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The Effectiveness of Training for Displaced Workers with Long Prior Job Tenure

  • Jones, Stephen
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    Workers displaced from long-tenure jobs often have difficulty finding new employment and can take a substantial drop in earnings when they find reemployment. These losses are large and persistent, and can easily dwarf the transitory losses from the initial period of nonemployment. Policy response for these long-term problems has centred on education, training and skill development. This paper surveys and assesses a variety of strategies that have been employed to determine training effectiveness, using results from field experiments and from econometric work based on non-experimental data. Findings from this large research enterprise are not encouraging. Both experimental and non-experimental research shows that the returns to training for displaced workers are low, almost surely less than the (well-estimated) returns to formal schooling which lie in the 6-9% range. On a cost-benefit basis, the body of evidence does not show that training pays off for most of the displaced population. Alternative means to compensate the losers from economic adjustment might include modified or expanded EI coverage, without any necessary link to training expenditures, and perhaps consideration of alternative policies, such as Wage Insurance. Since evidence on training programs for displaced workers gives only limited promise, it is important to search for other creative ways to ensure that the costs of economic restructuring do not fall disproportionately on a narrow group.

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    File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2092%20-%20Stephen%20Jones.pdf
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    Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2012-3.

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    Length: 27 pages
    Date of creation: 29 Jan 2012
    Date of revision: 29 Jan 2012
    Handle: RePEc:ubc:clssrn:clsrn_admin-2012-3
    Contact details of provider: Web page: http://www.clsrn.econ.ubc.ca/

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    1. Louis Jacobson & Robert J. Lalonde & Daniel Sullivan, 2005. "The Impact of Community College Retraining on Older Displaced Workers: Should We Teach Old Dogs New Tricks?," ILR Review, Cornell University, ILR School, vol. 58(3), pages 398-415, April.
    2. Frenette, Marc & Morissette, René & Zhang, Xuelin, 2009. "Earnings Losses of Displaced Workers: Canadian Evidence from a Large Administrative Database on Firm Closures and Mass Layoffs," CLSSRN working papers clsrn_admin-2009-51, Vancouver School of Economics, revised 25 Sep 2009.
    3. Heinrich, Carolyn J. & Mueser, Peter R. & Troske, Kenneth & Jeon, Kyung-Seong & Kahvecioglu, Daver C., 2009. "New Estimates of Public Employment and Training Program Net Impacts: A Nonexperimental Evaluation of the Workforce Investment Act Program," IZA Discussion Papers 4569, Institute for the Study of Labor (IZA).
    4. James J. Heckman & Jeffrey A. Smith, 2003. "The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program," NBER Working Papers 9818, National Bureau of Economic Research, Inc.
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    6. Louis Jacobson & Robert J. LaLonde & Daniel Sullivan, 2005. "The impact of community college retraining on older displaced workers: Should we teach old dogs new tricks?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 398-415, April.
    7. Louis Jacobson & Robert LaLonde & Daniel G. Sullivan, 2002. "Estimating the returns to community college schooling for displaced workers," Working Paper Series WP-02-31, Federal Reserve Bank of Chicago.
    8. Guido M. Imbens & Jeffrey M. Wooldridge, 2008. "Recent Developments in the Econometrics of Program Evaluation," NBER Working Papers 14251, National Bureau of Economic Research, Inc.
    9. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Finnie, Ross & Gray, David, 2009. "Displacement of Older Workers: Re-employment, Hastened Retirement, Disability, or Other Destinations?," CLSSRN working papers clsrn_admin-2009-24, Vancouver School of Economics, revised 13 Mar 2009.
    11. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
    12. Steven Glazerman Dan Levy David Myers, 2003. "Nonexperimental Versus Experimental Estimates of Earnings Impacts," Mathematica Policy Research Reports 7c8bd68ac8db47caa57c70ee1, Mathematica Policy Research.
    13. Schirle, Tammy, 2009. "Earnings Losses of Displaced Older Workers: Accounting for the Retirement Option," CLSSRN working papers clsrn_admin-2009-17, Vancouver School of Economics, revised 16 Feb 2009.
    14. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," NBER Working Papers 9055, National Bureau of Economic Research, Inc.
    15. Miana Plesca & Gueorgui Kambourov & Iourii Manovskii, 2005. "Returns to Government Sponsored Training," 2005 Meeting Papers 521, Society for Economic Dynamics.
    16. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
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    19. repec:mpr:mprres:3694 is not listed on IDEAS
    20. Bruce Chapman & Thomas F. Crossley & Taejong Kim, 2002. "Credit Constraints and Training after Job Loss," Department of Economics Working Papers 2002-15, McMaster University.
    21. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
    22. Louis S. Jacobson & Robert LaLonde & Daniel G. Sullivan, 2005. "Is retraining displaced workers a good investment?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 47-66.
    23. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
    24. Stephen A. Wandner, 2010. "Solving the Reemployment Puzzle: From Research to Policy," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number srep, November.
    25. Riddell, W. Craig, 2009. "Economic Change and Worker Displacement in Canada: Consequences and Policy Responses," CLSSRN working papers clsrn_admin-2009-41, Vancouver School of Economics, revised 22 Jul 2009.
    26. Gueorgui Kambourov & Iourii Manovskii & Miana Plesca, 2012. "Occupational Mobility and the Returns to Training," Working Papers tecipa-444, University of Toronto, Department of Economics.
    27. Souleles, Nicholas S., 2000. "College tuition and household savings and consumption," Journal of Public Economics, Elsevier, vol. 77(2), pages 185-207, August.
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