SOFT SKILLS, HARD SKILLS, AND THE BLACK/WHITE WAGE GAP

Abstract

This study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between Blacks and Whites in the United States. It posits that the Black/White pay gap may vary across occupations that require the use of different types of skills. We classify occupations into hard‐skill intensive versus soft‐skill intensive jobs using the skill content measures of different occupations from the Occupational Information Network (O*Net). We then use data from the National Longitudinal Survey of Youth (NLSY) and Current Population Survey (CPS) to investigate the impact of job skill type on the wage gap. Consistent with our theoretical predictions, we show that this wage gap in white‐collar jobs is smaller for hard‐skills jobs than it is for soft‐skills jobs. Moreover, we demonstrate that, in response to variations in the wage gap across different occupations, Blacks are more likely to self‐select themselves into hard‐skills jobs, ceteris paribus. This shows not only that discrimination against Blacks varies across occupations, but also that such discrimination induces the self‐selection of Blacks into certain occupations. Moreover, this finding highlights the role played by co‐worker/customer discrimination in explaining the racial wage gap in the U.S. labor market. (JEL J15, J31)