Advertisement

Journal of Labor Research

, Volume 31, Issue 4, pp 365–386 | Cite as

Occupations, Human Capital and Skills

  • Alec Levenson
  • Cindy ZoghiEmail author
Article

Abstract

Economists have long recognized that occupations can be used as proxies for skills in wage regressions. Yet the potential existence of non-market factors such as discrimination and occupational choice (sorting) on the basis of job attributes that are separate from, but potentially correlated with, wages makes occupations an imperfect control for skills. In this paper, we consider whether inter-occupational wage differentials that are unexplained by measured human capital are indeed due to differences in unmeasured skill. Using the National Compensation Survey, a large, nationally-representative dataset on jobs and ten different components of job requirements, we compare the effects on residual wage variation of including occupation indicators and these skill requirements measures. We find that although these skill requirements vary across 3-digit occupations, occupation indicators decrease wage residuals by far more than can be explained by skill alone. This indicates that “controlling for occupation” does not equate to controlling for only these skill measures, but also for other factors. Additionally, we find that there is considerable within-occupation variation in skill requirements, and that the amount of variation is not constant across skill levels. As a result, including occupation indicators in a wage model introduces heteroskedasticity that must be accounted for. We suggest that caution be applied when using and interpreting occupation indicators as controls in wage regressions.

Keywords

Occupations Human capital Job skill Wages 

References

  1. Autor DH, Levy F, Murnane RJ (2002) Upstairs, downstairs: computer-skill complementarity and computer-labor substitution on two floors of a large bank. Ind Labor Relat Rev 55(3):432–447CrossRefGoogle Scholar
  2. Bayard K, Hellerstein J, Neumark D, Troske K (2003) New evidence on sex segregation and sex differences in wages from matched employee-employer data. J Labor Econ 21(4):887–922CrossRefGoogle Scholar
  3. Blank RM (1990) Understanding part-time work. In: Bassi LJ, Crawford DL (eds). Research in Labor Economics 11: 137–158Google Scholar
  4. Blau FD (1998) Trends in the well-being of American women, 1970–1995. J Econ Lit 36(1):112–165Google Scholar
  5. Blau FD, Kahn LM (2000) Gender differences in pay. J Econ Perspect 14(4):75–99CrossRefGoogle Scholar
  6. Cain GG (1986) The economic analysis of labor market discrimination: a survey. In: Ashenfelter O, Layard R (eds) Handbook of labor economics, vol 1. Elsevier, Amsterdam, pp 693–785CrossRefGoogle Scholar
  7. Card D, Krueger AB (1992) School quality and black-white relative earnings: a direct assessment. Q J Econ 107(1):151–200CrossRefGoogle Scholar
  8. Conk MA (1978) Occupational classification in the United States Census: 1870–1940. J Interdiscip Hist 9(1):111–130CrossRefGoogle Scholar
  9. Edwards AM (1911) Classification of occupations: the classification of occupations, with special reference to the United States and the proposed new classification for the thirteenth census report on occupations. Publ Am Stat Assoc 12(94):618–646Google Scholar
  10. Edwards AM (1941) Occupation and industry statistics. J Am Stat Assoc 36(215):387–392CrossRefGoogle Scholar
  11. Fields J, Wolff EN (1995) Interindustry wage differentials and the gender wage gap. Ind Labor Relat Rev 49(1):105–120CrossRefGoogle Scholar
  12. Filer RK, Petri PA (1988) A job-characteristics theory of retirement. Rev Econ Stat 70(1):123–128CrossRefGoogle Scholar
  13. Fogel W (1979) Occupational earnings: market and institutional influences. Ind Labor Relat Rev 33(1):24–35CrossRefGoogle Scholar
  14. Gathmann C, Schönberg U (2010) How general is human capital? A task-based approach. J Labor Econ 28(1):1–50CrossRefGoogle Scholar
  15. Gibbs M, Levenson A, Zoghi C (2010) Why are jobs designed the way they are? In: Jobs, Training and Worker Well-Being: Research in Labor Economics 30: 107–154Google Scholar
  16. Gittleman M, Pierce B (2011) Inter-Industry Wage Differentials, Job Content and Unobserved Ability. Ind Labor Relat Rev 64(2), forthcomingGoogle Scholar
  17. Groshen EL (1991) The structure of the female/male wage differential: is it who you are, what you do, or where you work? J Hum Resour 26(3):457–472CrossRefGoogle Scholar
  18. Gunderson M (1989) Male-female wage differentials and policy responses. J Econ Lit 27(1):46–72Google Scholar
  19. Helwege J (1992) Sectoral shifts and interindustry wage differentials. J Labor Econ 10(1):55–84CrossRefGoogle Scholar
  20. Hirsch BT, Macpherson DA (2004) Wages, sorting on skill, and the racial composition of jobs. J Labor Econ 22(1):189–210CrossRefGoogle Scholar
  21. Johnson G, Solon G (1986) Estimates of the direct effects of comparable worth policy. Am Econ Rev 76(5):1117–1125Google Scholar
  22. Kambourov G, Manovskii I (2009) Occupational specificity of human capital. Int Econ Rev 50(1):63–115CrossRefGoogle Scholar
  23. Keane MP, Wolpin KI (1997) The career decisions of young men. J Polit Econ 105(3):473–522CrossRefGoogle Scholar
  24. Killingsworth MR (1990) The economics of comparable worth. Upjohn, KalamazooGoogle Scholar
  25. Killingsworth MR (2002) Comparable worth and pay equity: recent developments in the United States. Can Public Policy/Analyse de Politiques 28(Supplement):S171–S186CrossRefGoogle Scholar
  26. Macpherson DA, Hirsch BT (1995) Wages and gender composition: why do women’s jobs pay less? J Labor Econ 13(3):426–471CrossRefGoogle Scholar
  27. McCall BP (1990) Occupational matching: a test of sorts. J Polit Econ 98(1):45–69CrossRefGoogle Scholar
  28. Oaxaca R (1973) Male-female wage differentials in urban labor markets. Int Econ Rev 14(3):693–709CrossRefGoogle Scholar
  29. Pierce B (1999) Using the National compensation survey to predict wage rates. Compensation and Working Conditions. Winter: 8–16Google Scholar
  30. Roy AD (1951) Some thoughts on the distribution of earnings. Oxf Econ Pap 3:135–146Google Scholar
  31. Shaw KL (1987) Occupational change, employer change, and the transferability of skills. South Econ J 53(3):702–719CrossRefGoogle Scholar
  32. Sorensen E (1990) The crowding hypothesis and comparable worth. J Hum Resour 25(1):55–89CrossRefGoogle Scholar
  33. Sullivan P (2010) Empirical evidence on occupation and industry specific human capital. Labour Econ 17(3):567–580CrossRefGoogle Scholar
  34. Willis RJ (1986) Wage determinants: a survey and reinterpretation of human capital earnings functions. In: Ashenfelter O, Layard R (eds) Handbook of labor economics, vol 1. Elsevier, Amsterdam, pp 525–602CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC (outside the U.S.) 2010

Authors and Affiliations

  1. 1.Center for Effective Organizations, Marshall School of BusinessUniversity of Southern CaliforniaLos AngelesUSA
  2. 2.US Bureau of Labor StatisticsWashington DCUSA

Personalised recommendations