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The Value of Skills

  • Francis Green


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.

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Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 9819.

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Date of creation: Oct 1998
Date of revision:
Handle: RePEc:ukc:ukcedp:9819
Contact details of provider: Postal: School of Economics, University of Kent, Canterbury, Kent, CT2 7NP
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  1. 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 1147-58, December.
  2. Dinardo, J.E. & Pischke, J.S., 1996. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," Working papers 96-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Francis Green & Scott M. Montgomery, 1998. "The Quality of Skill Acquisition in Young Workers' First Job," LABOUR, CEIS, vol. 12(3), pages 473-487, 09.
  4. 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.
  5. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November.
  6. 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.
  7. 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 251-66, May.
  8. McNabb, Robert, 1989. "Compensating Wage Differentials: Some Evidence for Britain," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 327-38, April.
  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. 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.
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