Noncognitive skills, occupational attainment, and relative wages

an article by Deborah A Cobb-Clark (The University of Melbourne and IZA) and Michelle Tan (Australian National University) published by ScienceDirect: Labour Economics as an accepted manuscript on 6 August 2010

Abstract
This paper examines whether men’s and women’s noncognitive skills inuence their occupational attainment and, if so, whether this contributes to the disparity in their relative wages. We find that noncognitive skills have a substantial effect on the probability of employment in many, though not all, occupations in ways that differ by gender. Consequently, men and women with similar noncognitive skills enter occupations at very different rates. Women, however, have lower wages on average not because they work in different occupations than men do, but rather because they earn less than their male colleagues employed in the same occupation. On balance, women’s noncognitive skills give them a slight wage advantage. Finally, we find that accounting for the endogeneity of occupational attainment more than halves the proportion of the overall gender wage gap that is unexplained.

This paper uses confidentialised unit record file data from the Household, Income and Labour Dynamics in Australia (HILDA) survey. The HILDA Project was initiated and is funded by the Department of Families, Housing, Community Services, and Indigenous Affairs (FaHCSIA) and is managed by the Melbourne Institute of Applied Economic and Social Research (MIAESR). The findings and views reported in this paper, however, are those of the authors and should not be attributed to FaHCSIA or MIAESR.

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