Teresa Backhaus, Bonn University - Personality and labour earnings across the life-cycle

Title:   Personality and labour earnings across the life-cycle

Abstract: Earnings differences over the working life arise from the joint evolution of wages, employment stability, and career dynamics. This paper examines how personality traits shape the accumulation of labour earnings over the life cycle. We exploit a novel linkage of German administrative social-security records with long-running survey data, allowing us to combine complete employment and earnings biographies with established measures of the Big Five personality traits, risk preferences, and locus of control.

We find that personality traits are significantly related to earnings accumulation. Decomposing lifetime earnings into wage and employment components shows that an internal locus of control is associated with higher accumulated earnings for both men and women, and conscientiousness for women. In contrast, agreeableness, neuroticism, and—particularly for women—extraversion are linked to lower earnings accumulation. Conscientiousness operates primarily through stronger labour market attachment, whereas locus of control affects both wages and employment; agreeableness and neuroticism are disadvantageous on both margins.

To uncover the underlying mechanisms, we analyse wage and employment dynamics, educational and job type selection, career trajectories, welfare dependence, and job mobility separately for women and men.

Traits associated with lower earnings are often amplified through unfavourable educational and job selection, which also leads to higher employment instability. We further find gender differences for openness and extraversion. While openness is associated with higher wages for women, it is associated with lower labour force participation for men. Extraversion is associated with lower earnings only for women. Allowing for non-linearities shows that for some traits and outcomes it is beneficial to belong to the middle of the distribution.

Presenter: Teresa Backhaus, Bonn University

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