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The Labor Market Needs the ‘Soft’ Skills Older Workers Have

You’re getting older. But you’re also getting better.
May 27, 2021
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Old dogs, it seems, don’t need new tricks. New research from David J. Deming at Harvard’s Wiener Center for Social Policy examines lifetime earning patterns and shows how the peak earning years have shifted dramatically up the age continuum over the past five decades. This trend has been driven by changes in the mix of skills required in the workforce—away from routinized tasks and toward non-cognitive domains like critical reasoning and decision-making.

The breadth of this shift is difficult to overstate. Between 1960 and 2018, the portion of the nation’s “labor bill” going to management and management-related occupations rose from 15 percent to 32 percent, moving the peak career earnings years from the 30s into the 50s. Deming controls for top executive pay to show this is not a function of the eye-popping salaries of the nation’s elite business leadership but a pervasive workforce reality.

The increasing demand for decision-making skills has several causes, including especially technologically driven reductions in the number of occupations that involve routine tasks and a corresponding rise in the premium for those who can lead and manage workplaces with ever-higher levels of automation. One of the main qualifications for such jobs appears to be the ability to absorb, integrate, and learn from the massive troves of data the modern economy creates.

Between 1960 and 2018, the number of jobs with decision-making components has increased from 6 percent to 34 percent of the total workforce, Deming reports, with almost half that increase occurring since 2007. The price of advancement in the workforce seems to be the ability to use data to guide decision-making, adapt work processes to maximize performance, and incorporate learning from previous successes (and failures) over time.

Which is to say, it isn’t the bright, young things who keep our economy humming but the seasoned managers who know how to deploy and manage the skill sets of smart but less experienced workers.

Deming’s research points to important and underappreciated facets of contemporary work: wisdom and judgment. The reason peak earnings have shifted further up the age spectrum is that successful, older workers have gradually gained experience and decision-making capacity that operates in the background of day-to-day work helping companies to interpret data points and reduce errors and frictions in their systems. If Baby Boomers are staying on stage longer than Gen-Xers and Millennials would like, it’s not narcissism (or, perhaps I should say, not just narcissism) but because the economic value embodied in their accumulated experience and management skills is vital in an increasingly automated, data-driven economy. Boomers love irony and the irony here is that some of the comparatively slow, methodical, and analogue qualities of older workers are necessary for leading a just-in-time, rapidly changing, and increasingly digital economy. In its most crass form, age and guile still beats youth, innocence, and speed.

The implications of Deming’s most recent study are consonant with another paper he coauthored last year with Kadeem Noray on “soft” or non-cognitive skills. They report that, from 2007 to 2019, the most durable skills from a labor market perspective were not advanced technical skills, which tend to become obsolete relatively quickly, but general skills like communication, critical thinking, and teamwork. In his new paper, Deming suggests in passing that students might acquire such “soft” skills through renewed emphasis on the liberal arts and humanities which can help sharpen the ability to integrate knowledge and understand and appreciate human behavior. Such preparation is especially important in light of how a large share of those who devote four years to tightly focused professional and technical education exit those fields as technology and skill requirements evolve.

While Deming’s findings are important for all workers, they have special relevance for low-income, entry-level, and disadvantaged populations struggling to find their way in the economy. Decision-making is an important element of a package of human skills called “executive function” that can become impaired by chronic trauma—violence, abuse, neglect, racism, bullying—and interfere with finding and sustaining jobs and careers.

In other words, individuals from high-poverty areas with high levels of social dysfunction often suffer a double disadvantage that combines other deficits, from poor nutrition to lead exposure to low educational performance, with impaired executive function. This challenge can’t be solved via formal education—in fact, classroom instruction tends to “bounce off” frenetic, traumatized minds that have trouble focusing. Instead, we should focus our efforts on developing and deploying trauma-informed social services, training, and on-the-job workforce development strategies to help these workers heal and adapt to the pressures and demands of life in the workforce. (AEI’s recently released volume, Minding Our Workforce, examines this challenge and potential solutions in depth.)

Deming’s research illuminates a number of important truths about the future of work, especially as artificial intelligence techniques become more advanced, affordable, and widely used. Cognitive demands are going up across the board and no amount of job-hoarding through regulation or limitations on trade can reverse that, nor would we want them to. What we can and must focus on are strategies for developing human capital by leveraging natural human advantages—the capacity to learn, grow, respond, and adapt—to find frontiers where we continue to use tools rather than be used by them.

Brent Orrell

Brent Orrell is a resident fellow at the American Enterprise Institute where he works on criminal justice reform and job training.