A large literature in cognitive science studies the puzzling "Flynn effect" of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort's mix of skills is determined by different skills' relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.
A large literature in cognitive science studies the puzzling "Flynn effect" of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort's mix of skills is determined by different skills' relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.
This paper establishes that a low dimensional vector of cognitive and noncognitive skills explains a variety of labor market and behavioral outcomes. For many dimensions of social performance cognitive and noncognitive skills are equally important. Our analysis addresses the problems of measurement error, imperfect proxies, and reverse causality that plague conventional studies of cognitive and noncognitive skills that regress earnings (and other outcomes) on proxies for skills. Noncognitive skills strongly influence schooling decisions, and also affect wages given schooling decisions. Schooling, employment, work experience and choice of occupation are affected by latent noncognitive and cognitive skills. We study a variety of correlated risky behaviors such as teenage pregnancy and marriage, smoking, marijuana use, and participation in illegal activities. The same low dimensional vector of abilities that explains schooling choices, wages, employment, work experience and choice of occupation explains these behavioral outcomes.
We use information from the National Longitudinal Survey of Youth 1979 (NLSY79) and supplementary data sources to examine how cognitive performance, measured at approximately the end of secondary schooling, is related to the labor market outcomes of 20 through 50 year olds. Our estimates control for a wide array of individual and family background characteristics, a limited set of non-cognitive attributes, survey year dummy variables and, sometimes, geographic place effects. The analysis reveals five main findings. First, cognitive performance is positively associated with future labor market outcomes at all ages. The relationship is attenuated but not eliminated by the addition of controls for non-cognitive characteristics, while the inclusion of place effects does not change the estimated associations. Second, the returns to cognitive skill increase with age. Third, the effect on total incomes reflects a combination of positive impacts of cognitive performance for both hourly wages and annual work hours. Fourth, the returns to cognitive skill are greater for women than men and for blacks and Hispanics than for non-Hispanic whites, with differential effects on work hours being more important than corresponding changes in hourly wages. Fifth, the average gains in lifetime incomes predicted to result from greater levels of cognitive performance are only slightly above those reported in prior studies but the effects are heterogeneous, with larger relative and absolute increases, in most models, for nonwhites or Hispanics than for non-Hispanic whites, and higher relative but not absolute returns for women than men.
The American workforce and the American workplace are rapidly changing—in ways that make them increasingly incompatible. Advances in automation and telecommunications have eliminated many jobs based on routine tasks and muscle power and fueled the demand for employees who can understand and apply new technologies. But, as Earl Hunt convincingly demonstrates in Will We Be Smart Enough?, such "smart" employees will be in dangerously short supply unless fundamental changes are made to our educational and vocational systems. Will We Be Smart Enough? combines cognitive theory, demographic projections, and psychometric research to measure the capabilities of tomorrow's workforce against the needs of tomorrow's workplace. Characterized by sophisticated machinery, instant global communication, and continuous reorganization, the workplace will call for people to fuse multiple responsibilities, adapt quickly to new trends, and take a creative approach to problem solving. Will Americans be able to meet the difficult and unprecedented challenges brought about by these innovations? Hunt examines data from demographic sources and a broad array of intelligence tests, whose fairness and validity he judiciously assesses. He shows that the U.S. labor force will be increasingly populated by older workers, who frequently lack the cognitive flexibility required by rapid change, and by racial and ethnic minorities, who have so far not fully benefitted from the nation's schools to develop the cognitive skills necessary in a technologically advanced workplace. At the heart of Will We Be Smart Enough? lies the premise that this forecast can be altered, and that cognitive skills can be widely and successfully taught. Hunt applies psychological principles of learning and cognitive science to a variety of experimental teaching programs, and shows how the information revolution, which has created such rapid change in the workplace, can also be used to transform the educational process and nurture the skills that the workplace of the future will require. Will We Be Smart Enough? answers naysayers who pronounce so many people "cognitively disadvantaged" by suggesting that new forms of education can provide workers with enhanced skills and productive employment in the twenty-first century. "Hunt's book provides succinct, lucid presentations of our best scientific understandings of thinking, intelligence, job performance, and how to measure them. Only by comprehending and applying these understandings to develop sound educational and instructional strategies can we create a capable workforce for the digital age." —John T. Bruer, President, James S. McDonnell Foundation
Skills are at the core of improving individuals' employment outcomes and increasing countries productivity and growth while ensuring social cohesiveness. This is particularly relevant as today's global competition is characterized by a higher share of knowledge-based content which heavily relies on high-level cognitive and behavioral skills. The 1994-1998 International Adult Literacy Survey (IALS) and the 2012 Survey on Adult Skills (PIAAC) are unique datasets providing measures of individual cognitive skills for a representative sample of the adult age population across a number of OECD countries using methods of educational testing jointly with household survey techniques. Thus, they offer an exceptional opportunity to better understand how cognitive skills have evolved and how they are likely to influence our lives now and in the future, particularly in what refers to employment chances. The aim of this technical report is threefold: (1) to analyse the current levels and distribution of skills in the working-age population of the sixteen Member States which participated in PIAAC; (2) to investigate to what extent these skills are important for labour market success; and (3) to examine how individuals (and the population) gain, lose and preserve their cognitive skills over time. To further complement this empirical evidence, we investigate the employment dynamics with respect to economic factors. The observed trends go in the direction of a concentration of employment in sectors which are more likely to require a higher educational level and consequently a higher level of skills. With all the caveats in mind, the reasoning behind this simple exercise is to grow awareness about the need to reinforce skills, and desirably, anticipate skills needs, through both efficient education policies and active labour market programs, including training.
We investigate the returns to cognitive ability in the labor and capital markets. Using population-wide Swedish military enlistment data and administrative tax records, we find that cognitive ability is much better at predicting capital income than labor earnings. The difference is almost a factor of three and remains substantial even after controlling for education, occupation, savings, inheritance, and parental background. Moreover, ability is significantly positively correlated with wealth returns. Our results provide new insights into why inequality in capital income is greater than in labor income and shed light on the drivers of economic mobility.
