Regional digital transformation has revitalized economic development and revolutionized the employment landscape of the labor force. The study employs a dynamic panel system GMM model to investigate the direct and indirect effects of regional digital transformation on the employment quality of China’s labor force using panel data from 31 mainland provinces. The findings suggest that regional digital transformation initially has a negative impact on employment quality, but that it continues to improve continuously as it progresses, showing a “U-shaped” trend. A nonlinear mediation analysis across industry, sector, and skill levels of the labor force structure uncovers a complex, bridging effect on employment quality. This study provides valuable insights for improving employment policies and promoting full employment, highlighting the dynamic interplay between regional digitization and the labor market.
Employment quality stands as the cornerstone of people’s livelihood and is intrinsically linked to a nation’s development. Advancing full employment is vital for enhancing public welfare, impacting family happiness and the long-term economic growth and social stability of a country. The current downward trend in the global economy makes it more challenging to achieve full employment1, and improving employment quality has become a critical issue that needs to be solved urgently2. However, the employment environment has been partially improved with the rapid development of the digital economy, and new employment spaces continue to emerge under the regional digital transformation3. Specifically, digitalization has given rise to new and more creative social forms, inspired workers to upgrade their skills to meet the development requirements continuously, improved the employment situation4, and become one of the critical elements of employment quality improvement. It can be said that regional digital transformation optimizes employment quality. Therefore, in the background of the rapid development of the digital economy, optimizing the labor force structure, as well as using regional digital transformation to improve employment quality, has important theoretical significance and practical value.
The research on the coordinated development of regional digital transformation and employment quality explores the impact of digital transformation on employment quality based on the theoretical level3and researches the mechanism analysis and development path and other aspects of the effects from the empirical level. A combination of the literature shows that the “digital divide” and other unbalanced development phenomena caused by regional digital transformation will have a certain degree of impact on employment5. Based on existing research, this study explores regional digital transformation’s role in influencing employment quality and related mechanisms. It analyzes the realization paths to promote the development of the level of employment quality. The marginal contribution may lie in the following. First, the index system of employment quality is constructed, and the employment quality is scientifically measured, further improving the comprehensiveness of the evaluation dimension of employment quality. Second, it examines the impact of regional digital transformation on employment quality, finds the “U-shaped” trend of digital transformation on employment quality, and verifies its robustness with various methods. Third, from the perspective of labor force structure, we consider employment quality and labor force structure as two completely independent but related variables. The mechanism of regional digital transformation on employment quality is explored from the industry level, sector level, and skill level, respectively, and the non-linear mechanism is measured by using the instantaneous mediation effect. It provides strategic recommendations for advancing regional digital transformation and is instrumental in enhancing employment rates. Furthermore, it executes and refines the implementation of regional employment policies to augment their efficacy.
The theory of skill-biased technological progress proposed by Acemoglu states that technological progress does not have the same impact on all types of workers and that it is more inclined to enhance the productivity of highly skilled workers6. This theory is further validated in the context of regional digital transformation. Digitalization increases the demand for high-skilled labor while low-skilled labor is even replaced. This skill-biased technological advancement leads to a non-linear change in employment quality. The employment quality of high-skilled labor is enhanced while low-skills may decline. In addition, according to Schumpeter’s theory of “creative destruction”, digital transformation is an innovative process usually accompanied by the elimination of old technologies and the rise of new industries. The impact mechanism is distorted when the original labor force structure equilibrium is disrupted. On the one hand, the innovation and application of digital technology promote the development of new industries and create a large number of employment opportunities; on the other hand, the decline of traditional industries and the substitution of technology also lead to unemployment. Therefore, the impact of regional digital transformation on employment quality presents a “U”-shaped characteristic: at the initial stage, the employment quality of part of the workforce may decline due to the impact of new technologies and substitution effects; however, the development of emerging industries and the popularization of technologies will gradually improve the overall employment quality as time goes by.
