Skills with the Best Payoff for Improvement

Last July, I wrote a blog entry about the relationship between skills and income, based on research done under the direction of the urban theorist Richard Florida. At the time, I was working on the second edition of 150 Best Jobs for Your Skills. Now that this book is published, I want to share what my own research indicates about the skill-income connection.

In 150 Best Jobs for Your Skills, I simplify the O*NET taxonomy of skills by collapsing skills with highly correlated ratings of occupations. That is, if two skills say almost the exact same thing for the full range of O*NET occupations, I can collapse those two skills. I ended up with only 9 skills and used these throughout the book.

To investigate the skills-income connection, I started with the 750 SOC occupations for which skills data is available. For the 9 skills that I use in the book, I looked at the range of ratings that are given to these 750 jobs. For example, the scores for Thought-Processing Skills range from a low of -0.50 (for Tank Car, Truck, and Ship Loaders) to a high of 1.98 (for Chief Executives). I divided this range into five equal zones and divided the 750 jobs according to which zone they belong in. The number of occupations in each zone varies greatly. For example, only two occupations (Chief Executives and Purchasing Managers) have scores that put them in the top zone for Management Skills, whereas 49 occupations (such as Electricians, Rail Car Repairers, and Avionics Technicians) have a top-zone level of Equipment Use/Maintenance Skills.

I computed the average annual income for the jobs in each zone (based on the OES survey) and then computed the average difference between the earnings in each zone and in the next-highest zone. This procedure indicated, for each skill, the average monetary difference (“payoff”) that is associated with a higher level (“improvement”) of skill. Finally, I ordered the 9 skills from highest to lowest average payoff to produce the following list. In other words, the skills nearest the top of the list have the highest payoff for higher mastery. If high income is important to you, you should think about developing these skills.

Note that I’m not looking at literal “improvements” or “payoffs.” I’m measuring differences between skill levels and between earnings. I’m not measuring the historical behavior of individuals or the rewards they’ve achieved by improving. For example, the average income difference between occupations at different levels of Management Skills is $32,002, but that doesn’t mean you should assume that every manager who improves his or her managerial abilities will automatically achieve that boost in earnings.

On the other hand, smart employers recognize and reward workers who improve their skills, often with promotions or raises. The lesson to take away is that you should aim for a high level of skill when you first prepare for career entry and continue to improve your skills as you work.

Average Payoffs for Improvement of Skill, from Highest to Lowest

Skill      Average Payoff for Skill Improvement

1. Management Skills $32,002
2. Social Skills $18,221
3. Thought-Processing Skills $16,278
4. Communication Skills $15,284
5. Mathematics Skills $14,123
6. Science Skills $13,061
7. Technology/Programming Skills $10,747
8. Installation Skills $1,059
9. Equipment Use/Maintenance Skills $367

We're Eating Our Seed Corn

The most troubling news article I have seen all week was on the front page of this morning’s New York Times, with the headline “Where the Jobs Are, the Training May Not Be.” The article notes, “As state funding has dwindled, public colleges have raised tuition and are now resorting to even more desperate measures--cutting training for jobs the economy needs most.” It’s a cruel irony that the hottest career skills--health care, high tech, and engineering--are also among the most expensive to teach, partly because of the nature of the equipment used, partly because the instructors need to be offered high salaries to lure them away from nonteaching jobs, and in some cases because of safety requirements.

Cash-strapped states are reducing their subsidies for higher education, forcing students to pay more and in many cases admitting only a small fraction of the students who want to enroll. “At one community college in North Carolina--a state with a severe nursing shortage--nursing program applicants so outnumber available slots that there is a waiting list just to get on the waiting list.”

States continue to cut college funding continue even though higher education is demonstrably one of the best investments a state can make. Google the phrase “every dollar a state invests in higher education,” and you will find research showing that California gets $3 of economic activity for every dollar invested and Texas gets more than $5. One study for the Federal Reserve Bank of Boston (PDF here) estimates a total return to government of $7.46.

So why is it politically acceptable to cut funding to higher education? At root is the implicit belief that (a) the people who get higher education are the ones who benefit from it, so (b) they should pay for it.

It’s important to recognize that this attitude has two parts, and that the second part depends on the accuracy of the first part. But it turns out that the first part of this belief is only half true. Yes, study after study has shown that higher education dramatically increases a person’s income and reduces the likelihood of unemployment. For example, see the Department of Labor’s “Education Pays” page. The recent recession has only amplified this trend.

