Employment Skills Demand and Skill Premiums: What Engineering Graduates Does the Market Require?

ABSTRACT This study expands the New Human Capital Theory by emphasising how the synergy of multiple skill combinations contributes to securing high‐paying positions. Unlike traditional research that focuses on the wage premiums of single or paired skills, this study finds that a composite configuration of decision‐making, innovation, research and development, and problem‐solving is the key determinant for engineering professionals to excel in high‐end roles. Industry analysis further reveals distinct skill demands across sectors. In science‐based industries (e.g., biopharmaceuticals and electronics telecommunications), technological innovation and decision‐making abilities are critical. In production‐intensive industries (e.g., mechanical manufacturing and electrical energy), management and strategic coordination play a central role. Meanwhile, in supplier‐dominated industries (e.g., construction and logistics), resource allocation and organisational capabilities are the primary drivers of salary premiums. These findings indicate that higher education should move away from a generalised training model and transition towards industry‐specific skill alignment. To quantify the factors influencing salary determination, this study develops a Skill Premium Index, addressing the collinearity issues inherent in traditional regression methods and enhancing the precision of identifying core competencies for high‐paying positions. Additionally, the study highlights a structural mismatch in China's state‐led skill formation system, where the expansion of graduate education has outpaced the growth of high‐skilled job opportunities, resulting in low employment matching rates for highly educated professionals. To resolve this challenge, engineering education should strengthen industry‐academia collaboration, optimise curricular structures, adopt dual‐education models and establish a comprehensive skill certification system. These measures will facilitate a deeper integration between higher education and industry demands, ultimately enhancing the labour market adaptability of engineering graduates.