Do Worker Non-cognitive Skills Affect Firm Outcomes?

This work will shed light on how much employers value cognitive (e.g. IQ) and non-cognitive (e.g. motivation, perseverance etc.) skills and the extent to which these skills are predictive of future productivity.

Workers’ skills are among the main determinants of firm productivity, particularly in developing countries with a labour intensive production process. However, there is very limited information on the value that employers place on cognitive skills vis-à-vis non-cognitive skills, and there is currently no empirical data on actual returns to non-cognitive skills in terms of productivity. The researchers propose to investigate the role of skills for firms in a developing country from two angles. First, they will quantify the value that employers place on various skill bundles of young entry-level work-seekers, specifically separating cognitive and non-cognitive abilities. Second, we will examine the relative returns (in terms of absenteeism, retention, promotion, wages and productivity) to cognitive and non-cognitive skills for large firms in a developing country context.

To address the first research question the researchers will construct a dataset containing detailed measures of employees’ cognitive and non-cognitive skills and employees’ level workplace outcomes for a sample of young South Africans. To answer to the second research question, they will use a specifically designed digital platform which allows to measure firm preferences among a sample of South African enterprises of different sizes in great detail. This will be possible thanks to a field partner, Harambee Youth Employment Accelerator, a prominent South African NGO that connects young South African job-seekers with formal employment opportunities.

Limited information about work-seeker skills may result in lower productivity when firms hire the wrong types of employees. However, as there is little empirical evidence on relative returns to productivity by type of skill, firms would not be equipped to identify accurately the most productive workers even if they had full information about their skills. This research will inform effective ways to boost firm-level productivity and facilitate SME expansion, with direct links to economic growth. In addition, information about the relative returns to skills may help individuals determine what level and amount of education is desirable. Lastly, a focus on firm search and hiring behaviour will yield important insights into firm-level preferences and constraints around finding workers, with important implications for employability of the unemployed.