'Soft' Skills, 'Hard' Skills, and the Black/White Earnings Gap

Abstract

This paper provides both a theoretical and an empirical investigation into the impact of job skill types on the black/white pay differentials. The theoretical analysis derives that the more intensively soft/hard skills are used in an occupation, the greater/smaller the black/white pay differential is there in that occupation. Moreover, in response to the differential pay gaps across jobs requiring different levels of soft/hard skills, blacks are more likely to self-select themselves into the jobs that use hard skills more intensively, ceteris paribus. Using NLSY data, we find consistent empirical evidence to our theoretical predictions. Hence, the paper bridges the existing literature on racial pay gaps and cognitive vs. non-cognitive skills by explicitly testing the impact of job skill types on racial pay gaps.

Keywords: soft skills, hard skills, discrimination, pay differentials

JEL Classification: J24, J31, J71