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Job Training: Costs, Returns, and Wage Profiles

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  • Jacob Mincer
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    Abstract

    Using information on time costs of training and gains in wages attributable to training I computed rates of return on training investments. The range of estimates based on several data sets generally exceeds the magnitudes of rates of return usually observed for schooling investments. It is not clear, however, that the difference represents underinvestment in job training. Two methods were used to estimate total annual costs of job training in the U.S. economy, for 1958, 1976, and 1987. The "direct' calculation uses information on time spent in training and on wages. For 1976 so calculated costs amounted to 11.2% of Total Employee Compensation and a half of costs of school education. In the "indirect" method training costs were estimated from wage functions fitted to PSID data. In 1976 the direct estimate amounted to between 65% and 80% of the indirect estimate based on the wage profile. This result represents strong support for the human capital interpretation of wage profiles. The estimates indicate a slower growth of training than of school expenditures in the past decades. Substitution of schooling for job training is a likely cause.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3208.

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    Date of creation: Dec 1989
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    Publication status: published as Market Failure inTraining Springer Verlag 1991
    Handle: RePEc:nbr:nberwo:3208

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    1. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
    2. Harry J. Holzer, 1988. "The Determinants of Employee Productivity and Earnings: Some New Evidence," NBER Working Papers 2782, National Bureau of Economic Research, Inc.
    3. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January.
    4. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
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    Cited by:
    1. Ingram, B.F. & DeJong, D.N. & Whiteman, C.H. & Wen, Y., 1996. "Cyclical Implications of the Variable Utilization of Physical and Human Capital," Working Papers 96-12, University of Iowa, Department of Economics.
    2. Nordman, Christophe Jalil & Wolff, François-Charles, 2007. "On-the-job learning and earnings in Benin, Morocco and Senegal," Economics Papers from University Paris Dauphine 123456789/4333, Paris Dauphine University.
    3. Almeida, Rita & Carneiro, Pedro, 2009. "The return to firm investments in human capital," Labour Economics, Elsevier, vol. 16(1), pages 97-106, January.
    4. Levine, David I., 1991. "Worth Waiting For? Delayed Compensation, Training and Turnover in the United States and Japan," Institute for Research on Labor and Employment, Working Paper Series qt97m9v25n, Institute of Industrial Relations, UC Berkeley.
    5. Almeida, Rita K. & Carneiro, Pedro, 2006. "The Return to the Firm Investment in Human Capital," IZA Discussion Papers 1937, Institute for the Study of Labor (IZA).
    6. repec:hal:journl:halshs-00193372 is not listed on IDEAS
    7. Yanick Labrie & Claude Montmarquette, 2005. "La formation qualifiante et transférable en milieu de travail," CIRANO Project Reports 2005rp-04, CIRANO.
    8. Galdo, Jose & Chong, Alberto, 2012. "Does the quality of public-sponsored training programs matter? Evidence from bidding processes data," Labour Economics, Elsevier, vol. 19(6), pages 970-986.

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