The Effect of Non-cognitive Ability on Salary: Based on the Mincer
Equation
ChongYu Li and YingGe Du
School of Economics and Management, Beijing Jiaotong University, Beijing, China
Keywords: Non-Cognitive Ability, Private Enterprise, The Five-Factor Model.
Abstract: In recent years, digitalization has gradually become the core strategic direction of global technological change.
Therefore, it is necessary to build a new human capital system that adapts to the needs of skills, especially
focusing on the cultivation and development of individual non-cognitive abilities. The data in this article
comes from the 2018 database of China Family Panel Studies. Through the Ordinary Least Squares method,
this paper analyzes the impact of non-cognitive abilities on the salary of employees in private enterprises. The
regression equation is based on the Mincer equation. The results show that non-cognitive abilities have a
significant positive effect on labor salary. Further research find that conscientiousness has the strongest
explanatory power, followed by agreeableness and neuroticism. And on this basis, this paper puts forward
targeted policy recommendations. For example, companies should actively carry out employee training on
non-cognitive abilities. Employees need to actively strengthen their non-cognitive ability training.
1 INTRODUCTION
Today, employees not only need to face more
frequent technological changes, but also need to face
more diverse needs for interpersonal cooperation.
Therefore, it is necessary to build a new human
capital system that adapts to the needs of skills,
especially focusing on the cultivation and
development of individual comprehensive ability. As
an important part of individual ability, non-cognitive
ability directly determines whether a person can
succeed.
Scholars’ research perspectives on Human
Capital Theory have also changed from the traditional
perspectives of education and health to the ability.
Theodore W. Schultz, Gary Stanley Becker and
others established the traditional Human Capital
Theory, a large number of studies have shown that
human capital investment can promote economic
growth, and from a micro perspective, people's
investments in education and health can significantly
affect their salary. In recent years, Heckman proposed
a new theory of human capital with “ability” as the
core, which consists of two parts, cognitive ability
and non-cognitive ability, to explore the effect of
ability on person and society. The two core elements
of education and health in traditional human capital
theory will affect individual economic behavior
through the accumulation of ability. Therefore,
scholars have mainly focused on the formation
mechanism of ability and the impact of ability on the
individual economic behavior. First the antecedent
variables of ability included family background and
school education. Wang Huimin found that children
with higher family socioeconomic status were more
likely to receive preschool education, and children
with preschool education had higher cognitive and
non-cognitive abilities than children without
preschool education. Li Bo found that parent-child
reading, parent-child activities, parent-child
communication and homework supervision all had
significant positive effects on children ’ s non-
cognitive abilities. Second, outcome variables for
ability included the career choice and the personal
salary. Sheng weiyan found that skilled employees
with higher non-cognitive abilities were more likely
to enter high-end service industries, and employees in
high-end service industries also had higher returns on
non-cognitive abilities. Li Xiaoman found that after
controlling for other traditional human capital
variables, cognitive ability and non-cognitive ability
could also show a significant positive effect on salary
for low-skilled and medium-skilled workers.
Up to now, most scholars divided the research
objects of non-cognitive ability into high education
Li, C. and Du, Y.
The Effect of Non-cognitive Ability on Salary: Based on the Mincer Equation.
DOI: 10.5220/0011174300003440
In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 291-295
ISBN: 978-989-758-593-7
Copyright
c
2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
291
and low education. This paper focuses the research
object on a specific sector, whicn is the private sector,
and puts forward more targeted policy
recommendations. Because, in China, private
enterprise employees are in a more intense talent
competition environment, this research has high
practical meaning. Therefore, based on “The Five-
Factor Model” (OCEAN), this paper analyzes the
impact of non-cognitive ability on the salary of
employees in private enterprises.
2 MATERIAL AND METHOD
The data in this article comes from the 2018 database
of China Family Panel Studies, which cover 25
provinces and autonomous regions in mainland China
and can be regarded as a relatively representative
national database. The purpose of this paper is to
explore the impact of non-cognitive abilities on the
salary of employees in private enterprises. Therefore,
this study mainly uses the survey data of the adult
sector.
According to the research needs, the research data
are processed as follows: (1)Keeping samples of
employment; (2)Keeping samples aged 18-65;
(3)Excluding extreme samples with monthly salary
below 1,000 yuan, as well as obvious outliers and
missing values of other core variables in this paper.
