What is the price of a skill? Revealing the complementary value of skills

Fabian Stephany, Ole Teutloff and Vili Lehdonvirta

MPRA Paper from University Library of Munich, Germany

Abstract: The global workforce is urged to constantly reskill, as technological change favours particular new skills while making others redundant. But which skills are most marketable and have a sustainable demand? We propose a model for skill evaluation that attaches a premium to a skill based on near real-time online labour market data. The model allows us to isolate the economic return of an individual skill measured as a premium on hourly wages. We demonstrate that the value of a specific skill is strongly determined by complementarity - that is with how many other high-value skills a competency can be combined. We introduce the idea of “hub skills” to the field of human capital formation, i.e., high-return skills that can be recombined with many valuable complements. Specifically, we show that the value of a skill is relative, as it depends on the capacities it is combined with. For most skills, their value is highest when used in combination with skills of the same type. In addition, we find that supply and demand and the membership in specific skill communities, such as finance and legal or software and development, determine the value of a skill. We illustrate that AI skills are hub skills, as they can be combined with other high-value skills to generate beneficial complementarities. The value of some of these in-demand skills has increased significantly over the last years. Furthermore, we contrast our skill premia with automation probabilities and find that some skills are very susceptible to automation despite their high economic value. The model and metrics of our work can inform digital re-skilling to reduce labour market mismatches. In cooperation with online platforms and education providers, researchers and policy makers should consider using this blueprint to provide learners with personalised skill recommendations that complement their existing capacities and fit their occupational background.

Keywords: labour; automation; human capital; skills; networks; complementarity: future of work (search for similar items in EconPapers)
JEL-codes: C81 J01 J24 J46 O33 (search for similar items in EconPapers)
Date: 2022-09-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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