Success through Future Skills

The trend towards skills-based hiring has been evident on the job market for years, and the Covid pandemic has accelerated it even further: Companies are increasingly hiring applicants based on their actual skills and are placing less emphasis on university degrees. At least this is the case in the USA, as Christina Langer, postdoctoral researcher at the Stanford Digital Economy Lab, found out in a study.

Skills-based hiring could alleviate the shortage of skilled workers, increase equal opportunities and diversity, and provide easier access to well-paid occupations for people who cannot afford expensive education. But what are the skills that promise long-term success in professional life? Christina Langer and her co-author, Prof. Simon Wiederhold from Martin Luther University Halle-Wittenberg, have investigated this in another study, which focuses on Germany.

They analyzed text data from standardized training plans for 165 professions. They listed more than 13,000 different qualifications, which Langer and Wiederhold divided into five categories: cognitive, social, digital, manual and administrative. The two researchers then linked their data with the sample of integrated labor market biographies (SIAB) from the Institute for Employment Research (IAB), which contains information on the employment histories, training occupations and wages of a representative sample of two percent of German employees subject to social insurance contributions.

A look at the details

The analysis showed that cognitive, social and digital skills in particular are associated with higher salaries in the long term ‒ this is especially true for digital skills. It is worth taking a look at the details: for example, the positive effects of digital skills often only materialize in the long term, while those of social and cognitive skills can be felt almost immediately. "One reason for this could be that people often go on to obtain a university degree once they have acquired higher digital skills. This means you enter the job market later and the digital skills only pay off later," explains Langer. Another possible reason: the data was collected in the period between the 1990s and 2017. During these decades, digital skills generally became increasingly important and led to higher salaries.

There are also differences between the genders: women seem to benefit most from a stronger transfer of cognitive and social skills. The opposite is true for digital skills: men’s salaries increase more than women’s when they acquire these skills. The reasons for this are to be determined in a follow-up study.

Promising combination

Another finding is that cognitive skills pay off more in cities and regions where there is a greater demand for cognitive and digital skills. According to a study by the Burning Glass Institute with the Bertelsmann Foundation, this applies in Germany to regions with many technology companies such as Upper Bavaria with its strong automotive industry and the banking metropolis of Frankfurt, but also applies to Stuttgart, Darmstadt and Hamburg. Heilbronn-Franconia is in the upper midfield according to this study.

A combination of social and cognitive skills is also particularly promising. These are often required together in job advertisements and complement each other well, says Langer. She adds: "Although digital skills are important, they tend to be considered specialized skills and are less often required as a mandatory addition to social skills."

The role of AI in education

Which stakeholders can benefit from these results beyond the scientific community? "Our results offer possible guidance for the creation of curricula and training regulations. We want the redesign of training plans to be based on a solid empirical foundation and take into account the current needs of the labor market," says Langer. At present, the modernization of training content can hardly keep pace with the rapid progress in the field of AI, for example. "But if we can show that these updates pay off in wages, then hopefully that could speed up the process."

A further study in cooperation with Dr. Philipp Lergetporer, Professor of Economics at the TUM School of Management on Campus Heilbronn, and the Federal Institute for Vocational Education and Training will now investigate how AI can be used specifically in vocational training to improve quality. Langer explains: "We want to find out how trainees use AI and what the consequences are for them."