Adults' Cognitive and Socioemotional Skills and Their Labor Market Outcomes in Colombia/Las habilidades socioemocionales y cognitivas de los adultos colombianos y sus resultados en el mercado laboral/As habilidades socioemocionais e cognitivas dos adultos colombianos e seus resultados no mercado laboral.

• Author: Acosta, Pablo
• Pages: 109(40)

Introduction

People with higher socioemotional skills do better on the labor market (Saltiel, Sarzosa, & Urzua, 2017; Acosta & Muller, 2018). Once overlooked, people's behaviors and personality traits--their socioemotional skills--have been increasingly seen as essential factors explaining their trajectories in school and the labor market, at least much as their mental abilities--their cognitive skills--, long viewed as the primary determinants of success (Almlund et al., 2011). Three types of evidence sparked this rising interest: first, that beneficiaries of early childhood programs, designed to foster socioemotional development, had strikingly better labor-market and other outcomes decades later when adults (Heckman, Pinto, & Savelyev, 2013; Gertler et al., 2014); second, that children and youth with both higher cognitive and socioemotional skills measured by longitudinal surveys had better education, labor-market, and a range of other desirable outcomes later in life (Heckman, Stixrud, & Urzua, 2006; OECD, 2015), and third, employers in various countries think that socioemotional skills are of primary importance and lament the lack of them for their employees (Cunningham and Villasenor, 2016).

It is unclear, however, how much socioemotional skills matter for people in low-or middle-income countries. The consensus about the positive influence of these skills on the labor market is almost exclusively based on data from high-income countries. (1) Plus, although differences in skills measures and surveyed populations often challenge comparability, multi-country studies suggests that the returns to cognitive and socioemotional skills vary across countries (Hanushek et al., 2015, 2017; OECD, 2015). Indeed, the estimated wage returns to comparable measures of cognitive skills of adults in 32 countries range from 0.11 in Greece to 0.47 in Singapore (Hanushek et al., 2017). (2) For socioemotional skills, for example, the impact of raising adolescents' self-confidence in Norway and Switzerland from the lowest to the highest decile on the probability of being in the top income quartile in adulthood is as different as 35 % and 15 %, respectively (OECD, 2015).

A handful of studies on the topic in low- and middle-income countries confirm the unpredictability of results in a given country. Two longitudinal studies in rural China (Glewwe, Huang, & Park, 2017) and Madagascar (Sahn & Villa, 2016) suggest that both types of skills measured in childhood correlate with better labor market outcomes in early adulthood, mostly through their influence on education trajectories and sorting in employment sectors, rather than on productivity. A few cross-sectional studies in Bangladesh (Nordman, Sarr, & Sharma, 2019) and Latin American contexts, such as Argentina, Chile (Bassi et al., 2012), Mexico (Campos-Vazquez, 2017), Peru (Cunningham, Parra Torrado, & Sarzosa, 2016), and ten of its cities (Berniell et al., 2016), confirm that both cognitive and socioemotional skills also relate to labor market outcomes but with important variations in correlations magnitude across types of skills, outcomes, and countries.

We are interested in examining whether socioemotional skills might be valued differently in the labor market of Colombia, a Latin American middle-income country. There is a range of potential reasons why it could be the case; first, due to differences in the types of employment available. As a typical country of this income level, about half of Colombia's labor force works informally: off regulations and benefits. That could mean that informal workers with higher socioemotional skills such as resilience and social skills would do better in such adverse settings; or, on the contrary, it could mean that such labor markets have not yet produced more jobs requiring more adaptability and social skills as much as seen in the United States in the past forty years (Deming, 2017). Second, due to differences in levels of human development. In Colombia, about 25 % of the population is poor, and 40 % is vulnerable--they have a high chance of falling back in poverty in case of a shock--, which means that most children grow up in adverse contexts that hamper their lifelong cognitive and socioemotional development (Rubio-Codina et al., 2015); there might thus be a higher premium for both types of skills if the average stock of them is low. Third, due to differences in economic growth: the estimated returns to cognitive skills are larger in countries with faster prior economic growth, suggesting that workers with higher skills are more able to adapt and gain from economic changes (Hanushek et al., 2017). This may also be the case for socioemotional skills, which are about personal and social adaptation. Finally, some cultures might reward more some skills than others. For example, having self-confidence might be viewed positively in one country and negatively in another.

