Growing Importance of Cognitive Skills in Wage Determination

Posted June 15, 1995
By News editor

Cognitive skills were stronger determinants of wages at age 24 for 1980 high school graduates than for 1972 high school graduates, according to a new study by researchers at the Harvard Graduate School of Education and the Massachusetts Institute of Technology (MIT). This growing importance of academic skills learned in schools holds not only for graduates who went to college, but also for those who did not. It applied to women as well as to men. This study was conducted by HGSE professors Richard J. Murnane and John B. Willett and MIT Professor Frank Levy.

The researchers studied two large nationally representative samples of high school seniors who were followed for six years after high school graduation. Both the group graduating from high school in 1972 and the group graduating in 1980 took the same test of basic mathematics skills during their senior year.

For males who entered the labor market directly after high school graduation in 1972, the difference between mastery of basic mathematical skills (fractions, decimals, and line graphs) and weak understanding of these concepts translated into an hourly wage differential at age 24 of $0.48 per hour (or $960 per year for year-round, full-time workers). The comparable difference for males graduating in 1980 was $1.14 per hour (or $2,280 per year).

For women entering the labor market directly after graduation from high school in 1972, those with mastery of basic mathematical skills earned $0.78 per hour ($1,560 per year) more at age 24 than did those with weak math skills. The comparable differential at age 24 for women graduating from high school in 1980 was $1.48 per hour ($2,960 per year). (All dollar figures are expressed in constant 1988 dollars.) Relationships between reading scores and subsequent earnings were similar, although slightly less strong.

One important note of caution is that these earnings differences, while large at age 24, were much smaller at age 20. In fact, male high school seniors' math scores played no role in predicting wages at age 20. As Murnane explains, "Cognitive skills matter much more in today's labor market than in the labor market of the 1970s. However, it takes a while before the skills are rewarded."

On the significance of the research, Levy commented: "The trick is in getting the incentives right. You need to convince high school students that math skills will pay off even if they don't pay off in the first job."

The research team used data from the National Longitudinal Study of the High School Class of 1972 and from the High School and Beyond data set. Analyses are based on students from the two data sets who completed their formal education and were working for pay six years after graduating from high school. The study was published this week in the current issue of The Review of Economics and Statistics.

This study is part of the research on which the authors' forthcoming book, The New Basic Skills: Educating Children for Tomorrow's Middle Class, is based. The book will be published by Free Press in the spring of 1996.