Impacts of digital-technology adoption on workers: A simple model and evidence from China

This paper examines the impact of point-of-sale (POS) adoption on training to investigate firms' requirements of employees. We construct a two-sector general model and find that the adoption of technology drives firms to increase training activities and decrease their labor-income share. Based on the data of 2451 firms from China's Small and Micro-sized Enterprises Survey in 2015 with an instrumental variable approach, we document that a one year increase in POS use increases the likelihood of firm training by 18.5–32.6%. In addition, the added training results from the demand for professional competence rather than simple needs for operating the POS system. Correspondingly, POS service intensifies the polarization of internal wages and worsens workers' welfare. The plausible underlying mechanisms for this are technology use, financial constraints, and operational efficiency.