We rely on two methods, both with advantages and limitations, to estimate the extent to which measures of adults' cognitive and socioemotional skills correlate with their contemporaneous labor market outcomes using a 2012 cross-sectional survey. We study six labor market outcomes: earnings, formality, type of occupation (i.e., high- versus low- and medium-skilled), employment, being active or studying, and tertiary education attainment (3). Our first method uses standard ordinary least square (OLS) and logit regressions on our raw measure of cognitive skills, a test score that capture the ability to understand and reason from texts, and eight measures of socioemotional skills, survey-based measures of the Big Five personality traits and three other measures of attitudes, controlling for background factors. (4) This method has the advantage of assessing the links between skills and outcomes for a range of specific skills; the drawback is its survey-based measures of personality traits that are likely poor and may not capture the intended ones (Laajaj et al., 2019). Our second method rests on structural estimations of latent cognitive and socioemotional skills that treat survey-based skills measures as manifest scores that are a product of those skills (Bartholomew, Knott, & Moustaki, 2011; Sarzosa & Urzua, 2016). This method avoids the common measurement error of skills, but it comes at the cost of only estimating one factor for each type of them, which prevents us from observing the diversity of influence of various socioemotional skills. With both methods, our estimates could suffer from reverse causality (better outcomes could also cause better skills because of their simultaneous observation). Our results are thus best interpreted as conditional correlations rather than causal estimates.

We find that both cognitive and socioemotional skills correlate with favorable labor market outcomes in the Colombian context but with distinct roles and seemingly through different channels. Cognitive skills, both measured and estimated as latent, systematically correlate with all outcomes but employment--likely because employment also captures informal and poor-quality employment. For example, raising latent cognitive skills from the bottom to the top decile is correlated with an increase in hourly labor earnings of us$ 2 in 2011 purchasing power parity (around 50 percent more), being 28 percentage point more likely to work formally, and 60 percentage point more likely to have attended tertiary education. Estimated latent socioemotional skills have virtually no link with earnings, formality, and high-skilled jobs, but likely because the raw disaggregated measures tend to correlate differently and in opposite directions with these outcomes. However, both measured and estimated latent socioemotional skills strongly correlate with studying or being active in the labor market (working or looking for a job) and having attended tertiary education, more than latent cognitive ones for the former outcome and less for the latter. Raising latent socioemotional skills from the bottom to the top decile is correlated with an increase of 9 percentage points in the probability of being active or studying, and 16 percentage points more likely to have attended tertiary education. When considered jointly, highest levels of cognitive and socioemotional skills correlate more highly than highest levels for one or the other for most outcomes. For example, a switch from the bottom to the top decile in both skills raise the probability to having attended tertiary education from virtually zero (only 1.5 %) to 83 %%. Controlling for education drastically reduces the correlations between measures of cognitive skills and outcomes, suggesting that cognitive skills may also be indirectly linked to outcomes, through its links with higher levels of education attainment, while socioemotional-skills measures seem independent from education. In addition, while the link between both type of skills with labor earning is consistent across subgroups, the link between socioemotional skills and labor-force participation is particularly strong for women, the youth, and the less educated.

The remainder of this paper is organized as follows: section 2 describes the data set and the measures of cognitive and socioemotional skills, section 3 introduces the empirical strategy with its limitations, and section 4 presents the results. The final section offers our conclusions.

1. Data

1. a. Data set

   We use a cross-sectional survey of adults called Skills Toward Employment and Productivity (STEP), which was collected in Colombia in 2012. The STEP is a cross-sectional household survey implemented in around twenty low- and middle-income countries by the World Bank since 2012 (Pierre et al., 2014). The survey covers a wide range of background information (demographics, education, employment, etc.) and randomly selects one individual in each household between the ages of 15 and 64 to be further surveyed and tested on information...