To Support Employment, Focus on "Strength of Personality"

TSURU Kotaro
Program Director and Faculty Fellow, RIETI

In his speech to start the new year, Prime Minister Shinzo Abe touched on national defense, the Constitution, and the cultivation of people. He referred to human resources (HR) development as a way of building Japan's future. Quoting from Guanzi, a book on statecraft from ancient China, he emphasized the importance of "planning for a lifetime." Without question, this is a particularly important issue within the "third arrow" of Abenomics, a growth strategy for Japan.

In the education they receive before employment and the HR development they go through after hiring, people should be cultivated in a unified way. But the education people receive at school is in a state of confusion, bouncing between the much-criticized overemphasis on competitive testing and the mistakes of pressure-free education. Post-hiring HR development and occupational training also appear to have lost a clear focus at a time when the uniquely Japanese employment system on which they are based has become transformed and unstable. The difficulty is that changing a budget or a law does not magically advance HR development.

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In considering HR development, the focus should be on skills. Different jobs require different skills, and typically even one job uses a variety of skills. How does one acquire and increase these skills? Economists often classify skills into "firm-specific skills," which are used only at a company where the owner of the skills has previously worked, and "general skills," which are used at all businesses. Skills have also frequently been discussed in terms of their relationship with technological progress. This framework, however, can only explain so much about the urgent issue of HR development.

University of Chicago Professor James Heckman et al. have done research emphasizing the role of "non-cognitive abilities." Through this research, the winner of the 2000 Nobel Prize in Economics has provided some useful insights for considering educational and occupational problems in a unified way. Whereas cognitive abilities can be measured by achievement tests, non-cognitive abilities cannot, and are related to one's personality traits.

Heckman focused on programs designed to support preschool children in the United States living in a troubled home environment. He emphasized that enhancing these children's non-cognitive abilities had a greater beneficial impact on later life than did improvement of their cognitive abilities. In 2013, Heckman and University of Chicago Ph.D. student Tim Kautz published a paper surveying the literature on the subject. They took a comprehensive look at research on non-cognitive abilities up to that point, introducing not only childhood but also adolescent support programs. The scope of their evaluation extended all the way to occupational training.

What sets this paper apart is that, instead of cognitive and non-cognitive abilities, it refers to cognitive and personality skills. If we equate personality skills with personality traits, we likely would conclude that such skills are genetically determined and do not change much over time. The fact is, however, that personality skills can change, and people can learn them during their lifetime.

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Policy and economics have overlooked personality skills up to now, but psychologists have been studying them for many years. In particular, the "Big Five" categories of skills, listed in the Table, are widely accepted. The Big Five scheme lays out these personality skills on a grid to define them in more detail.

Table: The Big Five personality factor
ConscientiousnessTendency to be organized, responsible, and hardworkingSelf-discipline, achievement-striving, and deliberation
Openness to ExperienceTendency to be open to new aesthetic, cultural, or intellectual experiencesCuriosity, fantasy, aesthetic sense
ExtraversionOrientation of one's interests and energies toward the outside world of people and thingsAssertiveness, sociability, positive emotions
AgreeablenessTendency to act in a cooperative, unselfish mannerAltruism, tender-mindedness
Emotional StabilityPredictability and consistency in emotional reactionsLack of anxiety, hostility, and impulsiveness
(Source) Table derived from Heckman and Kautz's paper

Heckman and Kautz cited a vast amount of prior research and showed that personality skills impact a wide range of life outcomes, including the person's educational attainment, labor market success (wages, for example), health, and crime. Among the Big Five, the personality trait "conscientiousness" predicts the widest range of life outcomes.

Looking just at success on the labor market, conscientiousness was the personality trait most strongly related to work performance, but that relationship is only about half as strong as that between intelligence quotient (IQ) and work performance. The more complex a job is, the more important IQ becomes. It is particularly important for university professors and senior managers, but the importance of conscientiousness is not so closely related to job complexity, and Heckman and Kautz say it is useful for a wider range of jobs.

Measurements of the Big Five depend on self-reporting, mainly by questionnaires, and subjective bias can easily enter the results. For that reason, analysis is also done that uses third-party evaluation to measure personality skills.

University of Zurich Assistant Professor Carmit Segal reports in a 2013 paper that American eighth-graders who had demonstrated acts of misbehavior (e.g., truancy, tardiness, failure to submit homework) tended to have relatively lower earnings at ages 26-27, even after eliminating the influence of academic ability based on test scores. The same trend occurs at all educational levels, even after statistically controlling for the influence of educational achievement. On the other hand, eighth-graders' results on standardized tests are related to earnings only for those with post-secondary degrees.

In a 2011 paper, Stockholm School of Economics Assistant Professor Erik Lindqvist and Stockholm University Assistant Professor Roine Vestman analyzed data collected by a psychologist during personal interviews with Swedish army soldiers at the time of their enlistment. They found that those who were unemployed or had low annual earnings had both poorer personality skills and poorer cognitive skills than other people, but the personality skills were particularly lacking. On the other hand, cognitive skills had a greater impact on earnings in the case of skilled workers and persons with high earnings.

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Thus, personality skills are important in a wide range of both educational achievements and occupations, and a deficiency of such skills is strongly associated with occupational failure. Once we accept that, what should we do to enhance personality skills?

Heckman and Kautz acknowledge that there is solid scientific evidence that childhood is a critical time for forming any skill, but they also assert that personality skills have greater potential for expansion in later years than do cognitive skills. Therefore, they say that remediation efforts during adolescence should concentrate on personality skills. Under apprenticeship systems of the past, a young person built a trusting relationship with an adult, who gave the young person guidance and advice. It is likely that such systems worked so well because they taught not only techniques but also valuable personality skills, like showing up at work faithfully, getting along well with others, and working with perseverance.

It follows that, if personality skills were taught through workplace-based programs, young people with handicaps could receive discipline and guidance that they could not have at home or high school. In fact, adolescent intervention programs that aim to increase personality skills have clearly proven more effective than those focusing on cognitive or academic learning.

If we take that point of view, the reasons are clear why training for young people, unskilled workers, and the unemployed is not necessarily effective worldwide. Barbara Sianesi, a senior research economist at the Institute for Fiscal Studies in the United Kingdom, wrote in a 2008 paper about the most effective way of helping Sweden's unemployed find new jobs. The program she describes gives the private sector subsidies to hire people as permanent employees. She also found that those unemployed who were trained in full-time coursework outside a business actually had a lower probability of finding employment than those who had taken no program at all. These findings can be interpreted to mean that giving people the responsibility of working in a company enhanced their personality skills.

Europe now faces a serious problem of unemployment among young people, but countries like Germany, Switzerland, and Austria with active occupational training programs that originated with apprenticeship systems have low rates of unemployed youth. Even during the deep recession that began in 2008, the unemployment rate among young people did not rise significantly. This would also appear to be related to the personality skill building that happens at workplaces with occupational training programs.

Japan, too, should recognize the importance of personality skills in education, occupational training, and beyond. Increasing these skills should be one pillar of our HR development.

>> Original text in Japanese

* Translated by RIETI.

January 20, 2014 Nihon Keizai Shimbun

February 13, 2014