The existing literature needs to be more consistent in exploring the role of regional digital transformation on employment quality. In terms of positive effects, digital transformation is having a facilitating impact on employment quality. First, the infrastructure development driven by digital transformation improves the regional employment situation and increases the corresponding income7. Second, developing the digital economy increases self-employment opportunities, provides more private-sector jobs, and improves the employment environment8. Once again, digital transformation leads to the digitalization of industries, which directly expands the demand for labor and can continuously attract the inflow of workers9. Finally, integrating digital transformation with essential public services can improve the job market10. Overall, digital transformation optimizes the efficiency of labor allocation, shortens the gap between time, income, and other employment benefits11,12, and although there is a particular impact and substitution on the labor force, it promotes the upgrading of workers’ skills13, and plays a role in human capital14. In terms of the reverse effect, digital transformation may also have a dampening effect on employment quality. Issues such as the “digital divide” caused by digitization among employment groups have resulted in significant disparities in employment quality across regions and sectors5. For example, high-skilled groups have a high degree of adaptation to the changes brought about by digitization. In contrast, low-skilled groups have difficulty adapting to the complex requirements of digitized employment in the short term. It is necessary to explore how to avoid the expansion of the employment gap15,16, and to thoroughly study the substitution and compensation effects of regional digital transformation on employment17.
In summary, in the early stage of regional digital transformation, Some workers are unfamiliar with digital operations and technologies and cannot adapt to the needs of digital transformation, which will have an impact on the development of the employment market and the level of employment quality may show a short-term downward trend, expressed as the left side of a “U-shaped” curve; with the deepening of the regional digital transformation, through the strengthening of skills training, optimizing the matching of demand on the supply side of the labor force. After a short-lived employment shock, new market demand for labor emerges, and sustainable employment development has been achieved. As a result, employment quality shows an upward trend, expressed as the right side of a “U-shaped” curve. Based on the above theoretical analysis, this study has the following hypotheses:
H1: Regional digital transformation negatively impacts employment quality in the early stage, after which employment quality will gradually increase, showing a “U-shaped” curve.
Technological innovations and applications driven by digital transformation will inevitably trigger significant changes in employment demand across sectors and industries. These changes affect employment quality by adjusting the labor force structure, including industry, sector, and skill level reconfigurations. Thus, labor force structure plays a crucial mediating role in this chain of influence, allowing us to understand more fully the complex mechanisms of digital transformation on employment quality10. Some traditional sectors may reduce employment opportunities, while emerging sectors that utilize digital technologies generate new employment opportunities. Such changes affect the labor force structure at the industry level, sector level, and skill level18, which in turn has a direct impact on employment quality. For example, some emerging fields that urgently need high-skill requirements will provide high-paying jobs to attract laborers and improve their employment quality. The decline of some traditional industries has shrunk the demand for low-skilled workers and reduced their employment quality.
This study analyzes the indirect impact of digital transformation on employment quality from the perspective of labor force structure. First, from the industry level, the substitution effect of digital technology on the labor force will be accompanied by the complementary effect; the labor-intensive secondary industry dominates the substitution effect, and the high-end service and technology-intensive industry dominate the complementary effect3, advanced digital technology will gradually replace the labor force, and the production and sales of factories will move towards automation, which inevitably eliminates the low and medium-skill jobs and forces the labor demand to decline20. Second, the analysis of the labor force structure at the sector level is reflected in the fact that the regional digital transformation has increased the employment quality and size of public organizations. It significantly impacts the labor force structure at all levels, tilting the overall labor force structure toward manufacturing, high-tech, and high-skill, showing a “U-shaped” adjustment process. Finally, from the skill level labor force structure analysis, the development of digital technology has increased the number of high-skill jobs, promoting the transformation of the labor force structure from low-skill to high-skill employment21. The development will accelerate the change of skilled labor force structure22, which can contribute to productivity development by optimizing the corresponding structure23. Regional digital transformation affects employment trends and changes the direction of labor force structure. To test the possible nonlinear mediation effect of labor force structure, this study proposes the following hypothesis:
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