The effects of education and cognitive skill on earnings: How much do occupations and jobs matter?

To what extent are occupations and jobs useful contexts for understanding why and how education and cognitive skill are related to earnings? Analyses of data from the National Adult Literacy Survey (NALS) revealed several important findings. First, less than half of the education and skill effects on earnings are due to occupational sorting into broad occupations with varying skill demands. Second, education and cognitive skills remain positively related to earnings among workers within narrowly defined occupations. Third, while occupational and job level skill demands are related to workers’ earnings, neither accounts for education and skill effects on earnings within occupations. Finally, cognitive skills matter more for earnings for workers employed in more skill intensive occupations.