The Effect of Non-cognitive Ability on Salary: Based on the Mincer

Equation

ChongYu Li and YingGe Du

School of Economics and Management, Beijing Jiaotong University, Beijing, China

Keywords: Non-Cognitive Ability, Private Enterprise, The Five-Factor Model.

Abstract: In recent years, digitalization has gradually become the core strategic direction of global technological change.

Therefore, it is necessary to build a new human capital system that adapts to the needs of skills, especially

focusing on the cultivation and development of individual non-cognitive abilities. The data in this article

comes from the 2018 database of China Family Panel Studies. Through the Ordinary Least Squares method,

this paper analyzes the impact of non-cognitive abilities on the salary of employees in private enterprises. The

regression equation is based on the Mincer equation. The results show that non-cognitive abilities have a

significant positive effect on labor salary. Further research find that conscientiousness has the strongest

explanatory power, followed by agreeableness and neuroticism. And on this basis, this paper puts forward

targeted policy recommendations. For example, companies should actively carry out employee training on

non-cognitive abilities. Employees need to actively strengthen their non-cognitive ability training.

1 INTRODUCTION

Today, employees not only need to face more

frequent technological changes, but also need to face

more diverse needs for interpersonal cooperation.

Therefore, it is necessary to build a new human

capital system that adapts to the needs of skills,

especially focusing on the cultivation and

development of individual comprehensive ability. As

an important part of individual ability, non-cognitive

ability directly determines whether a person can

succeed.

Scholars’ research perspectives on Human

Capital Theory have also changed from the traditional

perspectives of education and health to the ability.

Theodore W. Schultz, Gary Stanley Becker and

others established the traditional Human Capital

Theory, a large number of studies have shown that

human capital investment can promote economic

growth, and from a micro perspective, people's

investments in education and health can significantly

affect their salary. In recent years, Heckman proposed

a new theory of human capital with “ability” as the

core, which consists of two parts, cognitive ability

and non-cognitive ability, to explore the effect of

ability on person and society. The two core elements

of education and health in traditional human capital

theory will affect individual economic behavior

through the accumulation of ability. Therefore,

scholars have mainly focused on the formation

mechanism of ability and the impact of ability on the

individual economic behavior. First the antecedent

variables of ability included family background and

school education. Wang Huimin found that children

with higher family socioeconomic status were more

likely to receive preschool education, and children

with preschool education had higher cognitive and

non-cognitive abilities than children without

preschool education. Li Bo found that parent-child

reading, parent-child activities, parent-child

communication and homework supervision all had

significant positive effects on children ’ s non-

cognitive abilities. Second, outcome variables for

ability included the career choice and the personal

salary. Sheng weiyan found that skilled employees

with higher non-cognitive abilities were more likely

to enter high-end service industries, and employees in

high-end service industries also had higher returns on

non-cognitive abilities. Li Xiaoman found that after

controlling for other traditional human capital

variables, cognitive ability and non-cognitive ability

could also show a significant positive effect on salary

for low-skilled and medium-skilled workers.

Up to now, most scholars divided the research

objects of non-cognitive ability into high education

Li, C. and Du, Y.

The Effect of Non-cognitive Ability on Salary: Based on the Mincer Equation.

DOI: 10.5220/0011174300003440

In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 291-295

ISBN: 978-989-758-593-7

291

and low education. This paper focuses the research

object on a specific sector, whicn is the private sector,

and puts forward more targeted policy

recommendations. Because, in China, private

enterprise employees are in a more intense talent

competition environment, this research has high

practical meaning. Therefore, based on “The Five-

Factor Model” (OCEAN), this paper analyzes the

impact of non-cognitive ability on the salary of

employees in private enterprises.

2 MATERIAL AND METHOD

The data in this article comes from the 2018 database

of China Family Panel Studies, which cover 25

provinces and autonomous regions in mainland China

and can be regarded as a relatively representative

national database. The purpose of this paper is to

explore the impact of non-cognitive abilities on the

salary of employees in private enterprises. Therefore,

this study mainly uses the survey data of the adult

sector.

According to the research needs, the research data

are processed as follows: (1)Keeping samples of

employment; (2)Keeping samples aged 18-65;

(3)Excluding extreme samples with monthly salary

below 1,000 yuan, as well as obvious outliers and

missing values of other core variables in this paper.

2.1 Measurement of Non-cognitive

Ability

When studying non-cognitive abilities and labor

income, widely accepted survey methods include the

Internal and External Control Scale (Rotter, 1973),

the Self-Esteem Scale (Rosenberg, 1978), and the

Five-Factor Model (Costa, 1992). Considering the

high applicability of the Five-Factor Model, this

paper uses the Five-Factor Model to measure non-

cognitive abilities based on the questions of the CFPS

questionnaire. The Five-Factor Model includes

openness, conscientiousness, extraversion,

agreeableness, and neuroticism.

