The Eroding Lifetime Return to Cognitive Skills

We study how lifetime labor-market returns to cognitive and social skills have changed across Swedish birth cohorts. We combine administrative records for cohorts born 1951–1980 with skills measured at military enlistment and follow earnings, employment, and wages from 1985 to 2023. Because complete working lives are not observed for every cohort, we estimate age profiles and predict lifetime outcomes. Social skills are a stronger predictor of labor-market success than cognitive skills, largely through employment, although both skills predict wages. Across cohorts, lifetime returns to cognitive skills decline markedly, while returns to social skills increase. We also compare men and women, using brothers’ skills as proxies for own skills in both groups. Skill returns increased more among women than among men, with the largest relative increase for women’s social skills. The results highlight substantial variation in skill returns by skill type, age, cohort, and gender.

Joint with Erika Forsberg, Peter Fredriksson, Georg Graetz, and Björn Öckert

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