What do employers pay for employees’ complex problem solving skills?

Abstract

We estimate the market value that employers assign to the complex problem solving (CPS) skills of their employees, using individual-level Mincer-style wage regressions. For the purpose of the study, we collected new and unique data using psychometric measures of CPS and an extensive background questionnaire on employees’ personal and work history. The data were collected in 16 firms (23 establishments) in Germany, Spain, South Africa, Denmark, Slovakia, Switzerland, and France in the period 2012–2014. We find significant economic returns to CPS in our sample. One standard deviation higher CPS is associated with 10–20% higher hourly wages. The returns to CPS are sizeable even after controlling for fluid intelligence, suggesting that CPS probably captures skills important for modern production that are beyond what general intelligence tests can measure.