Job Training

This paper considers whether it is possible to devise a nonexperimental procedure for evaluating a prototypical job training programme. Using rich nonexperimental data, we examine the performance of a two-stage evaluation methodology that (a) estimates the probability that a person participates in a programme and (b) uses the estimated probability in extensions of the classical method of matching. We decompose the conventional measure of programme evaluation bias into several components and find that bias due to selection on unobservables, commonly called selection bias in econometrics, is empirically less important than other components, although it is still a sizeable fraction of the estimated programme impact. Matching methods applied to comparison groups located in the same labour markets as participants and administered the same questionnaire eliminate much of the bias as conventionally measured, but the remaining bias is a considerable fraction of experimentally-determined programme impact estimates. We test and reject the identifying assumptions that justify the classical method of matching. We present a nonparametric conditional difference-in-differences extension of the method of matching that is consistent with the classical index-sufficient sample selection model and is not rejected by our tests of identifying assumptions. This estimator is effective in eliminating bias, especially when it is due to temporally-invariant omitted variables.

Retraining the labor force to match the demands of a modern economy is an important task during the transition process from a centrally planned to a market economy. This need is particular pressing in East Germany, because the transition process is much faster there than in the rest of Eastern Europe. Therefore, substantial resources are devoted to this purpose. This paper analyses the impact of continuous off-the-job training in East Germany from the point of view of the individuals who were in the labor force before German unification in 1990. It answers questions about the average gains from participating in a specific type of training. Typical outcomes considered to measure these gains are income, employment status, job security and expected career prospects. The methodology used for the empirical evaluation is the potential outcome approach to causality. This approach has received considerable attention in the statistical literature over the last 15 years and it has been recently rediscovered by the econometric literature as well. Here, it is adapted to allow for important permanent and transitory shocks that influence the decision to participate in the training as well as future labor market outcomes. The empirical results are based on the first five waves of the Socio-Economic Pariel (GSOEP)-East (1990-1994). This panel data set has the advantage that the fourth wave contains a special survey on continuous training and that it allows to keep track of individual behaviour on a monthly, respectively yearly, basis. The econometric analysis focuses on off-the-job training courses that began after unification. Although it is obviously too early to evaluate the long-run implications, the results suggest that at least in the short-run there are no positive effects.

Conventional analysis predicts that workers pay part of their on-the-job training costs by accepting a lower starting wage and subsequently realize a return to this investment in the form of greater wage growth. Missing from the conventional treatment of on-the-job training is a discussion of the process by which heterogeneous workers are matched to jobs requiring varying amounts of training. This matching process constitutes a key feature of the on-the-job training model presented in this article and tested with a unique data set containing extensive information concerning on-the-job training, employer search, wages, and wage and productivity growth.

We examine the relationships among on-the-job training, starting wages, wage growth, and productivity growth. Our models suggest that training lowers starting wages, but the estimated magnitudes are small. When firms are asked directly, we find that they pay higher starting wages to workers requiring less training than is typical, but do not pay lower starting wages to workers who require more training than is typical. In contrast to the results for wage growth, we find a large, robust impact of training on productivity growth, suggesting that firms pay most of the cost and reap most of the returns to training.

Empirical results in this paper indicate that firm-specific wage growth occurs almost exclusively during periods of on-the-job training. This finding suggests that within-firm wage growth is mainly determined by contemporaneous productivity growth. The results provide no evidence that contractual considerations are an important source of firm-specific wage growth. Copyright 1989 by American Economic Association.

This paper examines the benefits and costs of Job Training Partnership Act (JTPA) Title II-A programs for economically disadvantaged adults and out-of-school youths. It is based on a 21,000-person randomized experiment conducted within ongoing Title II-A programs at 16 local JTPA Service Delivery Areas (SDAs) from around the country. In the paper, we present the background and design of our study, describe the methodology used to estimate program impacts, present estimates of program impacts on earnings and educational attainment, and assess the overall success of the programs studied through a benefit-cost analysis.

We draw hypotheses about the factors related to company provision offormal job training programs from diverse theoretical perspectives and research findings. Using data from the 1991 National Organizations Survey, we analyze a sample of 688 establishments to estimate multivariate models. The relationships between employer-provided job training and organizational size, unionization, and workforce composition are reduced or eliminated in most multivariate equations. Employer-provided training is most extensive in establishments with elaborate internal structures that operate in complex market environments. The job-training practices of U.S. employers affect employees from the executive suite to the loading dock, enhancing skills from basic literacy to interpersonal sensitivity. A new training ideology is rapidly eclipsing the traditional segmented pattern-a pattern in which universities educate the professionals and technicians, companies prime the executives, unions apprentice workers in the skilled trades, and government prepares the disadvantaged. Facing competitive world economic pressures that have eroded America's market positions, employers are now using job training as one means of coping with changes fostered by technological innovation, market competition, organizational restructuring, and demographic shifts. Although training is an integral part of the employer-employee relationship, direct evidence about company training practices based on representative samples of diverse employing organizations is almost nonexistent. Most previous research has drawn on either self-reported labor force surveys or highly restricted samples of organizations (typically skewed to very large firms). We examine hypotheses about employer-provided job-training practices in the early 1990s, using a national survey of U.S. work organizations.

