Cognitive and socio-emotional skills play important yet different roles in explaining labor market productivity and success. Despite some limitations in the data and measurements used, policymakers would be well advised to include cognitive and socio-emotional skills development in school curricula. Promoting each skill set could lead to improvements in job quality or higher labor market participation and tertiary educational attainment. Given the influence of family environments on skill formation, parenting and extra-curricular activities can be very important in fostering cognitive and socio-emotional skills.
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Locus of control and the labor market - Deborah A Cobb-Clark
One of the most exciting developments in labor economics over the past decade has been the reframing of standard theoretical and empirical models to accommodate the role of non-cognitive skills in driving labor market outcomes. What began as a simple recognition that non-cognitive skills - for example, personality traits, perseverance, locus of control, self-efficacy, self-esteem, social skills, etc. - often have predictive power in wage equations has evolved into a considered analysis of the mechanisms through which non-cognitive skills impact worker and firm decisions in general. The result has been a more profound understanding of the way that labor markets work and a more nuanced view of what it takes to be successful.
The objective of this paper is to synthesize the emerging research on one non-cognitive skill: locus of control. Locus of control is perhaps best described as "a generalized attitude, belief, or expectancy regarding the nature of the causal relationship between one's own behavior and its consequences" (Rotter 1966 p.2) Those believing that life's outcomes are due to their own efforts are due to their own efforts have an internal locus of control, while those believing that outcomes are due to external factors (e.g., luck) have an external locus of control. Perceptions of control have long had a prominent place in psychology, with psychologists arguing that an individual's belief that his or her actions will lead to the desired outcome is fundamental to both motivation (i.e., effort) (Bandura 1986, 1989; Skinner 1996; Goldsmith et al. 2000) and self-control (Rosenbaum 1980).
Economists have been much slower than psychologists to turn to locus of control as a means of understanding human behavior. Nonetheless, locus of control has increasingly come to be regarded as one of the core concepts in many fields of applied economics, including labor economics. Having an internal locus of control has a demonstrable link with labor market success and appears to be central to many of the human capital investment decisions which consume the attention of labor economists. In particular, investments in education, health, self-employment, and job search have all been linked to individuals' beliefs about the extent to which they control life's outcomes. Research in organizational sciences demonstrates that the decisions a senior manager makes are driven in part by his or her locus of control, and there is the potential for locus of control to become an important screening device in the hiring process. Finally, as one component of self-control more generally, locus of control is also relevant for understanding the types of incentive contracts that firms offer their workers.
The conceptual origins of locus of control
The concept of locus of control emerged out of social learning theory more than 50 years ago. In his seminal work, Rotter (1954) proposed a theory of learning in which the reinforcement (i.e., reward or punishment) of a behavior strengthens individuals expectancy (expectation) that this particular behavior will be reinforced in the future. The anticipation of future reinforcement is increased more, however, when individuals believe that the current reinforcement is contingent upon their own behavior than when they do not. As individuals differ in the reinforcement that they have received in the past, Rotter argued that they will also differ in the degree to which they generally attribute reinforcement to their own actions and that these beliefs regarding the internal versus external nature of reinforcement constituted a personality trait (Rotter, 1966)
* Locus of control reflects individuals' beliefs about whether what happens in life is causally determined by their own decisions and behavior. LOC is a general skill that is thought to be stable across situations (Ajzen 2002)
On the importance of being internal
When people perceive that they have a high degree of control, they exert effort, try hard, initiate action, and persist in the face of failures and setbacks; they evince interest, optimism, sustained attention, problem solving, an an action orientation (Skinner 1996 p.556)
There is compelling evidence that having an internal locus of control is associated with labor market success. Workers with positive core self-evaluations (i.e., an internal locus of control) seek out more complex jobs (Judge et al. 2000), have better job performance (see Judge and Bono 2001), and are particularly good at capitalizing on the advantages associated with having a good education and an advantaged family background (Judge and Hurst 2007). Those with an internal locus of control also tend to set more challenging goals, persist in the face of adversity, experience less job stress, and be more successful generally (see Ng et al. 2006; Wang et al. 2010)
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