Digitalization and the Public Sector Workforce: A panel data exploration of 20 European countries

Abstract The study of the links between automation technologies and the organization of work has been traditionally conducted by observing the private sector in advanced economies. There is a notorious gap in the extant literature regarding the impact of digital technologies on the public sector workforce. The public sector is considered a large adopter of Information and Communication Technologies (ICT) and commands a massive and diverse workforce. The impacts of digital technologies on public sector workers have been conceptually acknowledged by the existing literature, but few empirical approximations of this matter were found. Some factors make this line of inquiry particularly complex: the very nature of the public sector as a non-market, the absence of prices for outputs, data limitations, and measurement challenges. The public sector is not homogeneous in scale or scope across and within countries, it responds to intricate institutional factors, path dependencies, socio-political arrangements, and economic and fiscal constraints. This chapter aims to address this gap in the literature by exploring the relationship between digitalization and selected public employment indicators in European countries at the national level by proposing an identification strategy exploring a relatively novel dataset, the World Bank’s Worldwide Bureaucracy Indicators (WWBI), and merging it with the digitalization indices found in the United Nations e-Government Development Index (EGDI). We examine public employment indicators in 20 European countries in six biennial periods from 2008 to 2018. We explore this dataset from three distinct perspectives: first at the aggregate level, by analyzing the public sector employment as a share of formal employment and the public sector’s wage bill as a share of GDP. Second, by analyzing the effects of digitalization on five different occupational classes of the public sector. Third, we analyze the effects of digitalization by the educational tier of the public sector workforce. In aggregate terms, digitalization does not seem to be a labor-saving technology in the European public sector, however, when explored at an occupational level the data suggest a polarization between high-skill and low-skill occupations and by educational tier reflecting some of the behavior described in a market context as the effects of automation technologies on labor. Digitalization has a negative and significant effect on the public sector wage bill suggesting that digitalization allows for the automation of some tasks, reducing the need for human labor and thus reducing the wage bill. It could also be that digitalization leads to the reorganization of work processes, which might reduce the number of employees needed. Due to data aggregation some of these findings may mask significant differences among public sector occupations. The European public sector is diverse in composition, scope, mandate, and labor market institutions are embedded in national contexts that have not been considered for this analysis.

Keywords: digitalization, European public sector, panel data, wage bill, e-government index, bureaucracy indicators, public sector occupations, aggregate data