However, it’s not true that the recipients of higher education are the only people who benefit. That $7.46 return on the dollar of investment is not coming solely from the increased tax payments of the college graduates. Demonstrably, the presence of educated people in the economy causes everybody to be more productive and thus earn more. A fascinating study by UCLA economist Enrico Moretti (PDF here) compared the wages of otherwise similar individuals who work in cities that have differing shares of college graduates. The research showed that “a percentage point increase in the supply of college graduates raises high school drop-outs’ wages by 1.9%, high school graduates’ wages by 1.6%, and college graduates wages by 0.4%.” In other words, everybody benefits from higher education, but it’s the least-educated people who benefit the most.

That’s why it’s so destructive when politicians argue against funding for higher education and whip up popular support by encouraging uneducated people to resent higher education. We saw that happen just this week as presidential candidate Rick Santorum branded President Obama a “snob” because “he wants everybody in America to go to college.” (As Politifact.com notes, the President actually advocates a full range of postsecondary education and training, including apprenticeships.)

In the present political climate, however, it’s not good enough to argue that everyone benefits from spending on higher education. Those who believe in a government small enough to drown in the bathtub don’t want any investments in the public sector that could be replaced by the private sector. In other words, the second half of the key belief--people should pay for higher education--is not based solely on the premise that education benefits only the people who receive it. It also draws on the premise that the private sector does everything best, so investments in higher education should come from the private sector. In practical terms, these investments consist of the loans that college students increasingly take out to pay for their education. Last year student debt passed the $1 trillion mark, exceeding America’s total credit card debt.

We hear increasing warnings that college debt is the next bubble threatening our economy, and sometimes the government itself is accused of inflating the bubble by making cheap college loans available. But consider that much less of this debt would be necessary if we had a well-funded system of public higher education. This is another example of what Thomas Friedman and Michael Mandelbaum refer to in the title of their book That Used to Be Us. We owe much of the post-World War II prosperity to the G.I. Bill and to well-funded state universities such as California used to have. But in the present political climate, it seems that education is too expensive, so we’re going to try ignorance instead.

Fastest-Growing Occupations Not Requiring College, 2010-20

Last week, I blogged about the fastest-growing college-level occupations, according to the latest round of employment projections published by the Bureau of Labor Statistics, applying to the years 2010 through 2020. This week, here is similar information for the fastest-growing occupations that don't require college.

Fastest-Growing Occupations Not Requiring College, 2010-20
Occ title	Empl 2010	Growth	Total annual job  open- ings	Edu- cation	Expe- rience	Train- ing
Personal Care Aides	861,000	70.5%	67,520	Less than high school	None	Short-term on-the-job training
Home Health Aides	1,017,700	69.4%	83,750	Less than high school	None	Short-term on-the-job training
Helpers--Brickmasons, Blockmasons, Stonemasons, and Tile and Marble Setters	29,400	60.1%	2,540	Less than high school	None	Short-term on-the-job training
Helpers--Carpenters	46,500	55.7%	3,820	Less than high school	None	Short-term on-the-job training
Reinforcing Iron and Rebar Workers	19,100	48.6%	1,320	High school diploma or equivalent	None	Apprenticeship
Helpers--Pipelayers, Plumbers, Pipefitters, and Steamfitters	57,900	45.4%	4,170	High school diploma or equivalent	None	Short-term on-the-job training
Physical Therapist Aides	47,000	43.1%	2,760	High school diploma or equivalent	None	Moderate-term on-the-job training
Glaziers	41,900	42.4%	3,340	High school diploma or equivalent	None	Apprenticeship
Medical Secretaries	508,700	41.3%	27,840	High school diploma or equivalent	None	Moderate-term on-the-job training
Brickmasons and Blockmasons	89,200	40.5%	5,450	High school diploma or equivalent	None	Apprenticeship
Bicycle Repairers	9,900	37.6%	630	High school diploma or equivalent	None	Moderate-term on-the-job training
Stonemasons	15,600	36.5%	890	High school diploma or equivalent	None	Apprenticeship
Pile-Driver Operators	4,100	36.0%	230	High school diploma or equivalent	None	Moderate-term on-the-job training
Tapers	22,900	34.7%	1,430	Less than high school	None	Moderate-term on-the-job training
Cement Masons and Concrete Finishers	144,700	34.6%	7,290	Less than high school	None	Moderate-term on-the-job training
Heating, Air Conditioning, and Refrigeration Mechanics and Installers	267,800	33.7%	13,760	Post- secondary non-degree award	None	Long-term on-the-job training
Emergency Medical Technicians and Paramedics	226,500	33.3%	12,080	Post- secondary non-degree award	None	None
Segmental Pavers	1,300	33.1%	90	High school diploma or equivalent	None	Moderate-term on-the-job training
Security and Fire Alarm Systems Installers	63,800	33.0%	3,670	High school diploma or equivalent	None	Moderate-term on-the-job training
Occupational Therapy Aides	7,500	33.0%	360	High school diploma or equivalent	None	Short-term on-the-job training
Pharmacy Technicians	334,400	32.4%	16,630	High school diploma or equivalent	None	Moderate-term on-the-job training
Ambulance Drivers and Attendants, Except Emergency Medical Technicians	19,600	32.1%	1,010	High school diploma or equivalent	None	Moderate-term on-the-job training
Insulation Workers, Mechanical	28,300	31.8%	2,010	High school diploma or equivalent	None	Apprenticeship
Medical Assistants	527,600	30.9%	24,380	High school diploma or equivalent	None	Moderate-term on-the-job training
Dental Assistants	297,200	30.8%	15,400	Post- secondary non-degree award	None	None

