Governing the Digital Transition: The Moderating Effect of Unemployment Benefits on Technology‐Induced Employment Outcomes

Abstract

The digital transition shapes work in numerous ways. For instance, by affecting employment structures. To ensure that the digital transition results in better employment opportunities in terms of socio‐economic status, labour markets have to be guided appropriately. The European Pillar of Social Rights can be the political framework to foster access to employment and tackle inequalities that result from the digital transition. Current research primarily examines scenarios of occupational upgrading and employment polarisation. In the empirical literature, there is no consensus on which of these developments prevail. Findings vary between countries and across different study periods. Accordingly, this article provides a theoretical explanation for the conditions under which occupational upgrading and employment polarisation become more likely. Further, this article examines how the use of information and communication technology (ICT) capital in the production of goods and services affects the socio‐economic status of individuals and, more importantly, whether unemployment benefits moderate this effect. Methodologically, the article uses multilevel maximum likelihood regression models with an empirical focus on 12 European countries and 19 industries. The analysis is based on data from the European Labour Force Survey (EU‐LFS), the European Union Level Analysis of Capital, Labour, Energy, Materials, and Service Inputs (EU‐KLEMS) research project, and the Comparative Welfare Entitlements Project (CWEP). The results of the article indicate that generous unemployment benefits are associated with occupational upgrading. This implies that educational and vocational labour market policies need to be developed to prevent the under‐skilled from being left behind and to enable these groups to benefit from the digital transition. Consequently, it is not only the extent to which work involves routine tasks or the skills of workers that determine how technological change affects employment, but also social rights shape employment through unemployment benefits.