The impact of digital transformation on labour demand quantity and structure: Evidence from China

Abstract

While the impact of digital transformation on firms’ labour demand has attracted considerable attention, no studies have examined how different types of digital transformation impact different workforce labour demand. Using data from Chinese A-share listed manufacturing companies from 2013 to 2022, this study employs a two-way fixed effects model, the instrumental variable method and multi-temporal difference-in-differences analysis. The findings reveal that digital convergence technologies significantly increase manufacturing firms’ labour demand, whereas e-commerce technologies have no significant effect on employment. Furthermore, digitalisation has a negative effect on the demand for operational employees and a positive effect on the demand for skilled and service employees. The mechanism test reveals that digital transformation primarily substitutes labour through productivity effects and generates labour demand via financing constraints and business scope effects, ultimately increasing manufacturing firms’ labour demand. These results further enhance the understanding of how digital technology development impacts labour demand.