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