Sorting in the Labor Market Based on Workers’ Noncognitive Skills

This paper proposes an extension of Rosen’s (1986) theory of equalizing differences model by incorporating the role of different types of noncognitive skills in worker’s job preference function to explain the U.S. labor market sorting mechanism. This study also tests the implication of the proposed labor market sorting model by using the current population survey and Occupational Information Network data sets and finds that a positive and statistically significant relationship exists between noncognitive skills and workers sorting behavior. The empirical results suggest that the relative employment share of women is higher in the occupation in which the people’s task is more important because of their job preferences, which depend on the level of different types of noncognitive skills such as interpersonal and social skills. The converse is true for black workers. These types of sorting behavior can explain a major portion of the changes in the male-female and black-white wage gaps.