Paying to program? Engineering brand and high-tech wages

Abstract: We test the hypothesis that employers that invest in emerging information technology (IT) systems are more attractive to IT workers and, in turn, can capture greater value from the wages they pay. We show that much of the utility IT workers derive from these employers is associated with the future value of the skills they acquire on-the-job. This is principally true for IT workers with less than fifteen years of experience, in work environments that are known to encourage learning on-the-job, and they are stronger in thick labor markets in which non-competes are not strongly enforced. The results are robust to including employer and location fixed-effects, worker demographic variables, and controls for various sources of non-wage compensation. We also analyze thousands of online employer reviews from Glassdoor.com to show that IT workers at firms on the technological frontier say that what they most value about their employers is access to interesting systems. These findings are important because first, they provide evidence of how worker preferences can influence firms’ IT investment decisions; second, because they shed light on factors influencing the development of IT skills; and third, because they point to a potentially important explanation for returns from existing IT productivity estimates.