Please note: A revised version of this paper may be available shortly before the seminar!
There are many indicators that interpersonal interactions are important for understanding individual outcomes and are becoming more important. Yet, empirical work suggests that the returns to people skills have remained low and people people have not progressed to the top of the job hierarchy. This paper develops a unified model to understand the role of people skills in the labor market, including task assignment and wages. We model interactions between people, letting individuals feel social pressure to help others, and affect the amount of social pressure experienced by others. We assume that people are heterogeneous with respect to caring and that jobs are heterogeneous with respect to the importance of caring. Consistent with our model, we find that as people skills become more important, the women’s
share of an occupation increases, but the employment shares of blacks, Hispanics, immigrants, and people with poor English decrease. We also show in an assignment context
that within caring jobs, the importance of caring is positively rewarded but that overall labor demand and supply may lead to a negative effect of being caring on wages. We present evidence that computers, team production and innovative work practices, complement people skills. Lastly, we present evidence that people people volunteer more, marry at younger ages, have children at younger ages, and have more children.