Where I mix career information and career decision making in a test tube and see what happens

Friday, June 2, 2017

Which Skills Have the Best Monetary Rewards?

Which skills have the best monetary rewards? One way to answer this question is by calculating the correlations between (a) the skill ratings (on the “level” scale) for occupations in the O*NET database and (b) the earnings for occupations as reported by the Bureau of Labor Statistics. For my calculations, I used release 21.2 of the O*NET database and the BLS earnings estimates for 2016. For some especially high-paid occupations, BLS gives no specific dollar figure but says only that the occupations pay “more than $187,200 per year.” For these occupations, I used $200,000 as the earnings figure.

A note about correlation for those with a spotty background in statistics: A correlation of 1 means a perfect relationship between the two factors. That is, as one factor increases, the other increases by exactly the same proportion. A correlation of 0 means that variation in one has a totally random association with variation in the other. When the correlation goes into negative territory, it means that as one factor goes up, the other goes down.

Now let’s look at the 35 O*NET skills and their correlation to earnings. First, you’ll note that the scores range from 0.7 to -0.2, so some skills tend to pay off much better than others.


Correlation
Skill
0.74
Complex Problem Solving
0.73
Judgment and Decision Making
0.69
Active Learning
0.69
Critical Thinking
0.68
Reading Comprehension
0.64
Systems Evaluation
0.64
Monitoring
0.63
Systems Analysis
0.63
Time Management
0.63
Active Listening
0.62
Writing
0.60
Operations Analysis
0.60
Speaking
0.59
Science
0.59
Instructing
0.56
Management of Personnel Resources
0.55
Learning Strategies
0.53
Persuasion
0.52
Coordination
0.51
Mathematics
0.50
Social Perceptiveness
0.48
Negotiation
0.43
Management of Financial Resources
0.40
Management of Material Resources
0.38
Programming
0.37
Service Orientation
0.34
Technology Design
0.02
Quality Control Analysis
-0.06
Operation Monitoring
-0.09
Installation
-0.11
Troubleshooting
-0.11
Equipment Selection
-0.19
Operation and Control
-0.20
Repairing
-0.22
Equipment Maintenance

The next thing you’ll probably observe is that the skills with the best monetary payoff are those that might be described as cerebral—those involving complex mental effort. These skills are associated with professional occupations. It usually takes a lot of education to master these skills, and it is well understood that a greater amount of education tends to lead to better-paying work, so this skill-income relationship is not surprising.

Managerial work also tends to be better paid, but it’s interesting to note that of the four skills with “Management” in their title, only one—Time Management—is very high on this list. Management of Personnel Resources falls in the middle of the list, and Management of Financial or Material Resources pays rather poorly. I speculate that what this is showing is that Time Management is an important skill in professional careers, because the professional worker’s cerebral activity is the crucial money-making factor, so it’s important for the worker to exercise care in parceling out his or her mental energies over the course of the workday. Financial and material resources, on the other hand, are often managed by clerical functionaries, who are comparatively low-paid.

The skills at the bottom of the list are associated with manual and mechanical work. The extent to which your work requires these at a high level actually predicts a lowering of your income. It may seem a paradox that a higher level of skill can result in lower income, but for these skills, that is the case—but only insofar as the earnings for the occupation compare to earnings in other occupations. Presumably, those within the occupation who have a higher level of these skills earn more than less-skilled workers in the same occupation (but my analysis is not designed to evince this).

The converse is also true: That is, In high-paying careers, having a higher level of skill at (say) Complex Problem Solving or Judgment and Decision Making does not necessarily mean that you’ll earn more than people in the same occupation with lower levels of these skills. Probably it will make that difference. But the real reason that these two skills are at the top of the list is that the high earners are using them at higher level than workers in other occupations.

In my calculations, I included all occupations for which O*NET gives skill ratings and for which earnings data are available. When you look at the full range of occupations, it’s pretty easy to see how earnings are linked to level of education.  But what about the differences within a certain level of education? Which skills have the best payoff within (say) bachelor’s-level occupations? Or within occupations requiring no preparation beyond high school? In my next blog, I’ll show the surprising results of this kind of analysis.

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