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Specific Training Sometimes Cuts Wages and Always Cuts Turnover

Author

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  • Lalith Munasinghe

    (Barnard College, Columbia University)

  • Brendan O'Flaherty

    (Columbia University)

Abstract

Turnover falls with tenure, but wages do not always rise (and sometimes fall) with tenure. We reconcile these findings by revisiting an old issue: how gains from firm-specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The lower the wage a firm pays to a specifically trained worker, the more profit it makes but the more likely the employee is to leave. The optimal time paths of wages and turnover show that, if marginal product is increasing, wages need not be increasing but it always implies a falling turnover rate.

Suggested Citation

  • Lalith Munasinghe & Brendan O'Flaherty, 2005. "Specific Training Sometimes Cuts Wages and Always Cuts Turnover," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 213-234, April.
  • Handle: RePEc:ucp:jlabec:v:23:y:2005:i:2:p:213-234
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    References listed on IDEAS

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    Cited by:

    1. Eva O. Arceo-Gómez & Raymundo M. Campos-Vázquez, 2011. "¿Quiénes son los NiNis en México?," Working papers DTE 524, CIDE, División de Economía.
    2. Christos Bilanakos & Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2017. "Do Dominant Firms Provide More Training?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 67-95, February.
    3. Sullivan, Paul, 2010. "Empirical evidence on occupation and industry specific human capital," Labour Economics, Elsevier, vol. 17(3), pages 567-580, June.
    4. Lalith Munasinghe, 2005. "A Theory of Wage and Turnover Dynamics," 2005 Meeting Papers 924, Society for Economic Dynamics.
    5. Heywood, John S. & Jirjahn, Uwe & Pfister, Annika, 2017. "Product Market Competition and Employer Provided Training in Germany," IZA Discussion Papers 11054, Institute for the Study of Labor (IZA).
    6. Carter Thomas J., 2011. "Training and Turnover with Equilibrium Unemployment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-23, March.
    7. Fabling, Richard & Grimes, Arthur, 2007. "HR Practices and Firm Performance: What Matters and Who Does It?," Occasional Papers 07/2, Ministry of Economic Development, New Zealand.

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