Changes in Returns to Multidimensional Skills across Cohorts

While social skills seem to gain importance in the workplace, other skills may become
less relevant. The evolution in skill demand and supply affects returns to skills over
time. This paper addresses the challenge of estimating returns, due to biases from
unmeasured ability and indirect effects via college, by using a dynamic model with
cognitive, social, and diligence skills to estimate both direct and indirect returns to
skills through education. In Germany, across cohorts, returns to social skills grew
by 6 percentage points. Due to routine-task displacement and sorting into routine-
intensive occupations, returns to diligence skills dropped by 10 percentage points
for low-cognitive individuals.