I consider the effect of minimum wages to on-the-job training from the viewpoint of trainers' incentives. In the work environment, experienced employees play significant roles in training new employees. However, the more training they provide to trainees, the less likely those trainers would be promoted. I call the trainers' situation the trainers' dilemma between promotion and training. I show that minimum wages alleviate the trainers' dilemma, since minimum wages increase income for not-promoted workers and reduce net benefit of promotion. Hence, minimum wage legislations enhance on-the-job training and social welfare, but reduce firms' profit
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Paper provided by Institute for Social and Economic Research in its series ISER working papers with number
2004-18.
Length: 20 Date of creation: 12 Oct 2004 Date of revision: Publication status: published Handle: RePEc:ese:iserwp:2004-18
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