The pandemic push: Digital technologies and workforce adjustments

Abstract

Using a novel firm survey matched to administrative employee records, we demonstrate that the COVID-19 pandemic was a push factor for the diffusion of digital technologies in Germany. Two out of three firms invested in digital technologies. Three quarters of those investing firms invested because of the pandemic, particularly in hardware and software to enable decentralized communication, management, and coordination. These investments also fostered additional firm-sponsored training, underscoring the complementarity between investments in digital technologies and training. We then show that the investments helped firms insure their workers against the economic downturn. Firms with additional digital investments retained more of their employees on regular working hours and relied less on short-time work. Low- and medium-skilled, as well as young workers, benefited the most from the insurance effect of digital investments.