The Growing Importance of Social Skills in the Labor Market

Deming, D-J. (2017). The Quarterly Journal of Economics, 1593-1640.

In this article, the author examines the increase in the importance of social skills in the labour market. 

SUMMARY

Trends in the labour market show that the importance of social skills has increased over time. “Jobs requiring high levels of social skills” (cooperation, interaction, teamwork, flexibility, adaptability) grew, while less social jobs shrank over the same period. To analyse these patterns, the author develops “a model of team production where workers “trade tasks” to exploit their comparative advantage”. In the model, an increase in efficiency is driven by a decrease in coordination costs due to social skills.

Data and Methodology

First, changes in the task content of work are studied using data from the Occupational Information Network (O*NET) that began in 1998, and the American Community Survey (ACS) from 2005 through 2012. Data on worker skills and wages come from the National Longitudinal Survey of Youth conducted from 1979 to 2012. Log hourly wages are regressed on a composite of four variables that measures skill: “(i) sociability in childhood, (ii) sociability in adulthood, (iii) participation in high school clubs, and (iv) participation in team sports) and their interaction”. 

Findings

He finds that the “wage return to social skills is positive” even after controlling for cognitive (ability to perform mental activities) and non-cognitive skill, and that “cognitive skill and social skill are complements”. He also finds that “workers with higher social skills are more likely to work in social skill-intensive occupations,” and that wages are relatively higher in these occupations. 

Second, he investigates the growing importance of social skills with two means. First, he demonstrates the relative increase in the demand for social skills in the US labour market. Second, he tests for the increase in the importance of social skills by comparing the two surveys and the cohorts who entered the labour market in the 1980s versus the 2000s. He finds that “social skills are a significantly more important predictor of full-time employment and wages in the NLSY97 cohort”. Finally, he shows that the return to social skills has increased greatly between 1980 and 2000. 

One caveat of this paper is that, while it demonstrates the importance of social skills, it doesn’t explain the origin of social skills and whether education and public policy have a role in promoting them. Thus, future research can examine the impact of social skill development in childhood on adult labour market outcomes.