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The Value of Skills

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  • Francis Green

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Abstract

Many commentators have argued that "key skills" are becoming more important in modern workplaces. This paper draws on a survey that uses a methodology based on job analysis to measure skills at work, and estimates their implicit prices using a hedonic wage equation. The main new findings are that: (a) Computer skills are highly valued in the current British labour market. Even at "moderate" levels of complexity, for example using word-processing packages, workers using computers earn an average premium (after controlling for other job skills) in excess of 20 per cent, compared to those who do not use computers at all. (b) Professional communication and problem-solving skills are also highly valued. A one-standard-deviation increase in either type of skill raises pay by around 5 per cent, after allowing for all the controls. To a lesser extent, verbal skills also carry a pay premium for women. But planning, and client and horizontal communication skills, have little independent association with pay. Numerical skills also have no conditional link with pay, other than through being associated with more complex computer usage. (c) Jobs involving task variety earn more pay, but there is no strong evidence that greater autonomy is positively rewarded. (d) Participating in Quality Circles and, more tentatively, in organised work teams attracts a pay premium. (e) Jobs which require a long learning time, which deploy transferable skills, and/or for which there are higher qualifications requirements command a higher pay. (f) A reasonably complete job analysis provides a useful means of accounting for a wage distribution via a hedonic wage equation.

Suggested Citation

  • Francis Green, 1998. "The Value of Skills," Studies in Economics 9819, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:9819
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    File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/9819.pdf
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    References listed on IDEAS

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    1. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
    2. Francis Green & Scott M. Montgomery, 1998. "The Quality of Skill Acquisition in Young Workers' First Job," LABOUR, CEIS, vol. 12(3), pages 473-487, September.
    3. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
    4. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    5. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-1158, December.
    6. McNabb, Robert, 1989. "Compensating Wage Differentials: Some Evidence for Britain," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 327-338, April.
    7. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1215-1244.
    8. John E. DiNardo & Jörn-Steffen Pischke, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 291-303.
    9. Machin, Steve, 1994. "Changes in the Relative Demand for Skills in the UK Labour Market," CEPR Discussion Papers 952, C.E.P.R. Discussion Papers.
    10. Entorf, Horst & Kramarz, Francis, 1997. "Does unmeasured ability explain the higher wages of new technology workers?," European Economic Review, Elsevier, vol. 41(8), pages 1489-1509, August.
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    Citations

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    Cited by:

    1. Peter Dolton & Gerry Makepeace & Helen Robinson, 2007. "Use It Or Lose It? The Impact Of Computers On Earnings," Manchester School, University of Manchester, vol. 75(6), pages 673-694, December.
    2. Ganna Vakhitova & Christopher R. Bollinger, 2011. "Labor Market Return to Computer Skills: Using Microsoft Certification to Measure Computer Skills," Discussion Papers 46, Kyiv School of Economics.
    3. Corgnet, Brice & Rodriguez-Lara, Ismael, 2013. "Are you a good employee or simply a good guy? Influence costs and contract design," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 259-272.
    4. Peter Dolton & Panu Pelkonen, 2008. "The Wage Effects of Computer Use: Evidence from WERS 2004," British Journal of Industrial Relations, London School of Economics, vol. 46(4), pages 587-630, December.
    5. Heijke Hans & Meng Christoph, 2007. "Discipline-specific and academic competencies of the higher educated: their value in the labour market and their acquisition in education," ROA Working Paper 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    6. Francis Green & Alan Felstead & Duncan Gallie, 2003. "Computers and the changing skill-intensity of jobs," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1561-1576.
    7. Heijke, J.A.M. & Meng, C.M. & Ramaekers, G.W.M., 2002. "An investigation into the role of human capital competences and their pay-off," ROA Research Memorandum 3E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    8. Chris N. Sakellariou & Harry A. Patrinos, 2004. "Technology, computers and wages: evidence from a developing economy," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 47(3-4), pages 543-543.
    9. Fatima Suleman & Jean-Jacques Paul, 2008. "Diversity of human capital attributes and diversity of remunerating systems," Post-Print halshs-00260115, HAL.
    10. Loo J. van & Semeijn J., 2001. "Measuring Competences in School-leaver Surveys," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    11. L Feinstein, 2000. "The Relative Economic Importance of Academic, Psychological and Behavioural Attributes Developed on Chilhood," CEP Discussion Papers dp0443, Centre for Economic Performance, LSE.
    12. Fatima Suleman & Jean-Jacques Paul, 2007. "Diversity of human capital attributes and diversity of remunerations," Post-Print halshs-00181402, HAL.
    13. Francis Green & Donna James, 2001. "Do Male Bosses Underestimate their Female Subordinates' Skills? A Comparison of Employees' and Line Managers' Perceptions of Job Skills," Studies in Economics 0107, School of Economics, University of Kent.

    More about this item

    Keywords

    Skills; Wages; Computers;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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