‘Cognitive Skills Are not Sufficient to Be Successful in Labour Market’

In September, HSE – St. Petersburg hosted the 3^rd IZA/HSE University Workshop on Skills and Preferences and Labor Market Outcomes in Post-Transition and Emerging Economies. The workshop brought together junior and senior researchers from all over the world to discuss the formation of human capital and its role in the labour market in post-transition and emerging economies.

The workshop covered topics such as the formation of cognitive and non-cognitive skills in early childhood and adolescence; the measurement of preferences and skills using surveys and experiments; the malleability of preferences and cognitive and non-cognitive skills, and their rank order stability; preferences and skills as driving factors of selection into labour market states and geographic mobility; and more.

Hartmut Lehmann,
Leading Research Fellow at the International Laboratory Centre for Labour Market Studies

Workshop co-organizer, Hartmut Lehmann, a professor of economics at the University of Bologna (Italy), joined HSE University as Leading Research Fellow at the Centre for Labour Market Studies in 2018. Professor Lehmann is also a Programme Coordinator for the research area ‘Labor in Post-Transition and Emerging Economies’ at the IZA Institute of Labor Economics. HSE News Service spoke with Professor Lehmann about human capital, the importance of cognitive and noncognitive skills, and the challenges empirical labour economists encounter when studying these issues in post-transition and emerging economies.

Cognitive vs. Noncognitive Skills

‘When we talk about human capital,’ says Professor Lehmann, ‘we mean above all cognitive and noncognitive skills. One of the important insights of research into human capital over the last decade is that cognitive skills, such as linguistic and mathematical skills, for example, are not sufficient to be successful in the labour market.'

Good cognitive skills have to be combined with noncognitive skills for success in the labour market

Noncognitive skills, the professor explains, are often called ‘personality traits’; they have been discussed for decades in the psychology literature but only recently in economics. ‘If, as a worker, I can combine cognitive skills with noncognitive skills, such as an openness to new experiences, conscientiousness, patience, and an internal locus of control, I will be much more successful in my career than if I had super cognitive skills but without the aforementioned personality traits or if I am unable to combine them with cognitive skills,’ he says. 

Professor Lehmann noted that there were several papers presented at the workshop that made precisely this point. ‘Several papers showed how important personality traits are in the labour market of post-transition and emerging economies since they are predictors of higher productivity and higher earnings,’ he says. ‘There were also papers that showed that personality traits and cognitive skills are formed early in childhood and that in many countries there is an emphasis on the formation of cognitive and noncognitive skills for boys.’

The workshop, however, also included presentations about more conventional topics related to human capital, such as the efficacy of active labour market policies directed at young unemployed workers, human capital measurement, lifetime earning profiles in post-transition countries, as well as issues such as the digital gender gap and entrepreneurship in emerging economies.     

Combination is Key

What skills are important for today’s labour market? The answer, Professor Lehmann says, depends on what kind of workers you have in mind. But also, he adds, ‘it is not so much that individual skills have becoming more in demand, but rather the ability to combine one’s noncognitive and cognitive skills in the right way.’

Even in occupations where vocational education is required, human resource managers, when asked, will tell you that it is not only cognitive skills like numeracy and literacy that are important, but noncognitive skills and how the two types of skills are combined

The reason for this, according to the professor, is that much of production today involves team work. ‘Noncognitive skills that enhance working in teams are crucial for a smooth production process. Of course, the demand for skills that are useful for the digitalization of work has tremendously increased in many occupations, but I would still argue that for the average worker it is a better use of noncognitive skills in combination with cognitive skills that is required from her or him.’

But Can It Be Learned?

If firms want to enable their employees to upgrade their current skillsets or acquire new skills, Professor Lehmann says, firms need to provide the right incentives. Such incentives may include promotions and raises. ‘Firms could also help cover the costs of skill enhancement courses, or they might directly offer courses on firm premises,’ he says. ‘We should stress, though, that when we are talking about enhancing skills of adult employees, we mainly have cognitive skills in mind. There is now ample evidence that the formation of noncognitive skills takes place predominantly in the family before children reach adulthood, so there is little that firms can do to enhance the noncognitive skills of their employees even if they are a crucial input in the skill mix required for a productive workforce.’

On Research Challenges

Many of the workshop’s areas of focus present challenges to researchers.

As I work on labour markets in post-transition economies, it is quite challenging to find themes that are both interesting to researchers in the post-transition region and to labour economists in general

‘An additional challenge for me as an empirical labour economist finding labour market data on post-transition regions that is of comparable quality to western data sets. Of course, with the Russian Longitudinal Monitoring Survey data that are sponsored by the HSE (RLMS-HSE), we have such a data set.

‘Some of my ongoing research uses the RLMS-HSE data. For example, one project looks at the impact of noncognitive skills and risk preferences on internal migration in the Russian Federation, while another project investigates whether the Russian labour market is segmented or integrated along the formal-informal divide. Another somewhat historical project looks in international perspective at how the Russian labour market has adjusted over the last thirty years to the many macroeconomic shocks that have occurred in the Russian economy since the dissolution of the Soviet Union, comparing Russian labour market adjustment with the adjustment in Poland.’