The Economics of Skill Development
The Economics of Skill Development
By teaching foundational skills in both cognitive and social domains, K-12 schools can prepare students for a lifetime of opportunity
By Bruno V. Manno
While economics is often called the dismal science, there is cheerful news coming from an area of study called the economics of skill development. This field analyzes the relationship between hard and soft skills—our cognitive and noncognitive domains—and how these domains affect wages and labor-market success. The good news is that, beyond simply mapping these relations, this discipline also identifies skills across industries and careers that boost upward mobility and promote pathways to opportunity. And its findings on the importance of soft skills such as communication and cooperation for wage progression have implications for school and life.
Unfortunately, most American K-12 schools have not yet caught on to the importance of skill development and do not teach foundational skills to their students. But these new insights can help K-12 educators understand what foundational skills young people should learn before they graduate from high school, whether they go into the workforce or college. These insights also should guide the development of an opportunity program for young people—one based on the complementary relationship between hard and soft skills, between the cognitive and technical domains and the social relationships needed for success.
Skill Development and Labor-Market Success
The importance of cognitive skills has declined as a predictor of labor-market wage success, while the economic importance of noncognitive skills, especially social skills, has increased, according to Harvard economist David Deming. While the two skill types complement each other, “[S]ocial skills are a significantly more important predictor of full-time employment and wages for youth in the 2004 to 2012 period, compared to the late 1980s and 1990s,” he writes. Noncognitive social skills are characterized by high levels of nonroutine interpersonal exchanges with others. They manifest in capabilities such as communication, cooperation, collaboration, social intelligence and conflict resolution.
On the employment side, Deming also finds that between 2000 and 2012, science, technology, engineering and math (STEM) jobs decreased as a share of U.S. employment, while non-STEM professional jobs in management, nursing and business support grew at a faster rate than in the previous decade. This finding seems to contradict the conventional wisdom that STEM jobs are growing rapidly and becoming a greater share of employment. But this conventional wisdom is based on (at least) two half-truths. First, some basic level of STEM proficiency is necessary for today’s jobs in ways not true of the past. Second, digital skills needed for today’s jobs include data analytics and other capabilities that require some level of STEM proficiency. These partial realities lead many to conclude that STEM jobs are a growing percentage of all jobs.
But this conclusion runs counter to the fact that between 1980 and 2012, the share of social-skill jobs grew nearly 12 percentage points as a share of all jobs. And wages for social-skill jobs grew more rapidly than those for other occupations. These non-STEM jobs rely extensively on interpersonal and analytical skills, with the latter integrating some basic STEM and digital competencies. Furthermore, individuals with social skills are team players with a sense of mutual obligation that comes with benefits and burdens. There is “suggestive evidence” that these team players advance group performance by inspiring the efforts of teammates. This leads Deming to define teamwork as “workers trading tasks . . . and reducing the worker-specific cost of coordination . . . with others.” It is not hard to see why employers would value such workers in an increasingly complex knowledge economy.
Deming also shows that, after age 35, life-cycle wage growth is greater in occupations that rely on nonroutine, high-variance jobs that are decision intensive and require worker adaptation. These contrast with routine jobs that execute clear rules and limit worker discretion and on-the-job learning. So, having social skills produces a wage premium. And since these people-intensive skills are learned and developed through practice and feedback over extended periods of time, peak earning years have progressed up the age spectrum to the 50s from the 30s. “Strong cognitive skills are increasingly a necessary—but not a sufficient—condition for obtaining a good, high paying job,” he writes. “You also need to have social skills.”
Recent research by Deming reinforces and develops this line of analysis. He shows that the wages individuals earn over the course of their lives are the result of what they learn over time in nonroutine occupations, including when adjusted for cognitive skill levels. Work experience and on-the-job learning really matter for long-term wage growth, so there is complementary between an individual’s learning ability and the complexity of a job. And skill attainment at one stage facilitates skill attainment at a later stage. Dynamic complementarity describes this process of skill formation. “Once you have [skills], it’s easier to get more of them,” says University of Chicago economist and Nobel Prize-winner James Heckman.
Foundational Skills and the K-12 Instructional Gap
Burning Glass Institute has conducted studies with other organizations that amplify Deming’s analysis and identify foundational skills important across industries and careers. Workers with these skills receive good wages and opportunities for upward mobility. Burning Glass Institute’s analysis of more than 150 million job postings and the case histories of 50 million workers produced 14 foundational skills across three categories:
Human skills include soft or noncognitive social skills such as communications and relationship building.
Technical or cognitive skills include domain knowledge, as well as skills such as data management and analysis.
Business enabler skills include project management and presentation capabilities that help individuals use skills in practical ways.
“The new foundational skills reinforce and amplify domain specific knowledge and technical capabilities,” writes Burning Glass Institute president Matt Sigelman, “and enable workers to acquire, exercise, and leverage technical skills.” Surprisingly, of the 21 million job postings in 2019 that mentioned a foundational skill, more than half did not require a college degree. Seligman continues, “Technical skills [help] students get on a career ladder but . . . foundational skills . . . help them climb.”
This is a key insight, but the K-12 education system has not yet caught up to it. A Burning Glass and American Student Assistance report on middle and high school teachers identified an instructional gap between foundational skills and what is taught in middle and high schools. Each foundational skill was ranked as essential by at least half of teachers, with 92% saying they were essential or somewhat important. But less than half of the teachers said these skills are taught in their school. This instructional gap is greater in schools where most students are Black or Hispanic. What this means is that the workforce has changed in ways that teachers recognize, but schools have failed to adjust to that new situation in the way they prepare students.
