Effect of cognitive and soft skills on labour market outcomes among adults in Ghana

Abstract

Cognitive and soft skills have gained traction among economists in recent times. Using the World Bank’s Skills toward Employment and Productivity (STEP) surveys, this study examines three objectives: (1) the effect of age of starting school on cognitive skills proficiency, (2) the effect of cognitive skills on labour market outcomes, and (3) the effect of soft skills on labour market outcomes. The econometric approaches used in this study were the ordinary least square (OLS), logit, ordered logit regression and structural equation modelling techniques. Empirical results indicate that starting school at the required age of six significantly improves cognitive skills proficiency by between 5 and 23 points. It was observed that one-standard-deviation increase in literacy proficiency score was associated with an average increase in hourly earnings of about between 3 and 25 percent. Further, cognitive skill proficiency had a significant positive effect on employment, working in the formal sector, being a wage worker and occupying a managerial position. In addition, personality traits capturing soft skills were found to have significant effect on all the labour market outcomes. The study recommended that the law on school starting age should be enforced through house-to-house sensitisations at the community level. Basic educational institutions should concentrate on developing cognitive competencies through the teaching of the three Rs – reading, writing and arithmetic. Finally, the teaching and learning of soft skills should be introduced by Ghana Education Service in the new educational reforms.