Digital adoption and human capital upscaling: a regional study of the manufacturing sector

We study the effect of the diffusion of digitalization, measured as the level of expenditures in digital technologies, on labor demand within the manufacturing sector. We exploit unique information from a focus study of the quarterly survey of Unioncamere Piemonte (one of Italy's most industrialized and technologically advanced regions) to measure the extent to which planned digital technologies investments impact hiring propensity, differentiated by educational level. Based on a representative sample of non-micro firms, our findings suggest a positive relationship between digital investments and the probability of hiring highly educated workers, mainly driven by the demand for individuals with a post-secondary technical institute (ITS) diploma and post-MSc qualifications or a PhD in STEM fields. Conversely, we also find that digital investments negatively influence the probability of hiring low-educated individuals, primarily referring to the demand for workers with secondary education. Our results reveal firms' human capital upscaling dynamics powered by digitalization processes.Digitalization in Piedmont's manufacturing sector increases demand for highly educated workers, reshaping job dynamics and driving the need for human capital upscaling. Our study examines how digital investments impact Piedmont's workforce, revealing a preference for workers with advanced technical education while reducing demand for less-educated workers. We also found complementary and substitution effects across educational levels-while technology boosts demand for highly educated workers, there remains a need for diverse qualifications in roles less likely to be automated. To stay competitive, companies must focus on upscaling their workforce's human capital. Policymakers should develop education and training initiatives that support a broad range of qualifications, ensuring workers can adapt to the evolving digital economy and trying to reduce the negative externalities deriving from job polarization.