A Career Framework
Insights gleaned from the economics of skill development suggest the need for a K-12 career education framework that integrates foundational skills into the school curriculum at each grade level and connects them with academic subjects and student learning experiences inside and outside school. The Burning Glass report proposes how this can be done for middle and high school with a sequence of foundational skills that develops from those most in demand to those that are more specialized.
For example, skills in demand across many occupations (such as communication and collaboration) can be integrated into the middle school curricula through literacy and language arts instruction. Those less in demand and more specialized (such as computer programming and data analysis) can be integrated into the high school curriculum through math instruction. They both can be linked with experiential learning that involves field trips in middle school or internships and apprenticeships in high school. All this can be bolstered by immersive technologies that allow students to integrate simulated or virtual content with the physical environment and create a blended reality.
This is not the only approach. The international 38-member Organisation for Economic Co-operation and Development has documented different approaches to student career development. They include examples from many of its member countries that span elementary, middle and high school. For example, one describes a Career Education Framework that begins with early childhood activities and continues through high school. Another focuses on high school and integrates a student’s passage through high school with increasing levels of employer engagement organized by three categories: exposure, exploration and experience.
Work exposure presents young people with information, ideas and activities such as career talks and workplace visits. Work exploration involves young people actively investigating work through in-depth research on specific occupations that includes job shadowing, internships, résumé development and mock interviews. Finally, work experience entails sustained and supervised experience and student work-related projects through internships and apprenticeships.
This educational triad of exposure, exploration and experience deepens a young person’s understanding of the structure and culture of work. It is also consistent with how learning occurs in the developing brain of children and adolescents. Learning is the result of “practice, exposure, and experience.” So, it encompasses inputs that young people receive from the experiences they have, including those that are part of career development from the exposure, exploration and experience continuum.
Pathways Programs
Career pathways programs are one way schools can incorporate career education. They immerse young people in education, training and work by connecting them with local employers. They often incorporate different forms of personal and occupational support services, including apprenticeships and internships; career and technical education; dual enrollment in high school and postsecondary education; career academies; boot camps for learning specific skills; and staffing, placement and other support services for those seeking jobs. Finally, they offer the crucially important opportunity to build the social capital of strong relationships with adult mentors from all levels of society.
States and communities are creating pathways programs in both “top-down” and “bottom-up” ways. The former includes statewide programs created by governors and legislators from both political parties, while the latter are formed among K-12 schools, employers and civic partners.
These career pathways programs have five common features:
An academic curriculum linked with labor-market needs, leading to a recognized credential and decent income.
Career exposure and work, including engagement with and supervision by adults working in the relevant fields.
Advisers who help participants navigate the questions and issues they confront, ensuring they complete the program.
A written civic compact among employers, trade associations and community partners.
Supportive local, state and federal policies that make these programs possible.
They are not simply making nips and tweaks to existing curricula, in other words. Instead, these pathways programs are dynamic, innovative approaches to integrating learning into the community and the workforce that allow students to build up the cognitive and noncognitive skills that will serve them well in the 21st-century workforce.
An Opportunity Program
Pathways programs are part of an opportunity program that can help K-12 education recognize both cognitive and noncognitive foundational capabilities as important to helping individuals pursue opportunity and flourish as adults. The essential elements of this program are what individuals know and who they know—knowledge and relationship networks. Habits of mind and association (cognitive and noncognitive capabilities, respectively) are the building blocks of individual opportunity. Both must be cultivated. An opportunity program equips young people with not only knowledge that pays, but also relationships that are priceless.
I call these capabilities “habits” because pursuing knowledge and developing networks require behaviors learned and internalized through practice. These habits are also moral strengths that can produce prosocial behavior. A combination of habits of mind and association enables the pursuit of opportunity and human flourishing. In short, an opportunity equation emerges: Knowledge + Networks = Opportunity.
This opportunity equation is complemented by opportunity pluralism, an approach that offers individuals multiple credentialing pathways to work and career. The key idea is that the nation’s opportunity infrastructure must become more pluralistic so that individuals can pursue opportunity through many avenues linked to labor-market demands. Opportunity pluralism aims to ensure that every American—regardless of background or current condition—has multiple pathways to acquiring the knowledge and networks needed for jobs, careers and human flourishing.
The benefits of an opportunity program and opportunity pluralism reach far beyond economic preparedness. They encompass the importance of the relational aspects of success as well as its technical and material dimensions—in short, they recognize the fact that relationships matter for individual and societal well-being. An opportunity program would also help individuals develop an occupational identity and vocational self. Choosing an occupation and developing a broader vocational sense of one’s values, abilities and personality is important for adult success. Further, an opportunity program pursued through pathways programs would foster local civic engagement from employers and other community partners. And it has the potential to provide faster and cheaper pathways to jobs and careers.
I suggested at the outset that the economics of skill development is a cheerful, not dismal, science. For what emerges from this field is a human capital talent development narrative that stresses individual agency. It opens new possibilities of individuals acquiring and extending knowledge and networks to help them succeed and flourish. Pursuing these insights through an opportunity program will better place individuals on a trajectory to economic and social well-being, informed citizenship and civic responsibility. Education today can indeed lay a foundation for adult success and a lifetime of opportunity and human flourishing.
Bruno V. Manno is senior adviser for the Walton Family Foundation education program. Some of the organizations mentioned in this piece receive financial support from the Walton Family Foundation.