The specific variable design is shown in Table 1

and explained as follows: (1)Each dimension

involves 2 questions, and the average score after the

sum of these two questions is the score of the

dimension；(2)This article only deals with 4 of the 5

dimensions of non-cognitive ability. Any text or

material outside the aforementioned margins will not

be printed.

Table 1: The Five-Factor Model.

The Five-

Factor Model

Variable design

Conscientiousness

The confidence in your future

A sense of accomplishment

Agreeableness

Relationship

Not hated by others

Neuroticism

Life cannot go on

Feel upset

Extraversion

Adventurous

Happy life

2.2 Construction of the Empirical

Model

Through the Ordinary Least Squares method, this

paper analyzes the relationship between non-

cognitive ability and the salary of private enterprise

employees. The regression equation is based on the

Mincer equation by adding non-cognitive ability

variables.

Lnw



= α + β × noncognitive



∑







+ε



（1）

Among them, Lnw

is the logarithm of the

monthly salary of the employee, α is a constant term,

noncognitive

is the non-cognitive ability measure

constructed under the framework of the “The Five-

Factor Model” in this paper, X

is a series of other

factors that affect salary, including age, education,

gender, health. The definitions of all variables are

shown in Table 2.

Table 2: Variable definition.

Variable

type

Variable

name

Indicator

name

Variable

efinition

Depende

variable

log of

monthly

salar

Log of

monthly

salar

Independ

ent

variable

Non-

Cognitive

ability

Conscien-

tiousness

The average

score after

the sum of

the

dimension

Agree-

ableness

The average

score after

the sum of

the

dimension

Neuro-

ticism

The average

score after

the sum of

the

dimension

BDEDM 2022 - The International Conference on Big Data Economy and Digital Management

292

Extraver-

sion

The average

score after

the sum of

the

dimension

Non-

Cognitive

ability

The score

after the

sum of the

four

dimensions

Control

variable

Gender

Male=1

；

Female=0

Health

From 1 to 7

oints

Age Age

Registered

permanent

residence

Non-

agricultural

registered

permanent

residence=1

；

Agricultural

registered

permanent

residence=0

Education

Elementary

school=1;

Junior high

school=2;

High

school/Tech

nical

school=3;

Junior

college and

above=4

3 RESULT AND DISCUSSION

The regression results of the model are shown in

Table 3, and the non-cognitive ability has a

significant promoting effect on salary. Model 1 to

Model 4 are the regression results of adding 4

different dimensional variables respectively.

Extraversion has no significant effect on the salary

private-sector employees. Conscientiousness,

agreeableness, and neuroticism are all remarkable at

level 1%, and the salary effects were 5.2%, 2.6%, and

-6.2%, respectively. These suggest that less

neuroticism, more agreeableness, and more

conscientiousness can significantly increase the

salary of private-sector employees. Model 4 includes

variables of four dimensions at the same time, and the

salary effects of the three dimensions of variables all

decrease significantly. Only conscientiousness is still

remarkable at the 1% level, and neuroticism is

remarkable at the 5% level. This may be due to the

collinearity of non-cognitive abilities in different

dimensions.

In Model 5, the total non-cognitive ability index

is remarkable at the 1% level, again proving that non-

cognitive ability has a significant impact on salary.

Among the control variables, males have more

obvious salary advantages, younger employees have

more obvious salary advantages, employees with

higher education level have higher salary.

Table 3: Regression result.

Variable 1 2 3 4 5 6

Conscien-

tiousness

0.05

***

0.04

***

(0.1

(0.0

Agree-

ableness

0.03

***

0.01

(0.0

09)

(0.0

09)

Neuro-

ticism

0.06

***

0.05

(0.0

Extra-

version

0.02

0.00

(0.0

19)

(0.0

12)

Non-

Cognitive

ability

0.03

***

(0.0

06)

Gender

0.39

***

0.39

***

0.39

***

0.39

***

0.38

***

0.39

***

(0.0

18)

(0.0

18)

(0.0

19)

(0.0

18)

(0.0

18)

(0.0

18)

Health

0.00

(0.0

08)

(0.0

08)

(0.0

08)

(0.0

08)

(0.0

08)

(0.0

08)

Age

0.00

***

0.00

***

0.00

***

0.00

***

0.00

***

0.00

***

(0.0

08)

(0.0

009)

(0.0

009)

(0.0

009)

(0.0

009)

(0.0

009

)

Registered

permanent

residence

0.00

(0.0

Education 0.12 0.12 0.12 0.12 0.12 0.12

The Effect of Non-cognitive Ability on Salary: Based on the Mincer Equation

293

*** *** *** *** *** ***

(0.0

11)

(0.0

11)

(0.0

11)

(0.0

11)

(0.0

11)

(0.0

11)

