Interpersonal, cognitive, and manual skills: How do they shape employment and wages?

Abstract

We study how interpersonal, cognitive, and manual skills affect employment and wages in a search and matching model through their impact on productivity, complementarity, job destruction, and the cost of unemployment. Combining several data sets on workers who acquired skills in vocational education and training (VET), we quantify each channel, allowing for unobserved heterogeneity in ability. All three skills increase productivity, yet they affect job destruction rates differentially. While manual skills are associated with lower job destruction, interpersonal and cognitive skills have the opposite effect. Focusing on low-ability workers, we then estimate the value of VET. Through VET, wages increase up to 10% and unemployment drops by over 50%. Low-ability workers thus have particularly large benefits from acquiring manual skills because they increase wages and shield from unemployment.