Full Citation

Title: The Growing Importance of Decision-Making on the Job

Citation Type: Miscellaneous

Publication Year: 2021

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: Machines increasingly replace people in routine job tasks. The remaining tasks require workers to make decisions and to have "soft" skills such as problem-solving, critical thinking and adaptability. This paper documents growing demand for decision-making and explores the consequences for life-cycle earnings growth. Career earnings growth in the U.S. more than doubled between 1960 and 2017, and the age of peak earnings increased from the late 30s to the mid-50s over this period. I show that a substantial share of this shift can be explained by increased employment in decision-intensive occupations, which have longer and more gradual periods of earnings growth. To understand these patterns, I develop a model that nests decision-making in a standard human capital framework. Workers predict the likely output of uncertain, context-dependent actions. Experience is valuable because it reduces prediction error, allowing workers to better adapt using data from similar decisions they have made in the past. Returns to experience accumulate more gradually in high variance, non-routine jobs. I test the predictions of the model using data from the three waves of the NLS. Life-cycle wage growth in decision-intensive occupations has increased over time, and it has increased relatively more for highly-skilled workers.

Url: https://cmepr.gmu.edu/wp-content/uploads/2021/04/Deming_Decisions_March2021.pdf

User Submitted?: No

Authors: Deming, David J

Publisher:

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: