Where I mix career information and career decision making in a test tube and see what happens

Wednesday, August 1, 2012

Transferable Skills with the Biggest Payoff


Everyone understands that improved skills are the key to higher income. But perhaps you’re wondering which skills carry the most clout. To make this comparison, I’m going to focus on the transferable skills in the taxonomy used by the O*NET database.

To identify the most lucrative transferable skills, I used the statistical procedure known as correlation, which measures how closely one characteristic varies along with another characteristic.

For example, when cigarette smoking first became popular, doctors noticed that heavy smokers were more often afflicted with certain diseases. Long before researchers were able to pinpoint the mechanisms by which the smoke caused harmful biological processes, they were able to demonstrate a statistical correlation between these two factors. To be sure, sometimes correlations are misleading. Some doctors once believed that there was a connection between polio and ice cream because the disease struck most often during the summer, when the most ice cream was eaten. Eventually the polio virus was discovered, and swimming was found to be an excellent way to acquire it.

Nevertheless, correlations often indicate a cause-and-effect relationship. And when it comes to the relationship between skills and employability, any employer can tell you that this is a real relationship, not like polio and ice cream. Employers look for highly skilled workers and pay them premium salaries.

So computing the correlations between the 35 O*NET skills and the occupations in the American workforce can be a useful indication of which skills have the highest value in the job market. A perfect correlation would be 1.0, meaning that any difference in skill levels between any two occupations is accompanied by a commensurate increase in the wages paid by those occupations. It would also mean that the difference goes in the same direction: higher pay when there’s higher skill. If skill increases were linked to wage decreases, the correlation would be a negative number. If no relationship existed between the two factors, just random variation, the correlation would be zero.

The following table shows, from highest to lowest, the correlations between each of the 35 O*NET skills and the median wages paid in the 747 occupations that are included in both the O*NET database and the salary surveys of the Department of Labor.

Correlations Between O*NET Skills and Occupational Wages
Skill
Definition
Correlation
Judgment and Decision Making
Weighing the relative costs and benefits of a potential action.
0.8
Complex Problem Solving
Identifying complex problems, reviewing the options, and implementing solutions.
0.7
Active Learning
Working with new material or information to grasp its implications.
0.7
Reading Comprehension
Understanding written sentences and paragraphs in work-related documents.
0.7
Critical Thinking
Using logic and analysis to identify the strengths and weaknesses of different approaches.
0.7
Time Management
Managing one’s own time and the time of others.
0.7
Systems Evaluation
Looking at many indicators of system performance and taking into account their accuracy.
0.7
Monitoring
Assessing how well one is doing when learning or doing something.
0.7
Active Listening
Listening to what other people are saying and asking questions as appropriate.
0.6
Writing

Communicating effectively with others in writing as indicated by the needs of the audience.
0.6
Systems Analysis
Determining how a system should work and how changes will affect outcomes.
0.6
Operations Analysis
Analyzing needs and product requirements to create a design.
0.6
Speaking
Talking to others to effectively convey information.
0.6
Science
Using scientific methods to solve problems.
0.6
Instructing
Teaching others how to do something.
0.6
Management of Personnel Resources
Motivating, developing, and directing people as they work; identifying the best people for the job.
0.6
Persuasion
Persuading others to approach things differently.
0.6
Coordination
Adjusting actions in relation to others’ actions.
0.6
Learning Strategies
Using multiple approaches when learning or teaching new things.
0.6
Social Perceptiveness
Being aware of others’ reactions and understanding why they react the way they do.
0.5
Mathematics
Using mathematics to solve problems.
0.5
Negotiation
Bringing others together and trying to reconcile differences.
0.5
Management of Financial Resources
Determining how money will be spent to get the work done and accounting for these expenditures.
0.5
Management of Material Resources
Obtaining and seeing to the appropriate use of equipment, facilities, and materials needed to do certain work.
0.4
Service Orientation
Actively looking for ways to help people.
0.4
Programming
Writing computer programs for various purposes.
0.4
Technology Design
Generating or adapting equipment and technology to serve user needs.
0.3
Quality Control Analysis
Evaluating the quality or performance of products, services, or processes.
0.0
Operation Monitoring
Watching gauges, dials, or other indicators to make sure a machine is working properly.
–0.1
Installation
Installing equipment, machines, wiring, or programs to meet specifications.
–0.1
Troubleshooting
Determining what is causing an operating error and deciding what to do about it.
–0.1
Equipment Selection
Determining the kind of tools and equipment needed to do a job.
–0.1
Operation and Control
Controlling operations of equipment or systems.
–0.2
Repairing
Repairing machines or systems, using the needed tools.
–0.2
Equipment Maintenance
Performing routine maintenance and determining when and what kind of maintenance is needed.
–0.2

Sources: O*NET database, release 16.0; May 2010 Occupational Employment Statistics survey. Tabulation produced by the author.

I’ll acknowledge that transferable skills are harder to learn than many job-specific skills such as Excel. You can’t take a four-week course in critical thinking and expect to boost your proficiency from zero to a level that employers want. On the other hand, critical thinking is something we all have been learning since childhood (even though certain benighted politicians are trying to keep it out of the classroom), so nobody starts from a zero level of proficiency.

3 comments:

  1. And yet, most companies only hire people who follow directions, not those who innovate.

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  2. Thank you very much for interesting research, Mr Shatkin. To be frank, as an econometric researcher, I believe the correlation analysis of "median income" with "skills" are insufficient to derive sharp conclusions.

    Firstly, your analysis shows, to what extend different skills contributed to higher income of analysed sample, believing you have specified the analysis as per following:
    Dependent variable: Median Income
    Independent variable(s): Separate d-u-m-m-y variable for each skill.
    In other words, it is not about future benefits, it is about current contribution of different skills to higher income.

    Moreover, to further asses results of your analysis, I would appreciate if you could provide readers with F-test and/or t-test results of your outcome.

    To assess what skills will be beneficial in future you may be better of by running a qualitative/non-parametric regression.

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  3. Greetings from Germany! In 2003 I learned the O*Net via http://www.assessment.com and repeated the test in 2008. I found it very valuable. Your research is a very good approach, and I will compare it to my MAPP / O*NET profile in detail.

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