Luck, soft skills, and human capital

nursery school

Imagine growing up in the 1960s with two college-educated parents, surrounded by other kids whose parents also went to college and whose family incomes were above the national average.

That was me: I grew up in Deephaven, Minnesota, in the 1960s and 1970s. I went to good schools and had excellent health care. I learned manners, patience, and a variety of what today we call soft skills before I entered a formal school setting to learn the hard skills such as reading, writing, and math.

Human capital is what economists call the set of soft skills, hard skills, and good health we need to live productive, satisfying lives.  We’ve done much research on the topic, and a number of economists (Theodore SchultzGary Becker, and James Heckman) earned Nobel prizes for their work in this area.

Economists have also done a lot of work on how a person’s socio-economic status and income affects their hard (or cognitive) skills and health. The evidence is clear: higher status and income leads to better cognitive skills and health in children than their lower income peers.  Further, these effects continue through childhood so that the gap in cognitive skills and health status grows larger over time.  Thus, students who come from lower-income households are already behind their more affluent peers in terms of cognitive skills and health status before they start middle school.

One gap in our work on human capital is the relationship between income and soft or non-cognitive skills.  A new paper by Jason Fletcher and Barbara Wolfe of the University of Wisconsin’s LaFollette School of Public Affairs goes a long way towards filling this space.

In “The Importance of Family Income in the Formation and Evolution of Non-Cognitive Skills in Childhood” Fletcher and Wolfe “use a recent US panel of school-aged children followed between Kindergarten and 5th grade to examine the effects of family income on children’s non-cognitive skill development (pp. 17-18).”  Here’s what they found (all quotes from p. 18 except as noted):

  1. They “provide evidence that children enter Kindergarten with substantial differences in non-cognitive skill endowments based on family resources.”  These non-cognitive skills include “maturity, learning skills, motivation, attention, patience, and the ability to act appropriately (p. 2, footnote 2).”
  2. Fletcher and Wolfe “then trace the evolution of these skill differences as children age through the 5th grade (12 years old) and show that the disadvantages grow substantially — often doubling or tripling in magnitude” between kindergarten and 5th grade.
  3. Could it be that there are other factors driving these results?  Fletcher and Wolfe ask “whether these skill differences can be explained by alternative measures of income, differences in children’s health, differences in parental time-invariant characteristics (such as their own non-cognitive skills) or differences in peer (classmate) skills.”  No; even when they control for these factors, there is still a “a compelling link between family income and children’s non-cognitive skill development net of these other factors that are independently associated with family income.”

The authors go on to state, “These results are important for understanding the intergenerational transmission of poverty or [socio-economic status] more generally. They suggest that beyond those outcomes already studied (health and cognitive outcomes) that family income also influences noncognitive skills. These skills are themselves important in determining an individual’s success in schooling and in later employment outcomes. Noncognitive skill differences seem to be an important route by which one’s family of origin influences one’s future family’s [socio-economic status](p. 18).”

Put more bluntly: where you start greatly affects where you end up in life.

Fletcher and Wolfe’s work adds more evidence supporting the policy recommendations of economists such as Timothy BartikJames Heckman, and Arthur Rolnick on early-childhood education.  It’s critically important that we invest in this, and other policies that promote non-cognitive skills in young children, if we are serious about closing the income gaps that plague our state and nation.

I got a great start because I was lucky. We need to develop public policies so that where we end up in life is not determined as much by luck as it is today.