The digital skill premium: Evidence from job vacancy data

This paper examines the relationship between digital skills demand and posted wages in the UK using novel vacancy data. Digital skills — classified into basic, intermediate, and advanced using an XGBoost model — are linked to significant wage premiums. Within occupations, they are associated with 5.8% higher wages, with advanced and intermediate skills increasing wages by up to 8.9% when listed in job postings. Each additional digital skill increases wages by 1%, rising to 1.6% for advanced and intermediate skills. Artificial intelligence (AI) and cybersecurity skills yield particularly high returns, increasing wages by 8.6%–9.7% when listed and by 4.8%–5.4% per additional skill. • Job vacancies requiring digital skills offer 5.8% higher wages than those in the same job without. • An extra digital skill is linked to wage gains of up to 1.6% in the same occupation. • Advanced and intermediate digital skills linked to 8.9% and 2.5% wage premiums. • AI and cybersecurity skills are linked to 8.6%-9.7% higher wages when listed. • AI and cybersecurity skills are linked to a 4.8%-5.4% wage increase per extra skill.