Skip to main content
Article thumbnail
Location of Repository

Minimum wages and on-the-job training

By Daron Acemoglu and Jorn-Steffen Pischke

Abstract

Becker''s theory of human capital predicts that minimum wages should reduce training investments for affected workers because they prevent these workers from taking wage cuts necessary to finance training. In contrast, in noncompetitive labor markets, minimum wages tend to increase training of affected workers because they induce firms to train their unskilled employees. We provide new estimates on the impact of the state and federal increases in the minimum wage in the US between 1987 and 1992 on the training of low-wage workers. We find no evidence that minimum wages reduce training, and little evidence that they tend to increase training. We therefore develop a hybrid model where minimum wages reduce the training investments of workers who were taking wage cuts to finance their training, while increasing the training of other workers. Finally, we provide some evidence consistent with this hybrid model

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2002
OAI identifier: oai:eprints.lse.ac.uk:20084
Provided by: LSE Research Online

Suggested articles


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.