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Release: Nov. 1, 1999

Math, verbal skills, combined with college education, lead to high income

IOWA CITY, Iowa — A recent study by two University of Iowa economics researchers shows that college-educated workers with mathematical and verbal skills have the potential to earn the biggest paychecks.

The study, based on the skill levels of workers and their incomes from 1971 to 1998, found that education level is not the only predictor of income level; skill level also is an important factor determining a worker’s future income.

"For generations, conventional wisdom has held college degree has been the ticket to the world of highly skilled and highly paid employment. But it’s becoming apparent in today’s high-tech workplace that a college degree is no guarantee of a high-wage job. You need the skills to analyze technical information and be able to communicate your findings as well," said Beth Ingram, associate professor of economics at the UI Henry B. Tippie College of Business.

UI economics professor George Neumann, who co-authored the study, said college-educated workers have enjoyed great wage gains over the past 25 years, and policy makers have argued that access to higher education is the solution to stagnant wage growth for unskilled workers.

In order to determine if this was in fact true, Ingram and Neumann focused on skill levels in four different worker groups: high school graduates working in technical jobs; high school graduates working in non-technical jobs; college graduates working in technical jobs; and college graduates working in non-technical jobs. Using demographic information from the Census Population Survey and job characteristic information from the Dictionary of Occupational Titles, they attached to each the appropriate skill level required for each type of job.

Technical jobs are defined as those requiring math and fine-motor skills, including doctors, engineers and teachers. Non-technical jobs are defined as those requiring manual labor, including factory work.

The study showed that of the four groups, the group that has fared the worst in earning wage increases over time has been college graduates working in non-technical jobs. This finding contradicts what some academics and policy makers have believed: that education alone is enough to boost earning power. Most estimates cite an employee’s return on their education investment to be 13 percent per year, but Ingram and Neumann find the return to be 6 percent after adjusting for the return to skill levels.

According to the study, the two most important skills for a worker to possess are verbal and math skills, both of which are associated with a formal education. Workers with fine motor skills, (including clerical ability) also had some income gains, along with those who are in physically demanding or hazardous jobs.

Since 1971, real wages (adjusted for inflation) for college-educated skilled workers have gone up 40 percent, Ingram said. But incomes of college-educated workers without job skills stagnated, performing no better than those without education and job skills.

Neumann said he and Ingram will continue their research focusing on this group of educated but unskilled workers, but also examine how workers are learning skills without a college education, possibly through company training programs or in a vocational college setting. They will also study how vocational training programs outside the United States teach skills.