Demand for white collar workers increases with the complexity of the industry concerned

Guy Michaels, 26 June 2007

Nowadays, the division of labour has become much more detailed as the production of most goods involves the coordination of a wide range of occupations. At the same time, white collar work involving generating, storing and communicating information has increased in importance in all firms and organizations. The author of DP6358 finds that this more complex division of labour has led to higher costs of processing information and consequently a raised demand for clerical office workers.

In general, in order to effectively allocate production in more complex factories (such as manufacturers of transportation equipment) with an occupationally heterogeneous workforce, each worker performs a different task, different inputs need to be acquired and distributed and various inventories tackled, which suggests that more information is required. The data on production of manufactured goods in US industries over the period 1860-2000 shows that not only average complexity of the industries increased but also more complex industries employed relatively more clerks.

The author also explores the relationship between complexity and the employment of clerks using information from the early IT revolutions when telephones, typewriters and improved filing techniques were introduced. The process raised the demand for clerks in all manufacturing sectors but significantly more in industries with a more complex division of labour. Furthermore, whereas in the past clerks and IT equipment were seen as complements, recent reductions in the price of IT have enabled firms to substitute computers for clerks, despite the decline in the relative wages of the latter. The findings suggest that the replacement has been more rapid in complex industries.

Overall, the results prove that the complexity of the production process is an important determinant of the demand for white collar workers. The author argues that although the paper focuses on the demand for clerks, the findings also shed a light on the demand for managers, who analyse the information produced by clerks and use it to coordinate production.

DP6358 The Division of Labour, Coordination, and the Demand for Information Processing

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URL: http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=6358.asp
Topics: Labour markets
Tags: complexity, division of labour, IT revolution, white collar work