Individuals’ skills are a key resource for economic growth and innovation as well as individual success in the labor market. Despite the large number of studies on the economic relevance of skills, central research questions are still unsolved:
a) Most economies have undergone substantial transformations which affect workplace conditions, e.g. technological change and the automation of tasks. Against this background, previous evidence on returns to skills may no longer be good indicators for current labor markets.
b) Existing studies widely neglect the fact that the skill vector relevant in the labor market has many dimensions. In addition to job-specific knowledge and cognitive skills, the question on the role of non-cognitive skills as well as their interplay with cognitive skills has not been comprehensively addressed.

This project overcomes these shortcomings by using two current large-scale and high qualitative data sets containing not only cognitive but also non-cognitive skill measures: the Programme for the International Assessment of Adult Competencies (PIAAC) and the National Educational Panel Study (NEPS). In combination these data sources allow an investigation of (a) societal differences in the role cognitive and non-cognitive skills play in the labor market as well as (b) changes in this role over time and in dependence of individual factors.
In particular, the project will investigate (i) to what degree returns to cognitive and non-cognitive skills on earnings differ across societies and if they have changed over time, (ii) the relevance of skill mismatch, namely the discrepancy between individual skills and job skill requirements, for societal as well as individual labor market success, and (iii) the role of age on skill declines and skill enhancements through further education.
Bringing together experts in labor economics, educational and sociological research, as well as personality psychology, this project will shape the understanding of which factors impact skills and returns to skills, and implications of skill changes for labor market outcomes.

The proposed project will comprise four substantive, highly interrelated work packages (see graphic):
1. Income: Returns to cognitive and noncognitive skills
2. Skill mismatch: Matching workers’ skills to labor market demands
3. Aging: Skill changes in an aging society
4. Training: Skill development through training participation
Within the project, LIfBi is mainly responsible for work package 2 “Skill mismatch”. In this work package, we will analyze the incidence, causes, and consequences of skill mismatch in various dimensions in Germany and across countries.