Dr. Victoria Prowse, Dr. David Gill and "The Creativity Premium"

Does creativity increase financial success?

In May of 2021, Dr. Victoria Prowse and Dr. David Gill published a discussion paper at the IZA Institute for Labor Economics entitled "The Creativity Premium." In this paper, they share research findings that show a statistical correlation between high measures of childhood creativity and increased earnings later in adulthood.

I recently spoke with Dr. Prowse about their work.

To begin, what led an economics professor to look at creativity?

I came to this question to better understand the inequalities people experience in their lives. A broad fixture in economics at the moment is the increasing amount of technological change. As a result, jobs that people did in the past are disappearing due to automation.

I was curious about how the soft skills established early in our lives might be important for things that happen later. I thought of creativity as one of the soft skills that might fit this criteria, but there wasn’t much evidence.

One sort of assumes that creativity would be a good thing, but I wasn’t at all certain it would positively influence earnings. For example, maybe people who are more creative go into careers that are less financially rewarding, such as theater managers or performing artists. I wasn’t sure what we would find, but I had an open mind and followed the data.

How did you approach your research? What methods did you use?

As an empirical economist, I wanted to work from data. We used the data cycles in the National Child Development Study (NCDS), a British cohort study that follows a group of adults from birth through their current age of 60.

One of the unique things about this survey is that it collected information in childhood (including a measure of creativity) and then followed these individuals to see how much they earn and what education they attain as they reach adulthood.

At age 7, the NCDS asked each child’s teacher to evaluate each child’s creativity relative to all children at the same age using five dimensions of creativity: writing, handiwork, art, storytelling, performing, music. The goal was to take a general assessment of creativity in the population, so teachers evaluated students on a 5 point scale, placing them in the top 5%, next 20%, middle 40%, next 20%, and bottom 5%.

We had empirical reassurance that the measure of creativity in childhood was valid by the information collected at age 16 and 23. When each young adult was asked to rate their ability in various high school subjects and practical activities, those who had been identified as more creative said they were better at things like music and art and practical subjects. Interestingly, these more creative students were not worse at core subjects like math, science, and English.

What did your research show?

We then combined data on how much these people earned at six different times between the ages of 23 and 55 to get a big picture measure of earnings. When we related this measure of earnings to the childhood measure of their creativity, we found that more creative individuals earned more in adulthood!

“When we related this measure of earnings to the childhood measure of their creativity, we found that more creative individuals earned more in adulthood!”

We also looked at the attributes, occupation, and education to see if we could better explain the link between creativity and earnings. So we explored the effect of creativity on:

• how well an individual does in education,
• what sort of career or occupation they start work in, and
• how much that individual earns in their adult career.

We did find that more creative people have higher levels of educational attainment. More creative people do better in education at age 16. They are also more likely to continue beyond compulsory education and attain a college or university education. Once they get into the labor market, they further benefit from this education, but this alone did not explain the increased earnings. The creativity benefit extended their earning potential even further.

The fact that creativity has an important impact on earnings is really of the first order of importance in how we think about how we should be educating individuals or how parents should be evaluating our children or helping them to develop their interests.

Creativity, a skill that’s not usually linked to being an economically valuable behavior, has a high rate of return. That’s why we call the paper the Creativity Premium — creative people earn more.

Dr. Victoria Prowse

Dr. Victoria Prowse is an Associate Professor in the Department of Economics and the Krannert School of Management at Purdue University. She is an empirical microeconomist with research interests in labor, public and experimental economics. Her research explores how cognitive skills and preferences affect effort provision, learning, and life outcomes including educational attainment, labor supply, retirement, and inequality. Learn more about Dr. Prowse and her work at her website.