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

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Author Info
David Fairris (University of California - Riverside)
Roberto Pedace (Claremont McKenna College)

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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.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2000-36.

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Handle: RePEc:clm:clmeco:2000-36

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  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416. [Downloadable!] (restricted)
  2. Prendergast, Canice, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 523-34, May. [Downloadable!] (restricted)
  3. Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(2), pages 173-188, January.
  4. Neumark, David & Wascher, William, 2001. "Minimum Wages and Training Revisited," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 563-95, July. [Downloadable!] (restricted)
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  5. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 539-556, January.
  6. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September. [Downloadable!] (restricted)
  7. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "Minimum Wages and On-the-job Training," NBER Working Papers 7184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December. [Downloadable!] (restricted)
  9. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
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  11. Anne B. Royalty, 1996. "The effects of job turnover on the training of men and women," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 49(3), pages 505-521, April.
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  14. Leslie E. Papke & Jeffrey M. Wooldridge, 1993. "Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates," NBER Technical Working Papers 0147, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
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  1. David Neumark & Olena Nizalova, 2004. "Minimum Wage Effects in the Longer Run," NBER Working Papers 10656, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Cardoso, Ana Rute, 2009. "Long-Term Impact of Youth Minimum Wages: Evidence from Two Decades of Individual Longitudinal Data," IZA Discussion Papers 4236, Institute for the Study of Labor (IZA). [Downloadable!]
  3. David Neumark, 2009. "Alternative Labor Market Policies to Increase Economic Self-Sufficiency: Mandating Higher Wages, Subsidizing Employment, and Increasing Productivity," NBER Working Papers 14807, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Yanick Labrie & Claude Montmarquette, 2005. "La formation qualifiante et transférable en milieu de travail," CIRANO Project Reports 2005rp-04, CIRANO. [Downloadable!]
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