Information Brief 2000-1

High Skills and High Pay—An Update

How is job pay related to the skills required for a job? Do jobs that require high skills pay more than jobs that require only simple skills? If so, what can high school students do to increase their opportunities for higher-paying jobs?

In a study published in 1998, ACT researchers found that pay was strongly related to skill requirements. Occupations with higher requirements for skills in mathematics, locating information, and reading paid higher entry-level salaries. This study, which is an update of the 1998 study, found that high skills and high pay are more strongly related than before. By increasing their skill levels while they are in high school, and by obtaining additional education and training after high school, students can significantly increase their opportunities for higher salaries.

WorkKeys® and Job Profiling

ACT's WorkKeys program measures employability skills in eight key areas: Applied Mathematics, Applied Technology, Listening, Locating Information, Observation, Reading for Information, Teamwork, and Writing. The scale for each area indicates the skill levels that people actually need for jobs. A person who scores at Level 3 on the Reading for Information test, for example, can understand short passages (such as announcements or deadlines) that use only simple words and that clearly state their meanings. A person at Level 5 can understand moderately detailed materials (such as memos describing a company's office procedures) that require drawing conclusions from the information presented. A person with Level 7 skills can understand and draw appropriate conclusions from very complicated documents (such as legal briefs) that are highly detailed and that contain technical terms whose meanings must be inferred from context.

An equally significant part of the WorkKeys program, in addition to testing, is job profiling. A WorkKeys job profile is produced when specially trained individuals work with employees in a particular job to identify the skill areas and skill levels that they need to perform effectively on the job. Figure 1 (below) shows an example of a job profile. An employee with the job of Licensed Practical Nurse at the Oak Village retirement community needs Level 6 Applied Mathematics skills, Level 5 Locating Information skills, and Level 6 Reading for Information skills to perform effectively. (The minimum possible score in each test is 3.) Of course, a licensed practical nurse working for some other employer might need a different skill profile.

Bar graph showing example of job profile

Figure 1.Example Job Profile: Licensed Practical Nurse at Oak Village

At the end of June 1999, there were more than 3,500 job profiles in the WorkKeys system. By averaging the results of the individual job profiles within occupations, ACT researchers developed 983 "occupational profiles." (The current version of the profiles can be accessed from our website http://www.act.org/workkeys.) Next, they linked the occupational profiles with average beginning salaries obtained from the Economic Research Institute (web address http://www.erieri.com) in January 2000. ACT researchers then studied the relationship between the average required skill level and the average beginning salary for the profiled occupations. Table 1 (below) shows the results, rounded to the nearest $1,000.

Results

There is a strong relationship between the average skills required for an occupation and its average beginning salary. For example, occupations that require Level 3 Applied Mathematics skills of their employees usually pay beginning salaries of about $19,000. Occupations that require Level 7 Applied Mathematics skills, on the other hand, typically pay beginning salaries of about $33,000. This is a huge difference! Similar results occur for the Locating Information and Reading for Information job profiles. In real life, job requirements involve more than one skill area; therefore, the salary differences between the lowest combinations of skills and the highest combinations are likely to be even larger.

Table 1. Average Occupational Beginning Annual Salary, by Average Profiled Skill Level
Average profiled skill level WorkKeys skill area
Applied Mathematics Locating Information Reading for Information
3 $19,000 $18,000 $19,000
4 $22,000 $22,000 $22,000
5 $26,000 $25,000 $25,000
6 $29,000 $29,000 $28,000
7 $33,000 . . . $31,000

The correlation coefficient is a measure of the strength of the statistical relationship between different quantities. A value of 0 means there is no relationship, while a value of 1 means there is a perfect positive relationship. For the data in Table 1, the correlations between average profiled skill level and average beginning salary were .54 (Applied Mathematics), .45 (Locating Information), and .44 (Reading for Information). These correlations suggest that, although other characteristics of an occupation may also be important in determining average beginning salary, required skills are very important.

Although the trends in Table 1 are clear, they should not be over-interpreted. For one thing, the salary data are at the occupational level, rather than at the level of individual jobs: Some jobs in an occupation pay more than the average, while others pay less. Furthermore, the jobs profiled by ACT's WorkKeys system are not necessarily representative of all jobs in the United States. Finally, changes in overall economic conditions could make the salary data no longer current.

What Do These Results Mean for Students?

The general implication of this research is clear: Employers are willing to pay higher salaries for higher skill levels. While higher skills do not guarantee high-paying jobs, they certainly make them more attainable.

The practical implication for high school students and for their counselors, teachers, and parents is also clear: By increasing their skill levels while in high school, and by obtaining additional education and training as needed after high school, students can place themselves in a position to improve their future salaries. While education is worthwhile for its own sake, it also has a dollar payoff in the future.