A Cost-Sharing Model of Worker Training
Abstract
Government and industry have entered into new partnerships to jointly train their employees in work-related skills. These partnerships use cost-sharing arrangements based on convenience rather than efficient allocations. This paper revisits Gary Becker's theory of training and extends training theory to discuss the payoffs to firms, students, and employees from training, both on the job and student-funded. The paper discusses who should pay for wage-increasing training, considering local economic climate, the nature of the training (general or specific), job risk, and the rewards to training. Employers systematically profit from employee training and education and should pay accordingly. Employers gain returns on training from both increases in productivity and wage stagnation over several time periods following training. Firms reward employees trained in firm-specific skills with wage increases but do not reward general training, creating paradoxical incentives. An efficient cost-sharing arrangement for a government-industry training partnership is proposed based on the discussion of employer's wage and productivity premiums derived theoretically in the paper.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 1999
- Accession Number
- ADA360113
Entities
People
- Virginia Stouffer
Organizations
- LMI