard to productivity, in Spain productivity grew 15 percentage points between 1995 and 2016, although this growth was uneven across sectors: it grew 60 points in the hardware sector while it dropped 50 points in sectors related to software development. These figures were very different in the U.S. where productivity in IT sectors outstripped U.S. productivity on the whole. BBVA Research believes “new research is required to explain these differences.”

Nevertheless, the situation in Spain is similar to the the U.S. in that these two IT sectors have made a “significant contribution” to the capital accumulation in Spain, and therefore on the gross value added (GVA) growth for the rest of the economy’s sectors.

In conclusion, BBVA Research’s report is a first step toward understanding and anticipating the impact of digitization on employment, productivity, and the sectoral composition of production and occupations. Further studies will shed light on the “winners and losers” of digitization, by sector, occupation, and  activity. According to BBVA’s report, this information represents “knowledge that is essential to properly manage the technological transformation process in the Spanish economy.”

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