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Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates

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  • Rinawi, Miriam
  • Backes-Gellner, Uschi

Abstract

This paper investigates how training firms retain their apprenticeship graduates if they are embedded in labor markets without the frictions that the new training literature considers to be essential for investments in general human capital. We hypothesize that performance pay schemes are an additional firm-level tool to increase the retention of graduates. We argue that firms with performance pay schemes are more likely to engage in apprenticeship training than firms not offering performance pay. This paper uses representative data from a large employer-employee panel data set and accounts for unobserved heterogeneity by employing fixed-effects estimations. We find that the performance pay rate has a significantly positive effect on a firm's share of internal apprenticeship graduates. Our results can be interpreted as an indication that performance pay firms are more likely to invest in training, as they can successfully retain their graduates.

Suggested Citation

  • Rinawi, Miriam & Backes-Gellner, Uschi, 2013. "Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80024, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:80024
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    Cited by:

    1. Franziska Burkart & Harald Pfeifer & Uschi Backes-Gellner, 2017. "Firms as Producers vs. Consumers of Skills: An Optimal Inventory Strategy," Economics of Education Working Paper Series 0136, University of Zurich, Department of Business Administration (IBW).

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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