General training under asymmetric information

One widely accepted conclusion in the human capital literature on training is that firms will finance only firm-specific training because it is non-transferable to other firms. Firms will not be willing to finance training in general (transferable) skills. In this paper it is argued that a recruiting firm will possess only limited knowledge of the training level in general skills acquired by workers in other firms. Hence a worker with transferable skills who changes employer can expect to suffer a cut in wages for a transition period while his level of productivity is being evaluated and recognized. Such a worker has no incentive to move as long as the present value of the loss in earnings is greater than the present value of the loss incurred in remaining with the training firm at a wage below the market-level for his skill. This result may have some important policy implications in countering the effects of market imperfections. It also suggests that training certification, in facilitating inter-firm mobility, discourages on-the-job training by firms.ICT Policy and Strategies,Labor Standards,Tertiary Education,Primary Education,Agricultural Research

Do Some Employers Share the Costs and Benefits of General Training?

[Excerpt] One of the central propositions of the human capital theory of on-the-job training is that workers pay all the costs and receive all the benefits of general training (see Ehrenberg and Smith 1996, Filer, Hammermesh and Rees 1996, Borjas 1996, Kaufman 1986). Since general training raises a worker\u27s ability to be productive in other organizations as well as the one providing the training, the training firm must pay a wage commensurate with the trained worker\u27s new higher level of productivity if they are to prevent the loss of their trained workers. Since the workers, not the firm, get the benefits of the training, firms [will] provide general training only if they [do] not have to pay any of the costs (Becker 1962 p. 13). Since the training is of value to prospective trainees, equilibrium in the training market requires that employees pay for general on-the-job training by receiving wages below what could be received elsewhere (Becker 1962 p. 13) in a job offering no training. Is this correct? Do Workers pay all the costs of training in skills that are technically general (i.e. useful at other firms)--WPAC for short? Do workers receive all the benefits of general training ( WRAB for short)

Wage Differentiation via Subsidised General Training

We provide a new explanation for why firms pay for general training in a competitive labor market. If firms are unable to tailor individual wages to ability, for informational or institutional reasons, they will pay for general training in order to attract better quality workers. The market provision of training may well exceed the first best level. Our explanation relies on wage compression within skill categories, while imperfect competition based explanations for firm subsidised general training rely on wage compression across skill categories.

Wage Differentiation via Subsidised General Training

We provide a new explanation for why firms pay for general training in a competitive labor market. If firms for informational or institutional reasons are unable to tailor wages according to ability, they will have an incentive to pay for general training in order to attract better quality workers. Under fairly weak conditions, we show that labor market equilibrium must involve subsidised general training. This does not require that firms capture a return in the form of a productivity rise induced by training that exceeds the wage rise. The market provision of training may well exceed the socially optimal level.

Investment in General Training with Consensual Layoffs

We study non-contractible firms' investment in general training in a model of frictional unemployment. Since training is vested in workers, firms' return to training is zero when a match ends. Consensual layoff provisions or large severance payments oblige firms to bargain efficiently over the joint payoff from separation. This increases employers' incentives to train as they share workers' outside return to general human capital. The result generalizes to all types of general investment that are vested in the non-investing party on separation. We also show that, independently from underinvestment in training, the laissez-faire equilibrium is always inefficient for any given level of investment.Consensual layoffs, General training, Matching

Meteorological Input to General Aviation Pilot Training

The meteorological education of general aviation pilots is discussed in terms of the definitions and concepts of learning and good educational procedures. The effectiveness of the metoeorological program in the training of general aviations pilots is questioned. It is suggested that flight instructors provide real experience during low ceilings and visibilities, and that every pilot receiving an instrument rating should experience real instrument flight

Is Training More Frequent When the Wage Premium Is Smaller ?

According to Becker [1964], when labour markets are perfectly competitive, general training is paid by the worker, who reaps all the benefits from the investment. Therefore, ceteris paribus, the greater the training wage premium, the greater the investment in general training. Using data from the European Community Household Panel, we compute a proxy of the training wage premium in clusters of homogeneous workers and find that smaller premia induce greater incidence of off-site training, which is likely to impart general skills. Our findings suggest that the Becker model provides insufficient guidance to understand empirical training patterns. Conversely, they are not inconsistent with theories of training in imperfectly competitive labour markets, in which firms may be willing to finance general training if the wage structure is compressed, that is, if the increase in productivity after training is greater than the increase in pay.general training; off-site training; training wage premia; wage compression; ECHP

Do Empoyers Share the Costs and Benefits of General Training?

This paper presents evidence that during the first year or so of a worker\u27s tenure, wages rise more slowly than productivity net of training costs when training is predominantly general and that many employers are, in effect, induced to share the costs and benefits of general on-the-job training with their employees. This occurs for three reasons. First, sorting, high job search costs and the reputational damages that result from premature separations make a dismissed worker\u27s next best alternative decidedly unattractive and this causes workers to prefer front loaded compensation packages which reduce the likelihood of involuntary terminations. Second, since most young workers are liquidity constrained and cannot afford to self-finance general training, employers take advantage of their better access to credit and take over the financing of a portion of the costs of general on-the-job training. Finally, the minimum wage and union contracts prevent young workers from agreeing to the low starting wages that would be necessary if they were to self-finance general on-the-job training. Analysis of data comparing the growth of compensation to the growth of productivity net of training costs in jobs reported to involve skills that were useful at other firms found that during the first two years of tenure that net productivity grows on average 4 to 5 times faster than compensation. While the effective specificity of training that is reported to be useful elsewhere accounts for a portion of this difference, it does not account for all of it. Consequently, one or more of the forces listed above is probably contributing to the front-loading of compensation during the first year or so on a job

Is training more frequent when the wage premium is smaller? Evidence from the European Community Household Panel

According to Becker [1964], when labour markets are perfectly competitive, general training is paid by the worker, who reaps all the benefits from the investment. Therefore, ceteris paribus, the greater the training wage premium, the greater the investment in general training. Using data from the European Community Household Panel, we compute a proxy of the training wage premium in clusters of homogeneous workers and find that smaller premia induce greater incidence of off-site training, which is likely to impart general skills. Our findings suggest that the Becker model provides insufficient guidance to understand empirical training patterns. Conversely, they are not inconsistent with theories of training in imperfectly competitive labour markets, in which firms may be willing to finance general training if the wage structure is compressed, that is, if the increase in productivity after training is greater than the increase in pay.General training; Off-site training; Training wage premia; Wage compression; ECHP