The Impact of Minimum Wages on Job Training: An Empirical Exploration with Establishment Data

Abstract

Using data from the National Employer Survey (NES), this study examines the relationship between wages and on-the-job training. Traditional theory argues that workers may finance onthe- job human capital accumulation through lower wages. A binding minimum wage may, therefore, reduce workplace training if it prevents low-wage workers from offering wage cuts to help finance training. Empirical findings in this area have failed to reach a consensus on the training effects of minimum wages. However, previous research has relied primarily on survey data from individual workers, which typically possess poor measures of job training and little information about the characteristics of firms. Unlike previous research, this study addresses the issue of minimum wages and on-the-job training with a unique employer survey. We find strong evidence to suggest that minimum wages are associated with a reduction in the percentage of an establishment’s workforce receiving training, but only weak evidence indicating that minimum wages reduce the average number of hours establishments devote to training activities.