Do Workers Pay for On-The-Job Training?

Barron, John M.; Berger, Mark C.; Black, Dan A.

doi:10.2307/146344

Cited by 181 publications

(150 citation statements)

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“…By contrast, the early empirical evidence on training revealed that employer-provided training is mostly general in nature and that, nevertheless, employers paid the costs of training (e.g. Lynch 1992; Spletzer, 1998, 1999;Barron et al 1999). …”

Section: Introductionmentioning

confidence: 99%

The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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By using new panel data for Finnish banks we study the impact of training on wages and performance. To the best of our knowledge, ours is the first paper to compare explicitly the effects of general and firm-specific workplace training on outcomes for both employees and firms. Unlike much existing literature, we find stronger evidence that training improves worker outcomes rather than organizational performance. Depending upon specification, the estimated wage elasticity with respect to training is in the range of 3-7%, whereas the performance effects vary widely depending on the measures of training intensity. The other key finding is that general training is associated with higher wage and performance effects than is firm-specific training. 2 I IntroductionTwo important issues are raised in most economic studies of training. First, does training increase efficiency and by how much? Second, who reaps the gains from training? In addressing these issues, the standard (Beckerian) theory concludes that in competitive markets, employers will not pay for general training. By definition, general training increases employee productivity by the same amount in the current workplace and elsewhere. If employees participate in general training, their employers have to bid up employees' wages reflecting the productivity increases due to training. If they fail to do so, other potential employers can "poach" these workers and free-ride in training expenses. Hence, according to this theory, in competitive labour markets, employers would finance training only if there are some specific elements in it. By contrast, the early empirical evidence on training revealed that employer-provided training is mostly general in nature and that, nevertheless, employers paid the costs of training (e.g. Lynch 1992; Spletzer, 1998, 1999;Barron et al. 1999).To explain this inconsistency between theory and empirics, many subsequent theorists point to imperfections in labour markets. It is argued (e.g. Acemoglu and Pischke, 1999;Manning, 2003) that search frictions, certain labour market institutions (e.g. unions, minimum wages), imperfect competition in small labour markets (Stevens 1994), or asymmetric information in training among current and potential employers may lead to situations where employees capture only a fraction of the productivity gains.These models also imply that wages do not equal marginal revenue product, and this has motivated recent literature that studies the impact of training on productivity and wages 1 .Consistent with theory grounded in imperfect labour markets, more recent empirical 1 For theoretical literature see e.g. Acemoglu and Pischke (1999) and Booth and Zoega (2004). 3 evidence on the impact of training on wages and productivity finds that there is a wedge between wages and productivity effects and that employees and employers seem to share the benefits from training. This applies both to industry levels studies (Conti 2005;Dearden et al. 2006) and firm level studies (e.g. Ballot et al. 2006). However, w...

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Section: Introductionmentioning

confidence: 99%

The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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“…Implicitly, we assume that workers receive wages during that time, i.e., Þrms bear the entire cost of providing informal training to workers. Empirical evidence by Barron et al (1999) indeed strongly supports this assumption. strictly convex function.…”

Section: The Modelmentioning

confidence: 63%

“…5 It is interesting to note that the required nature of training seem to have changed along with this kind of restructuring. For instance, Barron et al (1999) Þnd for a random sample of 3600 US businesses from the Comprehensive Business Database in 1992 that the average time a worker is in "informal management training" is threefold the time she is in "formal training", and that off-site training programs are by far less important than on-site training in the Þrm.…”

Section: Evidence On Task Composition and Trainingmentioning

confidence: 99%

Non-Routine Tasks, Restructuring of Firms, and Wage Inequality Within and Between Skill-Groups

Egger

Grossmann

2005

J. Econ.

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“…There is however empirical evidence emphasizing that, although many training programs are general (Harhoff and Kane, 1997;Acemoglu and Pischke, 1999a;Loewenstein and Spletzer, 1999), employers sponsor them (Loewenstein and Spletzer, 1998;Barron et al, 1999;Green et al, 2000;Autor, 2001;Booth and Bryan, 2005). Hence, why do firms bear most of the costs of training?…”

Section: Previous Studiesmentioning

confidence: 99%

Market imperfections and firm-sponsored training

Picchio

Ours

2011

Labour Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms' training expenditures. Instead, product market competition does not have an effect on firm-sponsored training. We conclude that increasing competition through international integration and globalization does not pose a threat to investments in on-the-job training. An increase in labor market flexibility may reduce incentives of firms to invest in training, but the magnitude of this effect is small.JEL Classification: D43, J24, J42, L22, M53

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Do Workers Pay for On-The-Job Training?

Cited by 181 publications

References 11 publications

The effects of general and firm-specific training on wages and performance: evidence from banking

The effects of general and firm-specific training on wages and performance: evidence from banking

Non-Routine Tasks, Restructuring of Firms, and Wage Inequality Within and Between Skill-Groups

Market imperfections and firm-sponsored training

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