Information Brief 2004-2

High Skills and High Pay—2004 Update

How is salary 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 two previous studies (see ACT Information Briefs 1998-1 and 2000-1), ACT researchers found that pay was strongly related to skill requirements in mathematics, locating information, and reading. This study is an update of the 1998 and 2000 studies. It is based on more current data (2002), and reports results for more skill areas.

WorkKeys® and Job Profiling

ACT's WorkKeys program measures employability skills in nine essential areas: Applied Mathematics, Applied Technology, Listening, Locating Information, Observation, Reading for Information, Teamwork, Writing, and Business Writing. The scale for each area reflects 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 materials (such as legal documents).

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 the skill levels they need to perform the job.

Using the cumulative results of individual WorkKeys job profiles, occupational profiles are based on the typical (median) skill levels across jobs within occupations. Occupations are defined by the U.S. Department of Labor's O'NET: http://www.onetonline.org

For example, among the profiled jobs in the occupation Machinist, the following skill areas were most often identified: Applied Mathematics, Locating Information, and Reading for Information. The typical (median) required skill levels were Applied Mathematics (5), Locating Information (5), and Reading for Information (4).The current version of the occupational profiles can be accessed from ACT's website: www.act.org/workkeys/occuprof/index.html

In spring 2004, ACT researchers linked the WorkKeys occupational profiles currently available (through 2002) with corresponding salary data obtained from the Bureau of Labor Statistics (www.bls.gov/oes/home.htm). The resulting file contained job profile and salary data for over 450 occupations. We then studied the relationship between the typical required skill level and the typical beginning salary among the profiled occupations. "Typical beginning salary" was defined as the 10th percentile of all salaries in an occupation.Table 1 shows the results, rounded to the nearest $1,000.

TABLE 1. Typical Occupational Beginning Annual Salary (2002),
by WorkKeys Profiled Skill Level
WorkKeys profiled skill level WorkKeys test
Applied Mathematics Applied Tech. Listening Locating Information Observation Reading for Information Teamwork Writing
1     $13,000         $15,000
2  $15,000    $17,000
3$16,000$17,000$18,000$14,000$16,000$15,000$17,000$19,000
4$20,000$19,000$20,000$19,000$18,000$19,000$20,000$22,000
5$23,000$22,000$23,000$23,000$20,000$22,000$22,000$24,000
6$27,000$24,000 $27,000$21,000$25,000$24,000 
7$30,000    $28,000  

Notes:

  1. The skill levels for a particular WorkKeys test range from the lowest level that employers typically need, to a level beyond which specialized training is required. Skill level ranges are 4 or 5 points, depending on the particular skill assessed. Adjacent skill levels can be distinguished both in terms of job requirements and individual skill development.
  1. The WorkKeys Business Writing test was introduced in 2002. Therefore, job profile data were not yet available to include Business Writing in this study.
     

Results

There is a clear relationship between the typical skills required for an occupation and its typical beginning salary. For example, occupations that require Level 3 Applied Mathematics skills usually pay beginning salaries of about $16,000. Occupations that require Level 7 Applied Mathematics skills, on the other hand, typically pay beginning salaries of about $30,000. This is a huge difference! Differences across skill levels also occur for the other WorkKeys tests.

In real life, job requirements involve more than one skill area.Therefore, the salary differences between the lowest and highest combinations of skills are likely to be even larger.

Previous studies of WorkKeys profiles and occupational salaries (see ACT Information Briefs 1998-1 and 2002-1) were based on different occupational classifications and salary data. For this reason, it is difficult to make exact comparisons with their results. The earlier studies did, however, show similar differences in salary among occupations with different profiled skill levels.

Although the trends in Table 1 are clear, they should not be over-interpreted. For one thing, the salary data used to develop the table 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.

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 assessing their job-related skill levels while in high school, and by using the results to guide them in additional education and training, students can position themselves to improve their future salaries. While education is worthwhile for its own sake, it also has a dollar payoff in the future.