The Skill-Income Relationship, Part 2

In my previous blog, I reported on an analysis of the statistical relationship between 35 skills and the earnings of close to 1,000 occupations.

I concluded 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.”

Having done that analysis, I wondered what would happen if I restricted my focus to only a subset of occupations—those requiring a bachelor’s degree. What relationships would I find between skills and earnings when the difference in level of education is not a factor?

The Bureau of Labor Statistics classifies occupations by the level of education most commonly required, so I extracted the subset of those requiring the bachelor’s degree, obtained the O*NET skills ratings for these occupations, and computed the correlations between level of skill and level of income.

The bachelor’s-level occupations include many managerial titles (e.g., Financial Managers) and many occupations that are considered professional but that do not require a post-baccalaureate professional degree (e.g., Cost Estimators, Accountants and Auditors, Chemical Engineers, and Secondary School Teachers).

The table below shows the correlations I found, plus (in the rightmost column) the rank that each skill achieved when I computed the correlations for all occupations. This column allows you to make easy comparisons to the table in the previous blog.

Correla- tion	Skill	Rank for All Occupations
0.59	Systems Analysis	8
0.56	Complex Problem Solving	1
0.54	Systems Evaluation	6
0.51	Management of Financial Resources	23
0.48	Judgment and Decision Making	2
0.46	Operations Analysis	12
0.45	Mathematics	20
0.44	Management of Material Resources	24
0.43	Management of Personnel Resources	16
0.42	Active Learning	3
0.39	Time Management	9
0.39	Monitoring	7
0.39	Critical Thinking	4
0.35	Programming	25
0.31	Technology Design	27
0.30	Coordination	19
0.29	Operation Monitoring	29
0.29	Troubleshooting	31
0.27	Quality Control Analysis	28
0.27	Instructing	15
0.27	Reading Comprehension	5
0.26	Persuasion	18
0.24	Science	14
0.22	Negotiation	22
0.21	Active Listening	10
0.19	Writing	11
0.17	Speaking	13
0.15	Installation	30
0.14	Equipment Maintenance	35
0.13	Equipment Selection	32
0.13	Repairing	34
0.13	Learning Strategies	17
0.09	Operation and Control	33
0.01	Service Orientation	26
-0.02	Social Perceptiveness	21

If you look at the previous blog, you’ll notice that the range of the correlation scores is greater than the range in the table above: a high of 0.74 and a low of -0.22, compared to 0.59 and -0.02. This is not surprising, because the skill-income relationship can be expected to be stronger when it’s viewed across the full range of educational requirements. Nevertheless, the range in the table above still shows a significant skills-income relationship.

The top three skills from the previous blog are reasonably high among those in the table above, and although only one of these ranks among the top three in the table above, the others in the top three above may also be considered cerebral skills. In this subset of occupations, it seems that thinking still pays. But what’s especially notable is how much the managerial skills have climbed in the rankings. The explanation, I believe, is that many managerial functions—e.g., tracking expenses and employees’ productivity—are typically handled by relatively low-paid clerical workers. Once you eliminate those clerical job titles by restricting the analysis to bachelor’s-level occupations, you see a much better payoff for the skills used by managerial titles and by high-level business analysts such as Accountants and Auditors. Mathematics, which rises from 20^th to 7^th, probably benefits in the same way.

Some of the mechanically-oriented skills that ranked low in the previous blog continue to rank low among bachelor’s-level occupations—for example, Equipment Maintenance, Equipment Selection, Repairing, and Operation and Control. However,  the mechanical skills that also have a cerebral element  get a boost—for example, Operation Monitoring, Troubleshooting, and Quality Control Analysis. Among the bachelor’s-level subset, these skills are associated with engineers rather than with mechanics and repairers.

The most notable declines in the table above are for Critical Thinking (from 4^th to 13^th) and Reading Comprehension (from 5^th to 21^st). I speculate that there is a baseline level of these skills that is expected for all bachelor’s-level occupations, and so differences in level of mastery are not as significant as they are across the full range of occupations. This is probably also true for Active Listening, Writing, Speaking, and especially Learning Strategies.

In my next blog, I’ll look at another subset based on level of required education.