Tech Boom, Cheap Capital & Long Term Impact on Wages
A study (Innovation Booms, Easy Financing, and Human Capital Accumulation by Johan Hombert & Adrien Matray) looks at the big tech boom in the 1990s, especially in companies focused on Information and Communication Technology (ICT). It was a time when lots of skilled workers joined 90s version of tech companies because they offered high salaries and exciting new opportunities. But, the study found something unexpected – these workers ended up earning less money years later.
What They Are Looking For: New technology can make companies grow quickly and hire a lot of skilled workers. This paper explores how these workers did over the long haul, using the 1990s tech boom as a case study.
Data Source: The research used data from France, covering 1994 to 2015. They looked at the job paths and salaries of skilled workers, focusing on those who started working in tech companies during the boom.
Key Findings:
- Many Skilled Workers Moved to Tech: There was a noticeable increase in skilled workers starting careers in the tech sector during the boom.
- Effects on Long-Term Earnings: These tech workers earned more at first, but after 15 years, they were making 6% less than their peers in other fields. This suggests the skills they picked up during the tech boom didn't hold their value, either because they become outdated and market needs change.
- The Role of Investment in Tech: Lots of money invested in tech companies during the boom. Interestingly, this seemed to worsen the long-term earning issue.
Why Did This Happen?
- Skills Became Outdated: Tech changes , so the skills these workers learned became less relevant, especially in high-tech roles.
- Job Loss Isn't the Full Story: While losing a job can impact long-term earnings, it didn’t fully explain the lower earnings these workers faced.
- No Winner-Take-All: The research didn't find that a few workers were earning way more than everyone else.
Bottomline: The study shows that the tech boom in the 1990s brought short-term benefits like higher initial pay. Yet, over time, these workers didn’t do as well financially because the skills they learned lost their value. This finding raises important questions about how tech booms affect workers' long-term prospects and the overall economy. More research is needed to fully understand these effects.