The wage premium associated with human skills
Australia is facing a large, and growing, skills shortage. In an Australian first, DeakinCo has asked Deloitte Access Economics to quantify the wage premium associated with human skills, following the 2017 work ‘Soft skills for business success’.
People are critical to the success of businesses, and the economy more broadly. But in order to succeed, businesses need people with the right skills. A critical component of this is human skills. And with human skills in shortage, the question for business is, is it better to 'build' these skills through training, or 'buy' them through recruitment. Today, for every $1 spent on recruitment, Australian businesses spend 64 cents on training. Do we have the balance right?
In new research for Australia, we use US wage and human skills data to measure how human skill attainment has changed across occupations over time, and look at the extent to which this affects wages.
We find that, generally, a 10 percentage point (or one standard deviation) increase in human skill attainment is associated with a 5% increase in wages. This is equivalent to an additional $3,822 per year for the average Australian full-time worker.
There is a clear rationale for both businesses and individuals to invest in the level of their human skills. Doing so is both beneficial for the individual and could also unlock more human capital to power our businesses and economy going forwards.
Published: November 2019