Mixed signals: cognitive skills, qualifications and earnings in an international comparative perspective

ABSTRACT

The relative importance of educational qualifications and cognitive skills forms an enduring debate in research on education and the labour market. While early work in human capital theory essentially equated qualifications and skills, signalling and screening theories provided a more nuanced distinction between the two, highlighting the importance of qualifications as a way of reducing uncertainty in hiring. Recent literature argues that most formal education is largely signalling that provides minimal productivity gains. This paper seeks to inform the debate on human capital and signalling theories by examining cross-national variation in how the qualifications and cognitive skills relate to earnings. Using data from the Programme for the International Assessment of Adult Competencies (PIAAC), we analyse variation in how cognitive skills (literacy, numeracy and problem-solving) and qualifications (secondary and higher education completion) relate to earnings. Although the contributions of qualifications tend to outweigh cognitive skills, the relative contributions of each factor vary considerably across countries. This variation suggests that high levels of signalling are not inevitable and may be explained by contextual differences in education systems and labour markets. Countries with more higher education attainment have lower levels of signalling and place higher premiums on cognitive skills.

KEYWORDS:

• Signalling
• human capital theory
• international comparison
• labour markets
• skills

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No potential conflict of interest was reported by the authors.

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Additional information

Notes on contributors

Robin Shields

Robin Shields is Professor of Education at the University of Bristol. His research interests focus on the globalisation of education from a macro-sociological perspective, particularly on new applications of quantitative methods such as social network analysis and multilevel modelling. Robin is co-editor of the Comparative Education Review and has served on the Executive Committee of the British Association for International and Comparative Education (BAICE). His research has been funded by the Economic and Social Research Council, the Higher Education Academy, and the Leadership Foundation for Higher Education. In 2013, he received the George Bereday Award from the Comparative and International Education Society for his application of social network analysis to international student mobility in higher education.

Andres Sandoval Hernandez

Andres Sandoval Hernandez a Lecturer in Educational Research at the University of Bath in the UK. Prior to that, he worked as Head of the Research Unit at the International Association for the Evaluation of Educational Achievement (IEA) in Hamburg, Germany, and held different academic appointments at the Universidad Iberoamericana (UIA) and the Facultad Latinoamericana de Ciencias Sociales (FLACSO). Over the last few years, he has worked with or consulted for the ministries of education of several countries, for the World Bank, IADB, OECD, UNESCO, UIS, and other international organisations. His research interests include developing work around comparative analyses of educational systems using large-scale assessment data with a focus on educational inequalities and civic education. Andres has a BA in Public Accounting from the Universidad Nacional Autónoma de México (UNAM), a Master’s in Educational Research from the UIA, and a PhD in Education from the University of Bath.