2.1 Measurement of Non-cognitive
Ability
When studying non-cognitive abilities and labor
income, widely accepted survey methods include the
Internal and External Control Scale (Rotter, 1973),
the Self-Esteem Scale (Rosenberg, 1978), and the
Five-Factor Model (Costa, 1992). Considering the
high applicability of the Five-Factor Model, this
paper uses the Five-Factor Model to measure non-
cognitive abilities based on the questions of the CFPS
questionnaire. The Five-Factor Model includes
openness, conscientiousness, extraversion,
agreeableness, and neuroticism.
The specific variable design is shown in Table 1
and explained as follows: (1)Each dimension
involves 2 questions, and the average score after the
sum of these two questions is the score of the
dimension；(2)This article only deals with 4 of the 5
dimensions of non-cognitive ability. Any text or
material outside the aforementioned margins will not
be printed.
Table 1: The Five-Factor Model.
The Five-
Factor Model
Variable design
Conscientiousness
The confidence in your future
A sense of accomplishment
Agreeableness
Relationship
Not hated by others
Neuroticism
Life cannot go on
Feel upset
Extraversion
Adventurous
Happy life
2.2 Construction of the Empirical
Model
Through the Ordinary Least Squares method, this
paper analyzes the relationship between non-
cognitive ability and the salary of private enterprise
employees. The regression equation is based on the
Mincer equation by adding non-cognitive ability
variables.
Lnw
= α + β × noncognitive
+
∑
γ
×
x
+ε
（1）
Among them, Lnw
i
is the logarithm of the
monthly salary of the employee, α is a constant term,
noncognitive
i
is the non-cognitive ability measure
constructed under the framework of the “The Five-
Factor Model” in this paper, X
in
is a series of other
factors that affect salary, including age, education,
gender, health. The definitions of all variables are
shown in Table 2.
Table 2: Variable definition.
Variable
type
Variable
name
Indicator
name
Variable
d
efinition
Depende
nt
variable
log of
monthly
salar
y
Log of
monthly
salar
y
Independ
ent
variable
Non-
Cognitive
ability
Conscien-
tiousness
The average
score after
the sum of
the
dimension
Agree-
ableness
The average
score after
the sum of
the
dimension
Neuro-
ticism
The average
score after
the sum of
the
dimension
BDEDM 2022 - The International Conference on Big Data Economy and Digital Management
292
Extraver-
sion
The average
score after
the sum of
the
dimension
Non-
Cognitive
ability
The score
after the
sum of the
four
dimensions
Control
variable
Gender
Male=1
；
Female=0
Health
From 1 to 7
p
oints
Age Age
Registered
permanent
residence
Non-
agricultural
registered
permanent
residence=1
；
Agricultural
registered
permanent
residence=0
Education
Elementary
school=1;
Junior high
school=2;
High
school/Tech
nical
school=3;
Junior
college and
above=4
3 RESULT AND DISCUSSION
The regression results of the model are shown in
Table 3, and the non-cognitive ability has a
significant promoting effect on salary. Model 1 to
Model 4 are the regression results of adding 4
different dimensional variables respectively.
Extraversion has no significant effect on the salary
private-sector employees. Conscientiousness,
agreeableness, and neuroticism are all remarkable at
level 1%, and the salary effects were 5.2%, 2.6%, and
-6.2%, respectively. These suggest that less
neuroticism, more agreeableness, and more
conscientiousness can significantly increase the
salary of private-sector employees. Model 4 includes
variables of four dimensions at the same time, and the
salary effects of the three dimensions of variables all
decrease significantly. Only conscientiousness is still
remarkable at the 1% level, and neuroticism is
remarkable at the 5% level. This may be due to the
collinearity of non-cognitive abilities in different
dimensions.
In Model 5, the total non-cognitive ability index
is remarkable at the 1% level, again proving that non-
cognitive ability has a significant impact on salary.
Among the control variables, males have more
obvious salary advantages, younger employees have
more obvious salary advantages, employees with
higher education level have higher salary.
Table 3: Regression result.
