Routine-Biased technical change: Individual-Level evidence from a plant closure

Abstract

Routine-biased technical change (RBTC) argues that digitisation decreases job opportunities for workers with routine task competencies, but increases job opportunities for workers with nonroutine task competencies. While there is considerable evidence for RBTC at the aggregate level, its effects on individual workers are yet to be fully understood. Therefore, this paper uses unique survey data of workers at a large car plant who became unemployed when the plant closed. In line with the RBTC hypothesis, we find that re-employment probabilities 1,5 years after the plant's closure are substantially higher for workers with nonroutine task competencies and with digital skills. Moreover, for the subset of individuals who were re-employed 1,5 years after the plant's closure, we find that the nonroutine content of job tasks is higher, wages are lower, and contracts are less permanent. Finally, our paper shows that a crude age-based early retirement policy that was negotiated as part of the plant's closure and that ignores workers’ skills, results in significant foregone employment of older workers with nonroutine task competencies.