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Technological development and the relocation of companies’ businesses to Asia and developing countries elsewhere have radically changed Western labour markets. New technologies have shifted routine tasks to machines, and companies have moved simpler tasks to countries with lower labour costs.

This has increased demand for employees who concentrate on non-routine tasks as well as on tasks calling for social skills – skills that cannot be replaced with machines and are harder to outsource.

Traditionally, success in the labour market has been associated with education and work experience. In recent years, the role of personality traits, social skills and other personality characteristics, in other words “non-cognitive” skills, has gained greater emphasis.

While education and cognitive skills still have a key influence on a person’s status in the labour market, research findings indicate that personality characteristics also have a notable correlation with success in the labour market.

The link between social competence and income levels is getting stronger

Edin, Fredriksson, Nybom and Öckert (2022) offer an interesting point of view on the significance of non-cognitive skills in the labour market. looked at how the correlation of non-cognitive and cognitive competences with income levels has changed in Sweden over the period from 1992 to 2013. The data comprised statistics on labour market outcomes as well as military service aptitude tests measurements in regard to personality characteristics such as social maturity, focus and perseverance, and emotional stability, including tolerance to stress. 

The findings showed that while the connection between cognitive abilities and income levels remained stable or slightly decreased, the significance of non-cognitive skills for labour market success increased during the observation period.

In particular, the role of non-cognitive skills grew stronger in highly paid occupations. 

During the observation period, employees with a high level of non-cognitive skills were positioned increasingly often in well-paid occupations with high levels of abstraction and where social interaction situations are common. In these occupations, the relative return of non-cognitive skills as measured by salaries grew the most. Also in industries where relocation abroad was common, demand and wage returns for non-cognitive skills increased. This may because offshoring increases the role of coordination and communication skills.

At the same time, the link between social skills and income levels has grown stronger, whereas the importance of cognitive capabilities has decreased. 

The highest income levels were found for those having higher than average levels of both social skills and cognitive abilities.

AI unlikely to replace social skills

In the future, technological development and AI may lead to machines replacing humans more often, even in non-routine tasks requiring higher competence levels. It is difficult to estimate to what extent machines or AI can take over tasks that have traditionally called for human interaction. 

However, replacing these tasks with machines is hard compared to traditional routine tasks, and it is therefore likely that the role of personality characteristics such as social skills will remain significant in the labour market in the future as well.

The writer, Jutta Viinikainen, is Professor of Economics at the Jyväskylä University School of Business and Economics (JSBE).