Variable 1 2 3 4 5 6
Conscien-
tiousness
0.05
***
0.04
***
(0.1
2)
(0.0
1)
Agree-
ableness
0.03
***
0.01
(0.0
09)
(0.0
09)
Neuro-
ticism
-
0.06
***
-
0.05
**
(0.0
2)
(0.0
2)
Extra-
version
-
0.02
4
-
0.00
3
(0.0
19)
(0.0
12)
Non-
Cognitive
ability
0.03
***
(0.0
06)
Gender
0.39
***
0.39
***
0.39
***
0.39
***
0.38
***
0.39
***
(0.0
18)
(0.0
18)
(0.0
19)
(0.0
18)
(0.0
18)
(0.0
18)
Health
0.00
8
0.00
9
0.00
8
0.00
9
0.00
6
0.00
8
(0.0
08)
(0.0
08)
(0.0
08)
(0.0
08)
(0.0
08)
(0.0
08)
Age
-
0.00
8
***
-
0.00
8
***
-
0.00
8
***
-
0.00
8
***
-
0.00
8
***
-
0.00
8
***
(0.0
08)
(0.0
009)
(0.0
009)
(0.0
009)
(0.0
009)
(0.0
009
)
Registered
permanent
residence
0.00
4
0.00
02
0.00
1
0.00
1
0.00
2
0.00
1
(0.0
2)
(0.0
2)
(0.0
2)
(0.0
2)
(0.0
2)
(0.0
2)
Education 0.12 0.12 0.12 0.12 0.12 0.12
The Effect of Non-cognitive Ability on Salary: Based on the Mincer Equation
293
*** *** *** *** *** ***
(0.0
11)
(0.0
11)
(0.0
11)
(0.0
11)
(0.0
11)
(0.0
11)
Constant
term
7.59
***
7.66
***
7.89
***
7.76
***
7.65
***
7.56
***
(0.0
84)
(0.0
81)
(0.0
79)
(0.0
73)
(0.1
01)
(0.0
96)
*p<0.1; **p<0.05 ***p<0.01
In order to more accurately study the impact of
non-cognitive abilities of various dimensions on
employees’ salary, this paper reports the standardized
coefficients of three dimensions that have a
significant impact on employees’ salary. The
explanatory power of conscientiousness, over
agreeableness and neuroticism, has the most
significant effect. If employees of private enterprises
want to increase their salary, they need to pay more
attention to the improvement of their sense of
responsibility. At the same time, it is also very
important to get along well with colleagues and
teams. In a tense working atmosphere, it is also
necessary for employees to maintain emotional
stability to raise their salary.
Table 4: Comparison of non-cognitive ability.
Conscientio
us-ness
Agreeable-
ness
Neuro-
ticism
OLS
coefficient
0.052 0.026 -0.062
Standar-
dized
coefficient
0.076 0.055 -0.052
R-squared 0.221 0.218 0.217
4 CONCLUSION AND
SUGGESTION
The New Human Capital Theory has confirmed that
both cognitive and non-cognitive abilities have a
significant impact on people’s success in achieving
socioeconomic status. Based on the existing research
ideas, this paper uses the “big five personality”
model, and focuses on the private enterprise
employees. Because, in China, private enterprise
workers are in a more intense competitive
environment, and private enterprise managers are
more likely to dismiss employees with insufficient
ability due to the harsh external environment. This
study adopts an empirical analysis method to explore
the impact of non-cognitive abilities on the salary of
workers in private enterprises, and draws the
following conclusions: (1) Non-cognitive ability
have a significant impact on employees’ salary. (2)
Among them, conscientiousness has the strongest
explanatory power, followed by agreeableness and
neuroticism.
Therefore, this paper proposes the following
policy recommendations. (1)Schools should
introduce the cultivation of students’non-cognitive
abilities in teaching. At the same time, schools should
pay attention to the assessment of non-cognitive
ability teaching in order to better develop students’
non-cognitive ability. Flexible and interesting
classroom models require high-level teaching staff,
therefore, schools should increase the training of
teachers on non-cognitive ability teaching. (2)When
recruiting, private enterprises should focus on
examining the communication and teamwork ability
of employees, as well as their sense of responsibility
and love for their work. At the same time, companies
should actively carry out employee training on non-
cognitive abilities; and design clear career plans for
employees, because with goals, employees will be
more motivated to complete their work. Also,
Enterprises should pay attention to cultivating
employees' personality qualities of passion and
selfless dedication. (3)Employees need to actively
strengthen their non-cognitive ability training and
accumulate human capital, so that they can find better
job opportunities and obtain higher returns on salary.
There are still some shortcomings in this paper.
At the same time, the non-cognitive ability variables
that can be constructed in this paper are limited, such
as the openness to experience dimension, which
cannot be observed.
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