Fastest-Growing College-Level Occupations, 2010-20

Last week, I blogged about the fastest-growing industries, according to the latest round of employment projections published by the Bureau of Labor Statistics, applying to the years 2010 through 2020.  If you're looking for college-level occupations with lots of job opportunities, here is some information you will find helpful. Next week I'll feature a similar table with occupations that don't require college.

Fastest-Growing College-Level Occupations 2010-20
Occ title	Empl 2010	Growth	Total annual job  open-ings	Edu- cation	Expe- rience	Train- ing
Biomedical Engineers	15,700	61.7%	1,310	Bachelor's degree	None	None
Veterinary Technologists and Technicians	80,200	52.0%	5,570	Associate degree	None	None
Physical Therapist Assistants	67,400	45.7%	4,120	Associate degree	None	None
Meeting, Convention, and Event Planners	71,600	43.7%	4,500	Bachelor's degree	Less than 1 year	None
Diagnostic Medical Sonographers	53,700	43.5%	3,170	Associate degree	None	None
Occupational Therapy Assistants	28,500	43.3%	1,680	Associate degree	None	None
Interpreters and Translators	58,400	42.2%	4,030	Bachelor's degree	None	Long-term on-the-job training
Marriage and Family Therapists	36,000	41.2%	2,260	Master's degree	None	Internship/ residency
Market Research Analysts and Marketing Specialists	282,700	41.2%	19,180	Bachelor's degree	None	None
Physical Therapists	198,600	39.0%	10,060	Doctoral or professional degree	None	None
Dental Hygienists	181,800	37.7%	10,490	Associate degree	None	None
Audiologists	13,000	36.8%	560	Doctoral or professional degree	None	None
Health Educators	63,400	36.5%	3,690	Bachelor's degree	None	None
Cost Estimators	185,400	36.4%	10,300	Bachelor's degree	None	None
Medical Scientists, Except Epidemiologists	100,000	36.4%	4,260	Doctoral or professional degree	None	None
Mental Health Counselors	120,300	36.3%	6,940	Master's degree	None	Internship/ residency
Veterinarians	61,400	35.9%	3,420	Doctoral or professional degree	None	None
Geographers	1,600	35.4%	130	Bachelor's degree	None	None
Industrial-Organizational Psychologists	2,200	34.9%	150	Master's degree	None	Internship/ residency
Occupational Therapists	108,800	33.5%	5,710	Master's degree	None	None
Healthcare Social Workers	152,700	33.5%	8,740	Master's degree	None	None
Optometrists	34,200	33.1%	2,340	Doctoral or professional degree	None	None
Software Developers, Systems Software	392,300	32.4%	16,800	Bachelor's degree	None	None
Personal Financial Advisors	206,800	32.1%	9,020	Bachelor's degree	None	None
Medical Equipment Repairers	37,900	31.5%	2,230	Associate degree	None	Moderate-term on-the-job training
Mental Health and Substance Abuse Social Workers	126,100	31.3%	6,940	Bachelor's degree	None	None
Biochemists and Biophysicists	25,100	30.8%	1,340	Doctoral or professional degree	None	None
Database Administrators	110,800	30.6%	5,270	Bachelor's degree	1 to 5 years	None
Athletic Trainers	18,200	30.0%	1,190	Bachelor's degree	None	None