Constant

term

7.59

***

7.66

***

7.89

***

7.76

***

7.65

***

7.56

***

(0.0

84)

(0.0

81)

(0.0

79)

(0.0

73)

(0.1

01)

(0.0

96)

*p<0.1; **p<0.05 ***p<0.01

In order to more accurately study the impact of

non-cognitive abilities of various dimensions on

employees’ salary, this paper reports the standardized

coefficients of three dimensions that have a

significant impact on employees’ salary. The

explanatory power of conscientiousness, over

agreeableness and neuroticism, has the most

significant effect. If employees of private enterprises

want to increase their salary, they need to pay more

attention to the improvement of their sense of

responsibility. At the same time, it is also very

important to get along well with colleagues and

teams. In a tense working atmosphere, it is also

necessary for employees to maintain emotional

stability to raise their salary.

Table 4: Comparison of non-cognitive ability.

Conscientio

us-ness

Agreeable-

ness

Neuro-

ticism

OLS

coefficient

0.052 0.026 -0.062

Standar-

dized

coefficient

0.076 0.055 -0.052

R-squared 0.221 0.218 0.217

4 CONCLUSION AND

SUGGESTION

The New Human Capital Theory has confirmed that

both cognitive and non-cognitive abilities have a

significant impact on people’s success in achieving

socioeconomic status. Based on the existing research

ideas, this paper uses the “big five personality”

model, and focuses on the private enterprise

employees. Because, in China, private enterprise

workers are in a more intense competitive

environment, and private enterprise managers are

more likely to dismiss employees with insufficient

ability due to the harsh external environment. This

study adopts an empirical analysis method to explore

the impact of non-cognitive abilities on the salary of

workers in private enterprises, and draws the

following conclusions: (1) Non-cognitive ability

have a significant impact on employees’ salary. (2)

Among them, conscientiousness has the strongest

explanatory power, followed by agreeableness and

neuroticism.

Therefore, this paper proposes the following

policy recommendations. (1)Schools should

introduce the cultivation of students’non-cognitive

abilities in teaching. At the same time, schools should

pay attention to the assessment of non-cognitive

ability teaching in order to better develop students’

non-cognitive ability. Flexible and interesting

classroom models require high-level teaching staff,

therefore, schools should increase the training of

teachers on non-cognitive ability teaching. (2)When

recruiting, private enterprises should focus on

examining the communication and teamwork ability

of employees, as well as their sense of responsibility

and love for their work. At the same time, companies

should actively carry out employee training on non-

cognitive abilities; and design clear career plans for

employees, because with goals, employees will be

more motivated to complete their work. Also,

Enterprises should pay attention to cultivating

employees' personality qualities of passion and

selfless dedication. (3)Employees need to actively

strengthen their non-cognitive ability training and

accumulate human capital, so that they can find better

job opportunities and obtain higher returns on salary.

There are still some shortcomings in this paper.

At the same time, the non-cognitive ability variables

that can be constructed in this paper are limited, such

as the openness to experience dimension, which

cannot be observed.

REFERENCES

Costa Paul T. and McCrae Robert R. Four ways five factors

are basic[J]. Personality and Individual Differences,

1992, 13(6): 653-665.

James J. Heckman and Jora Stixrud and Sergio Urzua. The

Effects of Cognitive and Noncognitive Abilities on

Labor Market Outcomes and Social Behavior [J].

Journal of Labor Economics, 2006, 24(3): 411-482.

Li Bo.The Influence of Parent Involvement on Children’s

Development: Based on the Perspective of Academic

Performance and Non-cognitive

Development[J].Education and Economy,2018(03):54-

64.

Li Xiaoman, Tu Wenjia, Peng Shijie. What Makes the Low-

skilled Workers Earn More? Based on the Perspective

of New Human Capital[J]. Population and

Economics,2019(01):110-122.

Mastellone Max. Applications of social Learning Theory of

Personality, Rotter J.E., Chance J., Phares E.J. (Eds.),

BDEDM 2022 - The International Conference on Big Data Economy and Digital Management

294

Holt, Rinehart and Winston, New York (1972) [J].

Behavior Therapy, 1973, 4(3): 472-473.

Rosenberg F R and Rosenberg M and McCord J. Self-

esteem and delinquency. [J]. Journal of youth and

adolescence, 1978, 7(3): 279-94.

Sheng Weiyan, Hu Qiuyang. Cognitive skills, Non-

Cognitive skills and skill premium-An empirical Study

based on CFPS2010-2016 Micro data [J]. Shanghai

Journal of Economics.2019, (04):28-42.

Wang Huimin, Wu Yuxiao, Huang Chao. Family

Socioeconomic Status, Preschool Education and the

Adolescents' Cognitive and Non-cognitive Abilities[J].

Youth Studies,2017(06):46-57+92.

The Effect of Non-cognitive Ability on Salary: Based on the Mincer Equation

295