Economics & Finance

The Increasing Significance of Soft Skills in Productivity

Workforces lacking in soft skills will struggle in the future economy. An increase in output is possible as a result of spending money on developing these essential abilities.

The Increasing Significance of Soft Skills in Productivity
Workforces lacking in soft skills will struggle in the future economy


The development of a nation depends on people having what are known as “soft talents,” or the behavioral and social attributes that allow people to collaborate well with one another.

Sixty percent of French companies place a higher value on “soft skills” like organization, flexibility, and teamwork than they do on technical expertise. Nonetheless, in comparison to other developed economies, France lags significantly in terms of its supply of soft talents.

We evaluated how much France may gain by bridging its soft skill gap in a report for the Council d’Analyse Economique, an independent advisory committee for the French Prime Minister. Our research suggests that putting money into people’s soft skills would boost productivity at the individual, company, and national levels, as well as open doors for development in industries where total factor productivity is expected to rise.

Distance measurement

Using the OECD’s Programme for the International Assessment of Adult Competencies, we rated 18 developed nations to calculate France’s estimated soft skills gap (PIAAC). According to the findings, France’s average level of soft skills is third lowest, behind only Germany and Japan. America topped the list, followed by the Czech Republic and Denmark.

The Increasing Significance of Soft Skills in Productivity
Distance measurement

This knowledge gap was also present among people with advanced degrees as well as those without a four-year college diploma, suggesting that the lack of interpersonal competence in France is not exclusive to a certain demographic.

The lack of interpersonal skills is a problem across all age groups in France. Another OECD poll indicated that French school children are less enduring, less efficient in problem solving and demonstrate lower degrees of internal locus of control comparing to their American, German and Northern European peers. Previous studies have demonstrated that the French schooling system does not effectively foster group dynamics and cooperation among its students.

How soft skills influence productivity

Social skills, defined as the set of abilities that allow an individual to engage correctly in a given social situation, have grown in importance over the last 40 years, particularly in fields such as healthcare, education, and law enforcement. Using data on the labor force in both France and the United States, we tracked the growth and decline of sociability-related occupations from 1982 to 2020. We found that jobs requiring social skills increased in both nations, whereas jobs requiring fewer social skills decreased in growth.

Engineers, financiers, physicians, educators, and managers of both production and operations all require HSHM expertise. Between 1982 and 2020, the percentage of French workers in these fields is projected to increase by as much as 9 percentage points. Nevertheless even by the year 2020, a smaller percentage of French workers were employed in jobs requiring high levels of social skills than in the United States.

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While it is difficult to establish a direct relationship between soft skills endowment and productivity due to a lack of high-quality data, we did find evidence that productivity increased in sectors that made greater use of soft and analytical skills while being flat or declining overall. Thus, sectors that rely increasingly heavily on HSHM personnel tend to experience rising productivity rates.
Then, we estimated pay regressions in France to calculate the value of soft talents. According to the findings, an increase of one standard deviation in numerical competence is connected with a 4.2% rise in hourly pay, whereas an increase of the same magnitude in soft competence is associated with a 4.4% increase. To put it another way, the association between salary and soft skills is as strong as that between salary and mathematical competence. These findings corroborated other studies’ estimates that softer skills are as least as crucial as hard abilities.

We discovered that the returns to soft skills were favorable for people with and without tertiary education, but were slightly greater for people with tertiary education.

How to close the gap

Many treatments aimed at children as young as three or four years old have been shown to improve non-cognitive skills and academic performance in subsequent years. Several studies have established a causal relationship between soft skill training in children and positive adult outcomes including increased trust and self-control, improved academic achievement, less delinquency, increased employment, and reduced reliance on social welfare. As French students are falling behind their OECD counterparts, we argue that a stronger emphasis on soft skills development in French schools is vital to equip them for the future. This, however, will necessitate significant adjustments to the French schooling system.

The Increasing Significance of Soft Skills in Productivity
How to close the gap

We also recommend that the French government make its soft skills evaluation for school-aged children nationwide. This would demonstrate France’s dedication to prioritizing the soft skills agenda, allow stakeholders to monitor the development of these vital abilities, and aid in the evaluation of policies and reforms on a national scale. Last but not least, it has the potential to establish France as an international leader in the field of soft skills.

Yet, soft talents are not fixed and may be honed even in later life. An employee’s degree of “soft skills” may be improved by participation in an on-the-job training program. An Indian randomized controlled study examined the benefits of teaching employees of a major textile export company social skills. Management of time, communicating effectively, overcoming problems, and understanding finances were all covered in the program. As a result, productivity rose by 12% and workers took on more challenging assignments, leading to a 10% rise in garment output.

Ways exist to help kids and grownups alike develop their soft skills. Putting money into developing these abilities will pay off handsomely in the long term. Spending time and money developing soft skills is money well spent in the long run.

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