Human capital theory and UK vocational training policy

Education, Training and Economic Performance: Evidence from Establishment Survival Data

“…If private underinvestment does not occur, and the level of training is, as far as can be discerned from the data, optimal from the employer's private point of view, this does not necessarily obviate the need for public intervention in the training market. As is well-known, training has external benefits that arise through labour mobility, whereby other employers can benefit from the training provided and funded by the current employer (Stevens, 1999;Acemoglu and Pischke, 1999). Training might be constrained in other ways, for example by capital market limitations facing employees.…”

“…We also incorporate the hypothesis that the impact of training depends on the educational ability of the labour force. Typically, it is argued that more educated workers are more "trainable" or that the psychic costs of training are lower for those with 5 This point is quite separate from the proposition that there may be externalities or market failures in training and workforce development, which could justify state intervention (Stevens, 1999), or whether such intervention might be warranted on equity principles: we are not considering these arguments in this paper. 6 The point is complemented by the idea that entrenched attitudes and working relationships and lack of trust effectively raised the short-term costs of adopting new practices.…”

Training and expectations on job mobility in the call centres sector

“…Moreover, the workers are reluctant to invest in these skills due to credit constraints and the uncertainty they face with respect to future benefits (e.g. Stevens, 1994Stevens, , 1999Acemuglu and Pischke, 1999). Non-optimal investments in transferable training particularly hold for vocational training that is relevant in a particular sector of industry.…”

Improving Skills for More and Better Jobs

“…First, if labour markets are not perfectly competitive, firms may have an incentive to invest in general human capital (valuable also at other firms) to the extent that the market for skilled labour is less competitive than the market for unskilled labour, so that the training firm can afford to pay a trained worker less than its marginal product while still retaining the worker (see Acemoglu and Pischke, 1999a;Stevens, 1999). This is particularly the case for skills that cannot be useful to many other employers (Stevens 1994;.…”

“…Moreover, individual human capital investment is often indivisible and therefore the risk associated to it cannot be diversified. Finally, although in a perfect information world, trainees could buy insurance to shelter against the risk, in practice, a private insurance market is unlikely to work in a proper way due to the unobservability of the trainee's effort and the size of human capital investments (the level of individual liability required to avoid adverse selection would be too high, see Stevens, 1999). The employer can partially relax the employee's credit constraint to the extent that the employee accepts a lower wage during the training period.…”