The Digital Skill Premium: Evidence from job vacancy data

This paper examines the relationship between the demand for digital skills and posted wages in the UK using novel vacancy data. We categorise digital skills into basic, intermediate, and advanced using an XGBoost classifier. Controlling for vacancy characteristics, non-digital skills, and labour market conditions, we find that each additional digital skill in job postings is associated with a 1.5% (1.0%) wage increase across (within) occupations. Each additional advanced and intermediate digital skill is associated with a skill premium of 2.2% (1.6%) and 2.1% (1.4%) across (within) occupations, respectively. The presence of digital skills increases wages by 9.1% (5.8%) across (within) occupations, with advanced and intermediate digital skills associated with premiums of 13.3% (4.4%) and 8.9% (2.5%), respectively. Posted wages increase by 4.8% for each additional AI skill and 5.4% for each cybersecurity skill within the same occupation. Vacancies listing at least one AI or cybersecurity skill show wage increases of 8.6% and 9.7%, respectively.