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The (New) Role of Socioemotional Skills in the Labor Market
economies than in many other economies, barring Sub-Saharan African economies, despite recent progress (World Bank 2020). Implementing measures that support sustained poverty reduction is thus a policy priority in the region. In many cases, these economies are now considering the development or scale-up of labor market programs targeted to poverty—such as means-tested technical and vocational training and economic inclusion programs—following the approach of BRAC’s Targeting Ultra-Poor graduation programs (Andrews et al. 2021).2 For example, Pakistan revamped its approach to social protection and poverty programming in 2019 through a cabinet-level restructuring that led to the creation of the Ehsaas (Compassion) platform and the Poverty Alleviation and Social Safety Division to promote coherent safety nets for vulnerable groups, as well as new interventions to support livelihoods and jobs among the poor.3 Poverty reduction as an explicit goal also features prominently in national planning documents more generally, as seen in Bangladesh’s five-year plans.
This chapter explores the role that socioemotional skills play in the determination of the earnings of the informal sector poor. The examination focuses on Pakistan and Sri Lanka primarily through the use of two microdatasets on labor market outcomes, education, and skills (technical, cognitive, and socioemotional): (1) the Pakistan Labor and Skills Survey (LSS) and (2) the Sri Lanka Skills toward Employment and Productivity survey (STEP). The analysis delineates the heterogeneity of socioemotional skills and earnings across various segments of the labor market in each country. The following section reviews the role of socioemotional skills in labor market outcomes, with a focus on developing economies and South Asia. The subsequent section presents an empirical analysis of data on socioemotional skills in Pakistan and Sri Lanka. The final section discusses the implications of the findings for programs designed to target the informal poor.
Although the importance of general education, work experience, and social norms in boosting the incomes of the poor is well recognized, there is a growing interest in exploring the potential of socioemotional skills to improve labor market outcomes (Acosta and Muller 2018; Heckman, Stixrud, and Urzua 2006) (box 6.1). Jencks (1979) shows that socioemotional skills are at least as important as cognitive skills, socioeconomic background, and educational attainment in predicting incomes later in life. More recent research finds that people with higher levels of socioemotional skills have better labor market outcomes (Saltiel et al. 2017). Heckman and Rubinstein (2001) find that individuals with General Education Development certificates are less likely to hold a job after they become adults and are more likely than high school graduates to engage in risky behaviors (teenage pregnancy, smoking, and drug use), even though they probably have similar levels of cognitive abilities. They adopt these behaviors presumably because of poorer socioemotional skills, such as discipline, patience, and motivation.4
