Non-cognitive skills and earnings of informal workers in China

Abstract

This study investigates the relationship between non-cognitive skills and wage earnings among informal workers. While existing research underscores the significance of non-cognitive skills in shaping labor market outcomes, their role within the informal sector remains under-explored. Utilizing data from the China Family Panel Studies, we analyze how non-cognitive skills, as measured by the Big Five personality traits, locus of control, and challenge-affiliation preference, predict wages in China’s informal labor market. Our findings reveal that openness, emotional stability, an internal locus of control, and a preference for challenge are positively associated with earnings, with effects varying across the earnings distribution and occupational categories. Further analysis identifies human capital accumulation, social capital formation, and occupational choice as key mechanisms underlying these relationships. These findings enhance our understanding of informal labor markets and offer policy insights for improving earnings through targeted skill development initiatives.