The Growing Importance of Social Skills in the Labor Market

Abstract

I show that the labor market increasingly rewards social skills. Between 1980 and 2012, jobs with high social skill requirements grew by nearly 10 percentage points as a share of the U.S. labor force. In contrast, math-intensive but less social jobs (including many STEM occupations) shrank by about 3 percentage points over the same period. Employment and wage growth was particularly strong for jobs requiring high levels of both cognitive skill and social skill. To understand these patterns, I develop a model of team production where workers “trade tasks” to exploit their comparative advantage. In the model, social skills reduce coordination costs, allowing workers to specialize and trade more efficiently. The model generates predictions about sorting and the relative returns to skill across occupations, which I test and confirm using data from the NLSY79 and the NLSY97. Using a comparable set of skill measures and covariates across survey waves, I show that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.