There is much talk about how soft skills might matter a lot for economic outcomes. And David and I blogged awhile back about a business training based on psychology that bested one based on traditional business practices. Into this discussion comes an interesting new paper by Laura Chioda, David Contreras-Loya, Paul Gertler and Dana Carney.
Chioda and co. set up two mini-MBA trainings for Ugandan students about to graduate from secondary school. One of these is predominantly hard skills, while the other focuses on soft skills. Three and half years later, it turns out they both work – and well: more businesses, higher profits and yes, more employees!
Let’s dig in. To start with there is a lot of focus on quality in these interventions. Chioda and co. spend a fair amount of time in the paper talking about the care with which trainers were selected and trained. But this doesn’t mean it was expensive – they estimate costs at around $118 per student.
Now let’s talk about these skills. The hard skill curriculum was 75 percent hard skills and focused on things like accounting, identifying a market, HR management, getting funding, and keeping books. The soft skills curriculum was 75 percent focused on soft skills, and focused on things like entrepreneurial identity, communication, negotiation, leadership, goal setting, and social networking – a range of intra- and inter-personal skills. Both curricula had training on defining entrepreneurship, identifying business opportunities, and using technology in a small business. In addition, both groups got a series of lessons on building a business plan and making a pitch. And this plan had a stake – students entered their plans in a competition with a chance to win one of ten $400 prizes. The soft skill curriculum came from an NGO called Educate!, the hard skills from the ILO and to both were added a dash from the business school at Berkeley.
For the experiment, Chioda and co. recruited students from a random (nationally representative) sample of 200 Ugandan secondary schools. Those who applied were randomized into the three-week resident program that took place between school terms. Take-up was good at around 70 percent.
So, did they learn anything? Chioda and co. do pre- and post-program tests of the material and yes – the quality training paid off. Soft skills students score 0.28 standard deviations more in the soft skills part of the assessment and hard skill folks score about 0.4 standard deviations more on hard skills.
Three and half years later, Chioda and co. check the skills again. What’s interesting here is that most of the skills converge. Both the soft skills and hard skills groups show 0.13 standard deviations higher knowledge of hard skills relative to the control group. And they show higher levels of plasticity (extraversion, openness/intellect) and stability (emotional stability, conscientiousness, and agreeableness) and lower stress. The one where there might be some difference is that the soft skills group shows an increase of 0.09 standard deviations in self-efficacy, but the hard skills group comes in at a statistically insignificant (and not statistically different) 0.05 standard deviations.
Now Chioda and co. get creative with measurement. To capture negotiation skills, they ask respondents to participate in a timed (short) negotiation exercise, with an incentivized payoff that is lottery tickets based on how well you bargain. Here the soft skills folks drive a harder bargain, scoring significantly higher on two of the outcomes of the negotiations. On the other hand, in a persuasion exercise (where they have to make a pitch that is judged by MBA students and business professionals), there is no significant difference across the skill treatments.
These higher skills translate into substantial economic impacts. Hard skills folks are 6.6 percentage points and soft skills are 4.8 percentage points more likely to be economically active than the control group. Relative to the control group, hard (soft) skills folks are 6.3 (6.6) percentage points more likely to have a functioning business, have 12 (14) percent more employees and 43 (36) percent higher investment. And their profits are higher: 24 percent for the hard skills group and 27 percent for the soft skills groups. None of these effects are statistically different between the hard and soft skills.
So, what’s the bottom line? Recall that costs were $118 per student. These higher earnings (profits plus wage income) translate into $73 per month for the hard skills and $68 per month in the soft skills. And that means, the increased earnings cover costs after 2 months (measured at the 3.5 year mark). Overall, this is a cool result – and one of the stronger I have seen for youth-oriented training. As Chioda and co. note, this was a highly motivated group of students and many of them planned to go to university. It would be interesting to see how this would play out with a less-selective group.