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Wages and Mobility: The Impact of Employer-Provided Training

  • Daniel Parent

Using data from the National Longitudinal Survey of Youth (NLSY) for the period spanning the years 1979-1991, this essay examines the impact of employer-provided formal training on the wage profile and on the mobility of young Americans making their transition to the labor market. By exploiting the longitudinal aspect of the data set, we are able to provide some control for unobserved individual and job-match heterogeneity by making use of the methodology proposed by Altonji and Shakotko (ReStud '87). The results show that (i) training with the current employer has a statistically and economically significant positive effect on the wage; (ii) employers seem to reward skills acquired through training with previous employers as much as skills they provide themselves; (iii) workers undergoing training have 18 percent lower starting salaries than other workers; this result is obtained by setting up a starting wage equation and by making use of a variable called on-the-job training still in progress at the time of the interview; (iv) with a hazard model which makes use of multiple employment spells by the same worker (thereby allowing the implementation of fixed-effects methods akin to the conditional logit method), skills acquired through formal training programs provided by the current employer seem to be fairly specific. The upshot from these results is that formal on-the-job-training in the current job contains both a general component which the employer rewards up to its market value and a specific component which reduces mobility while not being rewarded. En utilisant des données américaines du National Longitudinal Survey of Youth (NLSY), cette étude s'attarde à examiner l'impact de la formation dispensée par l'employeur sur le profil salarial ainsi que sur la mobilité des jeunes travailleurs faisant leur entrée sur le marché du travail. En exploitant l'aspect longitudinal de l'échantillon de façon à tenir compte de l'hétérogénéité non observée, les résultats montrent (i) un impact économiquement et statistiquement significatif de la formation sur le salaire dans l'emploi courant, (ii) un impact substantiel sur le salaire de la formation acquise avec les employeurs précédents, (iii) une réduction d'environ 18% du salaire de départ pour les travailleurs en formation, et (iv) par un modèle de durée qui tient compte des épisodes multiples d'emploi (permettant alors l'utilisation de méthodes de type effets fixes ), un degré substantiel de spécificité du capital humain acquis par le biais de programmes de formation dispensés par l'employeur. La conclusion à tirer de ces résultats est que le capital humain acquis contient à la fois une composante générale rémunérée également par tous les employeurs ainsi qu'une composante spécifique qui réduit la mobilité tout en n'étant pas rémunérée.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 95s-27.

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Length: 32 pages
Date of creation: 01 Apr 1995
Date of revision:
Handle: RePEc:cir:cirwor:95s-27
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  1. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  2. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  3. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt, June.
  4. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
  5. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-82, June.
  6. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  7. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
  8. David G. Blanchflower & Lisa M. Lynch, 1992. "Training at Work: A Comparison of U.S. and British Youths," NBER Working Papers 4037, National Bureau of Economic Research, Inc.
  9. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
  10. Finnie, R., 1993. "Tenure Experience, and Men's and Women's Wages: Panel Estimates from the National Longitudinal Survey of Youth," Papers 9305, Laval - Recherche en Politique Economique.
  11. MacLeod, W. Bentley & Malcomson, James M., 1993. "Specific investment and wage profiles in labour markets," European Economic Review, Elsevier, vol. 37(2-3), pages 343-354, April.
  12. Lorne Carmichael, 1981. "Firm-Specific Human Capital and Promotion Ladders," Working Papers 452, Queen's University, Department of Economics.
  13. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  14. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  15. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," NBER Working Papers 0278, National Bureau of Economic Research, Inc.
  16. 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.
  17. Joseph G. Altonji & James R. Spletzer, 1991. "Worker Characteristics, Job Characteristics, and the Receipt of On-the-Job Training," ILR Review, Cornell University, ILR School, vol. 45(1), pages 58-79, October.
  18. Brown, James N, 1989. "Why Do Wages Increase with Tenure? On-the-Job Training and Life-Cycle Wage Growth Observed within Firms," American Economic Review, American Economic Association, vol. 79(5), pages 971-91, December.
  19. Jacob Mincer, 1988. "Job Training, Wage Growth, and Labor Turnover," NBER Working Papers 2690, National Bureau of Economic Research, Inc.
  20. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
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