The return on human (STEM) capital in Belgium
Whilst overall productivity growth is stalling, firms at the frontier are still able
to capture the benefits of the newest technologies and business practices. This paper
uses linked employer-employee data covering all Belgian firms over a period of almost
20 years and investigates the differences in human capital between highly productive
firms and less productive firms. We find a clear positive correlation between the
share of high-skilled and STEM workers in a firm's workforce and its productivity.
We obtain elasticities of 0.20 to 0.70 for a firm's productivity as a function of
the share of high-skilled workers. For STEM (science, technology, engineering, mathematics)
workers, of all skill levels, we find elasticities of 0.20 to 0.45. More importantly,
the elasticity of STEM workers is increasing over time, whereas the elasticity of
high-skilled workers is decreasing. This is possibly linked with the increasing number
of tertiary education graduates and at the same time increased difficulties in filling
STEM-related vacancies. Specifically, for high-skilled STEM workers in the manufacturing
sector, the productivity gain can be as much as 4 times higher than the gain from
hiring additional high-skilled non-STEM workers. To ensure that government efforts
to increase the adoption of the latest technologies and business practices within
firms lead to sustainable productivity gains, such actions should be accompanied by
measures to increase the supply and mobility of human (STEM) capital. Without a proper
supply of skills, firms will not be able to reap the full benefits of the digital
revolution.
Published on July 08, 2021
In series:OECD Productivity Working Papersview more titles