The transition from school to work is typically a period in which many young workers experience a wide range of different jobs and experience some of their most rapid wage growth over their working life. Robert Hall (1982) has estimated that the first 10 years of an individual's working career will include approximately two-thirds of all lifetime job changes. Robert Topel and Michael Ward (1988) found that over half of young male new entrants held six or more jobs over the first 10 years of their work experience. Only one young male worker in twenty held a single job for 10 years in their sample. All of this suggests that young workers' early years in the labor market involve several employment transitions. The purpose of this paper is to examine for young workers in their first years of work the determinants of leaving an employer. In particular, this paper focuses on the role of different types of training on the probability of leaving an employer. In previous work (1990) I have examined the impact of private-sector training on the determination of wages and wage growth of young workers and reached the following conclusions. First, formal company-provided onthe-job training (ON-JT) appears to be highly firm-specific in the United States and, therefore, is not portable from employer to employer. Company-provided training raises wages in the current job but has no effect on the wages earned in subsequent employment. Second, formal off-the-job training (OFF-JT) received from "for-profit" proprietary institutions has little effect on the wages earned on the current job, but it does raise the expected wage in subsequent employment. Finally, there are important differences by race, gender, and education level in the probability of receiving different types of formal training and in the impact this training has on wages and wage growth. These findings have several implications for the impact of training on mobility. One implication is that if company-provided training is primarily firm-specific, then the probability of leaving an employer should decline if a young worker has experienced some ON-JT. An additional implication is that if a worker participates in an OFF-JT program, it appears that the worker should be more likely to leave the current employer. In this case, OFF-JT allows a young worker to change career paths and find a "better match." Using data from the National Longitudinal Survey Youth (NLSY) cohort, this paper examines in detail the factors that influence the probability of new entrants leaving their first job, including the differential effects of company-provided training, apprenticeships, and training from for-profit proprietary institutions.

The prevalence in Japan of flexible wages in the form of bonus payments is explained by a high profitability of investment in specific human capital together with the low costs of transactions facing the employer and the worker in assessing fluctuations in productivities. A model of on-the-job training is developed to analyze the determination of the amounts and the sharing of investment in specific human capital. The model predicts that increased profitability of investment leads to an increased bonus-earnings ratio. Evidence indicates that education and firm size, which are often said to be positively associated with the profitability of on-the-job training in Japan, as well as years of experience in the current firm, have significant positive associations with the bonus-earnings ratio. An observed positive association between the cyclical sensitivities in a production index and in the bonus-earnings ratio also supports the theory.

M OST theoretical and empirical work on the determinants of individual earnings has placed special emphasis on an individual's educational attainment and on his or her years of work experience. Although interpreting the effects of education on earnings is relatively straightforward,1 the proper interpretation of the effects of experience on earnings is much less clear. It is certainly true that earnings tend to rise with years of experience, but the nature of the underlying mechanism that generates that increase is still largely an unresolved issue. An understanding of the way in which experience increases earnings is especially critical for the analysis of wage differentials by race and sex. Previous empirical research has shown that black men and both black and white women have flatter experience-earnings profiles than white males and that differences in the returns to experience account for a large portion of observed wage differences.2 The most widely accepted interpretation of the relationship between experience and earnings is that of the human capital model, which considers years of work experience as a proxy for unobservable investment in on-the-job training.3 According to the human capital model, wage differentials among individuals over the life-cycle are largely the result of differential patterns of investment in human capital, primarily in the form of investments in on-the-job training. Most human capital training models have been developed for the case of training that increases worker productivity in more than one firm (general training) as opposed to specific training that increases productivity in only one firm. It is frequently argued that because women expect to have a less regular pattern of labor force participation, they have a shorter work horizon than otherwise similar men and, thus, they have clear economic incentives to invest in less on-the-job training.4 As a result, women will, in general, have accumulated less human capital than men with the same number of years of experience and, consequently, their returns to experience would be expected to be lower. For black males, lower human capital investment is attributed to discrimination and/or their presumed poorer quality of schooling. Discrimination reduces the value of any potential investment, while poor schooling is thought to increase the costs of acquiring training.5 An alternative view of the earnings-experience relationship draws on models of labor market segmentation.6 These models differ from the human capital model primarily in their focus on the characteristics of jobs and job markets, rather than the characteristics of individuals. Earnings are thought to be largely determined by the labor market in which an individual works rather than the skills (or human capital) he or she possesses. Training itself is viewed as being largely technologically determined by the design of jobs, so that a specified amount of training is intrinsic in any given job. An individual acquires training by first gaining access to a job that provides training; that is, jobs and job markets intercede between an individual and investment in on-the-job training. Segmented market theorists usually argue that because hiring decisions involve a considerable amount of subjective input there is ample opportunity to practice discrimination. They cite entry level discrimination as a major institutional barrier between the primary and secondary sector, Received for publication January 17, 1978. Revision accepted for publication November 1, 1978. * Institute for Social Research and University of Michigan, and University of Delaware, respectively. 1 A recent review of this literature is given in Blaug (1976). 2 For example, see Mincer and Polachek (1974), Blinder (1973). 3The basic references are Becker (1964), Ben-Porath (1967), and Rosen (1972). 4 Mincer and Polachek (1974); Johnson and Stafford (1974). 5 The effect of discrimination on investment varies in different versions of the human capital model. It has no effect in a Ben-Porath type model, but reduces optimal investment in Rosen's model. 6 This model was popularized by Doeringer and Piore (1971).